Advice on how to liquidate portfolio of Mutual funds, Stocks and Shares listed in Nasdaq to save tax

Hello Dear,

Answer 1:

The split between taking out a Rs.50 lakh mortgage and diluting the investment worth Rs.1.40 crores seems reasonable. However, the decision should be based on the mortgage interest rate and the expected ROI of the investment. It's also important to consider your monthly EMI payment on your mortgage and whether it fits into your monthly budget.

Answer 2:

It is important to plan the liquidation of your portfolio in a way that minimizes your tax liability. As you already mentioned that you want to take advantage of the LTCG limit by March 31st, so in order to take advantage of the tax exemption, it is recommended that you should sell your LTCG generated investments before that date.Sell ​​the assets that generated the LTCG to take advantage of the tax exemption limit of 1 Lakhs per year.

Other Advice:

Sell ​​the loss-making investment to offset the gains made by other investments. Sell ​​investments that generated a higher taxable STCG towards the end of the fiscal year to minimize the tax burden.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

The answer would have been different if you would have asked before but right now the interest rates are high and hence if you have liquidity it is advisable to keep less loan.

Also, it is advisable to sell first foreign shares then debt mf and then equity mf and equity and all long term and such long term would only be set off against your house.

Also, only house investment and registration charges would be allowed for exemption and interior won't be allowed as exemption.

So may be you can use your idle cash for interior and rest amount can be used by selling investment.

Although I might not be the best financial planner but I can help you with taxation and exemption.

Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.

- The comparison of the various options depends on the tax outflow from sale of the investments, benefit in the form of tax saving on the interest from housing loan, outflow on the existing housing loan interest rates and increase in housing loan interest rates (which is more likely) and exemptions applicable (if any)

- Assuming your taxable income would remain between Rs. 50 lacs - Rs.1 cr after sale of securities. Assuming tax rate applicable on sale of investments would be 30% alongwith surcharge of 10%. Net effective rate would be 34.32%

- LTCG on equity and MF is taxable @10% without indexation (irrespective of slab rate)

- STCG on equity is taxable @ 15% (irrespective of slab rate)

- STCG on Debt MF is taxable at slab rate (Point of consideration)

- Till 31.03.2023, LTCG on Debt MF is taxable at 20.8% with benefit of cost of indexation . On or after 01.04.2023, it would be treated as STCG and taxable at slab rate. (Point of consideration). Very important

- LTCG on foreign equity is taxable at 20% with benefit of indexation (irrespective of slab rate)

- STCG on foreign equity is taxable at slab rate. It is better to hold them for more than 2 years (Point of consideration)

- Deduction of Interest on housing loan available upto Rs.2 lacs

- You can avail benefit of Section 54F . As the cost of acquisition of house property would be more than the net sale consideration of the securities, entire LTCG would be exempted otherwise proportionately . If you sell the securities in FY 2022-23 then you have to take a decision to buy the property before 31.07.2023 (due date of filing of ITR) otherwise deposit in capital gain account scheme to avail the benefit of exemption u/s 54F and invest within 2 years (for purchase) from the date of sale of securities or 3 years from the date of sale of securities (for construction). From 01.04.2023, benefit of LTCG u/s 54F is limited to Rs. 10Cr.

- Firstly liquidate LTCG securities to avail benefit of section 54F and calculate how much period is left for STCG to get converted to LTCG. You can defer your decision of selling securities in FY 2022-23.

-  DTAA benefit - For tax paid in US on foreign securities, you can avail benefit of DTAA in India

- TDS liability - Before payment for the purchase of house property, confirm residential status of the seller and deduct TDS accordingly. If seller is resident deduct TDS@1% otherwise deduct TDS as per section 195

For detailed discussion on financing mix for the purchase of house property, you may opt for phone consultation

Hello, 

- LTCG on listed shares and equity oriented Mutual Fund would be 10% without the indexation. 

- STCG on equity oriented Mutual Fund would be taxed at 15%

- LTCG on debt oriented mutual funds would be taxed at 20% with indexation till March 31, 2023. Post April 1, 2023, the debt oriented mutual funds with upto 35% investment in equity shares would be taxed as deemed short term capital gains. If the exposure of mutual funds is upto 65%, then the long term capital gains would continued to be taxed at 20% with indexation

- STCG on debt oriented mutual funds would be taxed at slab rates

- LTCG on Shares in foreign company - 20% with indexation. 

- STCG on shares in foreign company - slab rates

You can sell the Long term capital assets with higher tax rates first i.e. shares of foreign company, debt oriented mutual funds and  equity shares and equity oriented mutual funds. You can claim the exemption of Rs. 1 lakh against the LTCG on equity shares and equity oriented MF. 

Against the LTCG taxed at 20%, you can claim the exemption under section 54F, the investment in the house property by buying property before 31/7/2023 (before filing of ROI) or alternatively by depositing amount in capital gains account scheme and utilizing the amount within 2 years from the date of sale of securities. You can claim exemption against the purchase amount and registration charges in proportion to the capital gains. Interior cost would not be allowed as exemption. Although, you can consider interior cost as cost of improvement, which you can deduct when you sale the house.