Hello. My friend asked me the same question the other say, do you have to pay taxes if you reinvest profits. Well, let me share the answer I gave to him. The answer is yes, you do need to pay taxes even after reinvesting profits. Now, the thing is that you have some control over the extent of tax you’d have to pay. I will share more details below.
Do you Pay Tax if you Reinvest Profits?
The tax that the government takes upon the profit you make is called capital gains tax. This tax can be classified into two types:
Short-Term Capital Gains: This is the tax on profits from assets held for a shorter period (Less than 1 to 3 years, based on the asset).
Long-Term Capital Gains: Profits gained from assets held for a longer period are categorised under LTCG.
Now, your benefit is in holding assets for longer, so that they come under LTCG as this category enjoys lower tax rates compared to STCG. You can also get exemptions for investments under LTCG for specific assets, while STCG does not offer this.
My suggestion would be to compare the LTCG and STCG for the particular asset and sort out a strategy to reap maximum tax benefits. I hope you now know if you reinvest profits are they taxable.
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Do you have to Pay Taxes if you Reinvest Profits?
vijay
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29 days
2025-01-31T17:32:37+00:00 2025-01-31T17:32:38+00:00Comment
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