ITR Filing 2026: 9 Key Deductions Salaried Taxpayers Can Use to Cut Capital Gains Tax

The tax season for Assessment Year 2026–27 has officially begun, with the Income Tax Department notifying the Income Tax Return (ITR) forms. Salaried and individual taxpayers are required to file their returns by July 31, 2026. Filing can begin once Form 16 is issued by employers, typically by June 15, 2026. As taxpayers prepare to file their ITRs, understanding how to legally reduce tax liability, especially on capital gains, becomes crucial.

Capital gains arise when you sell a capital asset such as property, land, or securities at a profit. The Income Tax Act provides several deductions and exemptions that can significantly reduce the tax burden on such gains, provided specific conditions are met.

One of the primary provisions is Section 48(i), which allows taxpayers to deduct expenses incurred wholly and exclusively for the transfer of a capital asset. This includes brokerage fees, legal charges, and other transaction-related costs. Additionally, Section 48(ii) permits deductions on the cost of acquisition and improvement of long-term capital assets, adjusted for inflation through indexation, thereby reducing taxable gains. ITR Filing Last Date: What Is the Deadline To File Income Tax Returns and How To File ITR Online Without a CA? Step-by-Step Guide Here.

For individuals selling residential property, Section 54 offers a major tax-saving opportunity. Long-term capital gains (LTCG) from the sale of a house can be exempt if reinvested in purchasing or constructing another residential property within the prescribed time frame. However, the exemption is subject to conditions, including limits on the number of properties owned. New Income Tax Act: Know How Your Take-Home Salary Changes in FY 2026-27.

Agricultural land transactions are covered under Section 54B, where exemptions are allowed if the proceeds are reinvested in other agricultural land. This applies to individuals or Hindu Undivided Families (HUFs), provided the land was used for agricultural purposes.

In cases of compulsory land acquisition, Section 54D allows exemptions if the compensation received is used to acquire or construct another land or building for business purposes. Similarly, Section 54ECprovides tax relief when LTCG from the sale of land or building is invested in specified bonds such as those issued by NHAI or REC, subject to a cap and lock-in period. 

Another useful provision is Section 54EE, which allows exemption of up to ₹50 lakh if capital gains are invested in notified funds within six months of transfer. Meanwhile, Section 54F applies when capital gains from assets other than residential property are reinvested into a residential house, offering proportional exemption benefits.

Start-up investments are encouraged under Section 54GB, where capital gains from selling residential property can be exempt if invested in eligible companies or startups. The invested company must utilize the funds to acquire new assets within a specified period.

While these deductions provide significant tax-saving opportunities, each comes with strict eligibility criteria, timelines, and documentation requirements. Taxpayers are advised to carefully evaluate these provisions and ensure compliance to maximize benefits.

As the ITR filing deadline approaches, leveraging these capital gains deductions can help taxpayers optimize their tax liability while staying fully compliant with the law.

(The above story first appeared on LatestLY on Apr 13, 2026 07:31 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).