How to Correctly Enter STCG and LTCG in Schedule CG of Your ITR

Asharam Swain
Jul 24
9 min read

When filing your Income Tax Return (ITR) for the Financial Year (FY) 2024-25 (Assessment Year 2025-26), it is crucial to correctly report your capital gains. Capital gains commonly arise from the sale of assets like property, stocks, bonds, and mutual funds, and are classified as Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG) based on the holding period. These two categories have different tax rates that investors must understand to accurately calculate and report their tax liability.

Short-Term Capital Gains (STCG) are gains made from selling an asset held for a period less than the prescribed threshold, generally 24 months for most assets but 12 months for listed equity shares and equity mutual funds. From July 23, 2024, the STCG tax rate on listed equity shares and equity mutual funds (where Securities Transaction Tax is paid) has increased to 20% (up from 15%). For other assets such as real estate, debt funds, bonds, or gold, STCG is taxed according to the individual’s applicable income tax slab rates.

Understanding STCG and LTCG: Definitions & Latest Tax Rates
How to Correctly Enter STCG and LTCG in Schedule CG
Key Updates for AY 2025-26
Conclusion
FAQs

Understanding STCG and LTCG: Definitions & Latest Tax Rates

Long-Term Capital Gains (LTCG) occur when assets are held beyond the specified holding period—more than 24 months for real estate, bonds, etc., and more than 12 months for listed stocks and equity mutual funds. Effective July 23, 2024, a uniform LTCG tax rate of 12.5% applies to all asset classes without the benefit of indexation (earlier LTCG on non-equity assets was 20% with indexation). For listed equity shares and equity mutual funds, LTCG exceeding ₹1.25 lakh in a financial year is taxed at 12.5%. For real estate acquired before July 23, 2024, taxpayers may opt to pay LTCG tax at 12.5% without indexation or 20% with indexation.

These revised tax rates and holding periods simplify the capital gains tax structure, replacing multiple slab rates and indexation options with a more uniform regime. The basic exemption limit for LTCG has increased from ₹1 lakh to ₹1.25 lakh for equity assets, giving taxpayers greater tax relief. It is important to stay updated on these changes for accurate tax filing and optimal investment and tax planning.

How to Correctly Enter STCG and LTCG in Schedule CG

When filing your ITR, the reporting of STCG and LTCG is done through Schedule CG (Capital Gains). This schedule captures all the details about the sale of assets and helps in determining the taxable capital gains.

Here’s how you can correctly report STCG and LTCG:

Report STCG: For Short-Term Capital Gains (STCG) on listed equity shares and equity-oriented mutual funds, enter the details under the "Short-Term Capital Gains" section of the Income Tax Return (ITR). The applicable tax rate is now 20% (up from 15%) if the assets are held for 12 months or less and Securities Transaction Tax (STT) has been paid.
For other assets, such as real estate or debt funds, enter the details under their respective categories, where STCG is taxed according to the individual’s applicable income tax slab rates.
Report LTCG:
For Long-Term Capital Gains (LTCG) on listed equity shares and equity-oriented mutual funds, if the gains exceed ₹1.25 lakh in a financial year, report these under the LTCG section in your ITR. LTCG on these assets is taxed at 12.5% without the benefit of indexation. This rate replaces the earlier 10% tax and increased exemption limit from ₹1 lakh to ₹1.25 lakh.
For LTCG on other long-term assets like real estate, debt mutual funds, gold, or unlisted shares, enter the gains under the appropriate long-term capital gains section in your ITR. Since July 23, 2024, LTCG on such assets is taxed at a uniform rate of 12.5% without indexation for assets acquired on or after this date. For assets acquired before July 23, 2024, taxpayers may opt to pay LTCG tax at 12.5% without indexation or 20% with indexation (which adjusts cost for inflation). Correct reporting ensures accurate tax calculation and compliance.

The calculation of capital gains involves deducting the cost of acquisition (adjusted for inflation in case of LTCG with indexation) and any expenses related to the sale of the asset from the sale price. The resulting value is your capital gain, which should be accurately entered in Schedule CG.

Key Updates for AY 2025-26

For the Assessment Year (AY) 2025-26, the Indian government has introduced a set of crucial changes in the taxation of capital gains, especially concerning long-term capital gains (LTCG) from listed equities and real estate. These changes have far-reaching implications for individual taxpayers, investors, and real estate holders, necessitating a careful understanding of how these updates affect tax planning and filing. Below, we detail the major updates, which impact how individuals report their capital gains and the resulting tax liabilities.

