Long-Term Capital Gains (LTCG): Tax Rates, How to Calculate, Exemptions and Examples

Long-term capital gains (LTCG) refer to the profits earned from selling a capital asset that has been held for more than one year. In India, assets like shares, real estate, and mutual funds are subject to long-term capital gain tax. The tax rate and exemptions depend on the type of asset and the holding period. Understanding LTCG taxation is essential for financial planning.

This article will explain LTCG, tax rates, calculations, exemptions, and examples, helping you manage your investments wisely.

What is long-term capital gain (LTCG)?

LTCG arises when you sell a capital asset after holding it for more than a specified period. In India, this period is typically more than 36 months for most assets. However, for certain assets like listed equity shares and equity-oriented mutual funds, the holding period is more than 12 months. The gain is the difference between the sale price and the cost of acquisition, adjusted for any improvements or expenses related to the sale, and is subject to taxation based on government policies.

Key features:

• LTCG applies to assets held for over one year.
• The taxation of LTCG varies depending on the type of asset.
• Indexation benefits apply to some asset classes, adjusting for inflation.
• Tax exemptions are available under specific sections of the Income Tax Act.

Recognising LTCG is essential as it impacts your tax liabilities and financial decisions.

Budget 2025 long term capital gain tax updates

According to the Budget 2025, the government has retained the long-term capital gain tax structure. The tax rate for equities, mutual funds, and stocks remains at 12.5% for profits exceeding Rs. 1.25 lakh per financial year. The policy aims to maintain consistency and encourage long-term investments.

Notable updates:

• A uniform 12.5% tax rate applies across asset classes.
• No changes to existing exemption limits.
• The government continues to monitor capital market trends to make future adjustments if necessary.

Tax rates for long-term capital gains

Asset type	Tax rate (effective from July 23, 2024)
Listed equity shares	12.5% (on gains > Rs. 1.25 lakh)
Equity-oriented mutual funds	12.5% (on gains > Rs. 1.25 lakh)
Real estate	12.5% (without indexation)
Other non-equity assets	12.5% (without indexation)

How to calculate long-term capital gains?

• Determine the sale price: The amount received from selling the asset.
• Identify the cost of acquisition: The original purchase price of the asset.
• Consider additional costs: Include expenses related to improvement or transfer.
• Calculate LTCG: LTCG = Sale Price - (Cost of Acquisition + Additional Costs)

Calculation of LTCG in a table format

Step	Calculation example
Sale price	Rs. 10,00,000
Cost of acquisition	Rs. 7,00,000
Additional costs	Rs. 50,000
LTCG calculation	Rs. 10,00,000 - (7,00,000 + 50,000) = Rs. 2,50,000

Long-term capital gains tax rate

Asset type	Tax rate
Listed equity shares	12.5%
Equity-oriented mutual funds	12.5%
Real estate	12.5% without indexation
Other non-equity assets	12.5% without indexation

Long-term capital gains tax on shares

Condition	Tax Rate
Gains > Rs. 1.25 lakh	12.5%

Long-term capital gains example

Asset type	Sale price	Cost of acquisition	Additional costs	LTCG	Tax applicable
Equity share	Rs. 10,00,000	Rs. 7,00,000	Rs. 50,000	Rs. 2,50,000	Rs. 2,50,000 x 0.125 = Rs. 31,250

How to fill long-term capital gains in ITR-2?

• Navigate to Schedule CG: Select the appropriate section in the ITR-2 form.
• Enter asset details: Provide details of the capital asset sold.
• Compute LTCG: Enter the calculated LTCG amount.
• Input tax liability: Apply the relevant tax rate and calculate payable tax.
• Verify and submit: Cross-check details before filing the return.

Long-term capital gains tax exemptions

• Exemption limit: LTCG up to Rs. 1.25 lakh on equity investments is tax-free.
• Grandfathering clause: For assets bought before January 31, 2018, tax applies only on gains exceeding the highest price on that date.
• Section 54 exemptions: Gains from the sale of property can be reinvested in residential property to avail of tax exemption.

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