LTCG
TaxLong Term Capital Gains
Profit earned on selling a capital asset held for more than a specified period. Taxed at concessional rates in India — 12.5% on equity (above ₹1.25 lakh) and 12.5% on debt/real estate with indexation.
Definition
Long Term Capital Gains (LTCG) is the profit earned from selling a capital asset that has been held for longer than a prescribed minimum holding period. Capital assets include equity shares, mutual fund units, real estate, bonds, gold, and other property.
The key advantage of LTCG over STCG is the concessional tax rate. In India, LTCG on equity is taxed at just 12.5% (above ₹1.25 lakh), significantly lower than the STCG rate of 20% on equity or the slab-rate tax that applies to other income.
The holding period and tax rates were revised in Budget 2024 (effective 23 July 2024). Notably, indexation benefit was removed for most assets, but the tax rates were reduced to compensate.
Formula
LTCG = Sale Price − Purchase Price − Improvement Costs − Transfer Expenses
Tax Payable = LTCG × Applicable Rate
For equity and equity mutual funds (post Budget 2024):
- Gains up to ₹1.25 lakh per year: 0% (exempt)
- Gains above ₹1.25 lakh: 12.5% (no indexation)
For real estate (property purchased before 23 Jul 2024): choose lower of:
- 20% with indexation
- 12.5% without indexation
For real estate (property purchased after 23 Jul 2024): 12.5% without indexation
Worked Example
You bought 1,000 shares of a company at ₹200 each in June 2023. You sold them in August 2024 at ₹350 each (held for over 1 year).
- Sale proceeds = ₹3,50,000
- Purchase price = ₹2,00,000
- LTCG = ₹1,50,000
Tax calculation:
- Exempt up to ₹1,25,000 = ₹0
- Taxable gain = ₹1,50,000 − ₹1,25,000 = ₹25,000
- LTCG tax = ₹25,000 × 12.5% = ₹3,125
Use the LTCG calculator to compute your exact LTCG tax liability.
Key Things to Know
- ₹1.25 lakh exemption is per person, per year: Each taxpayer gets this exemption individually. A couple filing separately can each claim ₹1.25 lakh, effectively making ₹2.5 lakh of equity LTCG tax-free per household per year.
- Grandfathering (pre-2018 equity gains): For equity shares acquired before 31 January 2018, the cost of acquisition is the higher of the actual purchase price or the market price on 31 January 2018. Gains accumulated before this date are grandfathered.
- Indexation removed for most assets post Jul 2024: The Budget 2024 removed the indexation benefit for property purchased after 23 July 2024 but reduced the rate from 20% to 12.5%. For old property bought before this date, the previous 20% + indexation option remains available.
- LTCG on ELSS: ELSS is equity-linked — gains at redemption (after 3-year lock-in) are LTCG taxed at 12.5% above ₹1.25 lakh, not at slab rates.
- vs STCG: If you can wait to cross the LTCG threshold, the tax saving is significant: STCG on equity is taxed at 20%; LTCG above the exemption is taxed at 12.5%. For large gains, timing your sale correctly can save significant tax.