Increased LTCG Exemption Limit for Equity

One of the key updates for the Assessment Year 2025-26 is the increase in the exemption limit for Long-Term Capital Gains (LTCG) on listed equities. The government has raised the threshold for tax-free LTCG from ₹1.25 lakh to ₹1.5 lakh. This means that taxpayers can now earn up to ₹1.5 lakh in LTCG from listed equities (such as stocks and equity mutual funds) without incurring any tax. Any gains above this amount will be taxed at a flat rate of 12.5% without the benefit of indexation.

This change improves tax relief for investors with substantial stock market holdings by allowing a larger portion of capital gains to remain exempt. For example, if you earn ₹2 lakh in LTCG from equities, the first ₹1.5 lakh will be tax-exempt, and the remaining ₹50,000 will be taxed at 12.5%.

No Indexation for Equities

A significant update is the removal of indexation benefits for long-term capital gains on listed equities and equity mutual funds. Indexation, which adjusts the purchase price for inflation to reduce taxable gains, is no longer allowed for these assets. Earlier, some forms of indexation were available to reduce LTCG tax, but now LTCG on listed equities is taxed at 12.5% without indexation.

While removing indexation simplifies computations, it can result in higher taxable gains for investors holding stocks or mutual funds over long periods. For example, an investor who purchased shares in 2010 for ₹100,000 can no longer adjust this cost for inflation. The entire gain above ₹1.5 lakh will be taxed at 12.5%, potentially increasing tax liability compared to assets like real estate where indexation still applies for LTCG.

These updates reflect the changes introduced and retained in Union Budgets 2024 and 2025, effective FY 2024-25 and onwards, harmonizing LTCG taxation with increased exemption limits and standardized rates, while eliminating indexation benefits on listed equity assets.

Real Estate Exemption

The taxation rules for Long-Term Capital Gains (LTCG) on real estate have also undergone a change for AY 2025-26. Under Section 54 of the Income Tax Act, individuals who sell a property and reinvest the capital gains into purchasing another residential property are eligible for a tax exemption on their LTCG. The government has expanded the exemption under Section 54 to allow for more deductions for individuals who reinvest their gains into residential property.

Previously, the exemption was capped at the amount of the capital gains used to purchase the new property. However, the updated rules allow individuals to claim exemptions based on a higher amount, providing more flexibility in utilizing LTCG for purchasing new residential properties. This change could benefit real estate investors, homeowners, and those looking to downsize or upgrade their homes, as it lowers their overall tax liability by allowing more of their gains to be reinvested in real estate without incurring taxes.

The expanded exemption applies only to residential properties, and the taxpayer must reinvest the proceeds into one or more properties within a specific timeframe (usually one year before or after the sale). The key takeaway here is that the government aims to encourage investment in the real estate market and support homeowners, while also making the process of reinvesting gains more tax-efficient.

Impact on Capital Gains Tax Calculation

These updates have significant implications for how individuals calculate and report their capital gains. The increase in the exemption limit for equities allows investors to benefit from higher tax-free gains, while the removal of indexation for equities simplifies the tax process but may increase the taxable gain for long-term equity investors.

For real estate investors, the expanded Section 54 exemption means that more of their gains can be used to purchase new property without incurring tax liability. This update provides additional incentives for individuals to reinvest in the real estate sector, which could help boost housing market activity.

However, taxpayers must be diligent in understanding these changes to ensure proper tax planning. The new rules also mean that careful tracking of equity investments and real estate transactions is essential to maximize exemptions and minimize tax liabilities. Investors may need to consult with a tax professional or use digital tax filing platforms like TaxBuddy, which offer guidance on leveraging these new provisions to their advantage.

Conclusion

Accurately reporting STCG (Short-Term Capital Gains) and LTCG (Long-Term Capital Gains) is a crucial part of filing your ITR, as it directly impacts your tax liability. Understanding the definitions, tax rates, and how to correctly enter capital gains in Schedule CG ensures that you comply with the tax laws while minimizing your tax burden. For the Financial Year 2024-25 (Assessment Year 2025-26), the updated tax rates for STCG and LTCG should be carefully applied, especially with the recent changes. Always ensure you are aware of the latest tax provisions and exemptions available to you. If you're unsure or need professional help, using platforms likeTaxBuddy mobile appcan simplify the process and ensure that your capital gains are reported accurately and in compliance with the law.

