Saving tax is something that we all love, now there are a lot of ways to go about it but very few of us actually know some real and of course legal ways to cut our taxes. Don't worry though, we're here with some amazing advice from Mintd community member Sambhav Daga who also happens to be a CA and the founder of Zaptax associates. Without further delay, let’s learn how to lower taxes on short-term as well as long-term capital gains.But, how do we define these terms and how do they get taxed? Well, terms for capital assets are defined based on how long we hold them, and these periods are different for different asset classes. For equity shares and equity-oriented mutual funds, the holding period for a capital asset to be classified as short-term is anything less than twelve months, while if a capital asset is held for more than twelve months, it is called a long-term capital asset.Now unlike what happens in intra-day trading, where you earn ‘speculative business income’ (and that gets taxed at your slab rates) as buying and selling on the same day is not considered an investment under tax laws, selling capital assets attracts capital gain income and it gets taxed in a different manner. Tax levied on short-term capital gain i.e. when you sell a short-term capital asset is 15% while tax levied on long-term capital gains over ₹ 1 lakh is 10%.Well, that’s enough theory so now let’s move to the application part where you’ll be lowering some taxes.

1. Suppose, you have an short-term capital gain of ₹ 50,000 in FY 21-22. Now, some scrips show notional loss like this
   Eg: Stock A 1000 bought at ₹ 200
   Current market price – ₹ 150
   Notional Loss here is ₹ 50000
   Sell Stock A and book an actual loss of ₹ 50000
   ‍
2. Next day, you can buy 1000 shares of A again at the price which would be around ₹150.
   Hence, you could save 15% of ₹ 50000 by booking loss of ₹ 50000 against gains of ₹ 50000.
   In the end, you still have 1000 shares of A so your rights do not change.
   Tax Payable-NIL
   ‍
3. For long-term capital gains
   Gains up to Rs. 1 Lakh are not taxable – for "Every FY".
   So, Suppose Stock B, C, D  were collectively bought at Rs. 1.5L on 5th Jan'2020 now have a market price of Rs. 2.5L on 7th Jan'2021.
   Sell all the shares and book a profit of 1L.
   Tax Payable-NIL
   ‍
4. Next day i.e. 8th Jan'2021, you can buy stock B,C and D again at a price around Rs. 2.5L. By doing this, your cost of acquisition becomes Rs. 2.5L
   Now, after another 12 months, assuming 10th Jan'2022, new market price becomes Rs. 3.1L
   You can sell & book gains of Rs. 60,000
   Tax Payable - NIL

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Inflation was yet again the most crucial market element in June. Inflation has prompted central banks to raise interest rates. India, like the USA and other nations, increased its repo rates by 50 base points to 4.90% this month. With the RBI rate hike, bond markets experienced a whipsaw in their yields. This reflected the nervousness in the bond market.

Also, the Indian Rupee hit an all-time low against the dollar (1 USD ~ INR 79) this month. As a result of Fed rate hikes, investors are withdrawing their investments from emerging markets like India. Continued FII exits (Net Outflows = INR 49,468.93 Cr, in June 2022) have put pressure on the domestic markets. Furthermore, dollar appreciation against currencies has impacted gold prices to fall globally. To curb its demand and bring down the trade deficit India has raised its import duty on gold to 12.5% this month.

As of June end, S&P 500 was down 15% YTD, and Nifty 50 was down by 9%, thus reiterating the fact that the Indian equities are outperforming their global counterparts. Despite the market volatility, mutual funds have continued to witness increased inflows during the month.  Over the last decade, low-interest rates and sufficient liquidity helped a worldwide equity bull run. However, lately, markets are witnessing a long-overdue correction. Higher inflation projections and crude oil prices are impacting the stock markets and the economy as a whole.

With Q1 behind us, all eyes are on the quarterly results. Quarterly earnings and the monsoon season is expected to set the stage for the markets in the coming months. While, global commodity prices, net FII flows and inflation continue to contribute their share. 

Currently, the markets continue to look iffy despite government efforts to curb inflation. Thus, it is wise to not meddle too much with your investments and asset allocations at the moment. Continue with your long-term SIPs and let it work to your advantage with rupee cost averaging.