There are 3 broad techniques that investors in equity funds can follow to reduce their tax outgo on LTCG. All it requires is a little bit of smart planning…

You can just avoid selling units and hold on in the hope that in the next couple of years the government may see the futility of imposing tax on capital gains and withdraw the same. Of course, you are taking a regulatory bet here.

The second way is to adopt the phased approach and ensure that you make the best of the limit of Rs.1 lakh. After all, this limit of Rs.1 lakh is applicable to each financial year and if you phase the profits, you get to claim these benefits each year. You can spread your profits across different financial years to make the best of the limits.

Lastly, there is always the facility of writing off your capital losses against your capital gains and you need to pay tax only on the net LTCG. That is another facility that is available to you. Prior to April, this facility was not available as capital gains for the long term were tax free. With the tax being re-imposed the benefit of los farming is also included.