Frequently Asked Question (FAQs)

Q1: What is the difference between STCG and LTCG? Short-Term Capital Gains (STCG) refer to profits earned from selling an asset held for less than the prescribed holding period. For listed equities and equity mutual funds, the holding period is less than 12 months, while for most other assets, it is less than 24 months. Long-Term Capital Gains (LTCG) arise from assets held for more than 12 months for listed equities and more than 24 months for other assets. These revised holding periods simplify earlier varied thresholds and apply uniformly as per the Union Budget 2024.

Q2: What is the tax rate for STCG on equities?

STCG on listed equities and equity mutual funds held for 12 months or less is taxed at a flat rate of 20% effective July 23, 2024 (up from 15%). This rate applies to individual taxpayers, HUFs, and others, while corporate taxpayers may have different rates.

Q3: How is LTCG on equities taxed?

LTCG on listed equities and equity-oriented mutual funds exceeding ₹1.25 lakh in a financial year are taxed at a flat rate of 12.5% without indexation. Gains up to ₹1.25 lakh are exempt from tax. This replaces the earlier ₹1 lakh exemption and 10% tax rate, aligning LTCG taxation with other capital assets.

Q4: What are the updates for LTCG taxation in AY 2025-26?

From AY 2025-26 onwards, a uniform LTCG tax rate of 12.5% without indexation applies to all assets, including listed equities, equity mutual funds, real estate, bonds, and others. Real estate properties acquired before July 23, 2024, allow a choice between paying 12.5% without indexation or 20% with indexation.

Q5: How do I calculate LTCG with indexation?

For assets eligible for indexation (mainly real estate acquired before July 23, 2024), calculate LTCG by subtracting the indexed cost of acquisition from the sale price. The indexed cost is computed by multiplying the original purchase price by the ratio of the Cost Inflation Index (CII) for the year of sale to the CII of the year of acquisition. This reduces taxable gains by adjusting for inflation.

Q6: Are there any exemptions available for LTCG on real estate?

Yes, Section 54 provides exemption from LTCG tax when gains from the sale of residential property are reinvested in another residential property. The new property must be purchased within one year before or two years after the sale, or constructed within three years. The exemption is subject to the new property’s value being equal to or exceeding the capital gains amount.

Q7: How do I report STCG and LTCG in my ITR?

STCG and LTCG must be reported in Schedule CG (Capital Gains) of your Income Tax Return. Provide details such as asset description, sale price, cost of acquisition, and holding period. Apply the correct tax rates—20% for STCG and 12.5% for LTCG—and include exemptions like Section 54 when applicable.

Q8: Can I offset my capital gains with losses?

Yes, you can set off capital losses against capital gains within the same category. Short-term capital losses (STCL) can offset both STCG and LTCG, while long-term capital losses (LTCL) can only offset LTCG. Unutilized losses can be carried forward for up to eight assessment years.

Q9: What happens if I fail to report capital gains correctly?

Incorrect reporting can attract penalties, interest on unpaid taxes, and scrutiny from tax authorities. Notices under Section 143(1) and penalties under Section 271(1)(c) may be issued. To avoid this, report all capital gains accurately with proper documentation.

Q10: How can I minimize my capital gains tax?

Reduce your tax burden by utilizing exemptions under Sections like 54 (real estate), investing in specified tax-saving instruments, holding assets beyond the long-term threshold, applying indexation where available, and offsetting losses against gains. Consultation with a tax advisor is recommended for personalised planning.

Q11: Is there any relief for LTCG on equity mutual funds?

Yes, LTCG on equity mutual funds exceeding ₹1.25 lakh in a financial year is taxed at 12.5% without indexation, the same as listed equities. Gains below this threshold are exempt. The exemption limit is combined across equity mutual funds and listed equity shares.

Q12: Can I carry forward my capital losses?

Capital losses, both short-term and long-term, can be carried forward for eight years, subject to proper declaration in returns. STCL offsets both STCG and LTCG, while LTCL offsets only LTCG, aiding future tax planning.