Long-Term Capital Gains (LTCG): Tax Rates, Holding Period, Calculation, Exemptions, and Examples
- Kanchan Bhatt
- May 14
- 10 min read
Updated: Jul 1
Long-Term Capital Gains (LTCG) are profits earned from selling a capital asset after holding it for the prescribed long-term period. These assets may include listed shares, equity mutual funds, land, house property, gold, debt instruments, and other investments. For listed equity shares and equity-oriented mutual funds, the asset is generally treated as long-term if held for more than 12 months. For many other assets, such as property and gold, the holding period is generally more than 24 months.
LTCG tax treatment depends on the type of asset sold and the applicable section of the Income Tax Act. Gains from eligible listed equity shares and equity-oriented mutual funds are taxed under Section 112A, while gains from other long-term capital assets may be taxed under Section 112. Taxpayers should also check available exemptions, indexation rules, and reporting requirements before filing their Income Tax Return.
Table of content
Key Points on Long-Term Capital Gains
Particulars | Details |
Meaning | Profit from selling a long-term capital asset |
Common Assets Covered | Shares, mutual funds, property, gold, land, bonds |
Listed Equity Holding Period | More than 12 months |
Property Holding Period | More than 24 months |
LTCG on Listed Equity | Taxed under Section 112A, subject to applicable exemption limit |
LTCG on Other Assets | Taxed as per applicable long-term capital gains rules |
Common Exemptions | Section 54, Section 54EC, Section 54F, Section 54B |
ITR Reporting | Reported under Schedule CG in the applicable ITR form |
What is Long-Term Capital Gain (LTCG)?
Long-Term Capital Gain means the profit earned when a capital asset is sold after holding it for the prescribed long-term period. The holding period depends on the type of asset. For listed equity shares and equity-oriented mutual funds, the asset is usually treated as long-term if held for more than 12 months. For residential property and many other assets, the long-term holding period is generally more than 24 months.
Example of LTCG on Listed Equity Shares
Particulars | Details |
Investor name | Meera |
Asset sold | Listed equity shares |
Purchase month | June 2024 |
Purchase value | ₹2,00,000 |
Sale month | August 2025 |
Sale value | ₹3,40,000 |
Holding period | More than 12 months |
Profit earned | ₹1,40,000 |
Type of gain | Long-Term Capital Gain |
Since Meera held the listed equity shares for more than 12 months, the profit of ₹1,40,000 will generally be treated as long-term capital gain, subject to applicable tax rules.
Example of LTCG on Residential Property
Particulars | Details |
Asset sold | Residential property |
Holding period | More than 24 months |
Tax treatment | Profit is generally treated as Long-Term Capital Gain |
LTCG Tax Rates by Asset Category in India
Long-term capital gains tax depends on the type of asset, holding period, and the applicable section of the Income Tax Act. Different assets such as listed shares, equity mutual funds, property, gold, and debt mutual funds may have different tax treatment.
Asset Category | When It Becomes Long-Term | Applicable Tax Treatment |
Listed equity shares | Held for more than 12 months | Taxed at 12.5%, subject to applicable exemption limit |
Equity-oriented mutual funds | Held for more than 12 months | Taxed at 12.5%, subject to applicable exemption limit |
Units of business trusts | Held for more than 12 months | Taxed at 12.5%, subject to applicable exemption limit |
Land or building | Held for more than 24 months | Taxed as per applicable LTCG provisions |
Gold, jewellery, or gold ETF | Held for more than 24 months | Taxed as per applicable LTCG provisions |
Specified debt mutual funds | Holding period rules may vary based on purchase date and fund type | Taxed as per applicable slab or capital gains rules |
Important Notes:
LTCG on listed equity shares, equity-oriented mutual funds, and business trust units may get an exemption up to the prescribed limit.
For certain property cases, taxpayers should check whether indexation benefit or special provisions apply.
Debt mutual fund taxation depends on the date of investment and fund classification.
Step-by-Step Process to Calculate Long-Term Capital Gains (LTCG)
Calculating Long-Term Capital Gains (LTCG) involves determining the sale value of the asset, reducing eligible expenses, adjusting the acquisition cost wherever applicable, and claiming eligible exemptions before arriving at the taxable capital gain.
Step 1: Determine the Sale Value
Start with the total amount received or receivable from selling the capital asset. This is the full value of consideration used for calculating the capital gain.
Step 2: Deduct Transfer-Related Expenses
Reduce expenses that are directly connected with the sale, such as brokerage, legal charges, stamp duty paid by the seller, or other eligible transfer costs. The remaining amount becomes the net sale consideration.
Step 3: Calculate the Cost of Acquisition
Deduct the original purchase price of the asset. Where permitted under the Income Tax Act, taxpayers may also consider the indexed cost of acquisition for eligible assets.
Step 4: Deduct Cost of Improvement
If money has been spent on improving the asset and the expenditure qualifies under the Income Tax Act, the eligible improvement cost can also be deducted while calculating LTCG.
Step 5: Claim Eligible Exemptions
Taxpayers may reduce the taxable capital gain by claiming exemptions available under applicable provisions such as Section 54, Section 54B, Section 54D, Section 54EC, or Section 54F, provided all prescribed conditions are satisfied.
Step 6: Calculate Taxable Long-Term Capital Gain
After deducting all eligible costs and exemptions, the remaining amount becomes the taxable long-term capital gain. The applicable LTCG tax rate depends on the type of asset and the relevant provisions of the Income Tax Act.
Illustrative LTCG Calculation
Particulars | Amount (₹) |
Sale value of asset | 58,00,000 |
Less: Transfer expenses | 80,000 |
Net sale consideration | 57,20,000 |
Less: Cost of acquisition | 35,00,000 |
Less: Cost of improvement | 2,20,000 |
Long-Term Capital Gain | 20,00,000 |
Less: Eligible exemption claimed | 5,00,000 |
Taxable Long-Term Capital Gain | 15,00,000 |
Formula for LTCG Calculation
Taxable LTCG = Sale Value − Transfer Expenses − Cost of Acquisition − Cost of Improvement − Eligible Exemptions
Note: The tax payable on LTCG depends on the type of capital asset sold and the applicable tax provisions. Certain assets may also qualify for indexation or other special tax rules as prescribed under the Income Tax Act.
LTCG Calculator, Grandfathering Rules, Indexation, and Exemptions
You can use a capital gains calculator to estimate long-term capital gains tax on different assets such as shares, mutual funds, property, gold, and other investments. It helps taxpayers understand the taxable gain, applicable tax rate, and possible exemption amount before filing the ITR.
Grandfathering Rule for Listed Equity Investments
Grandfathering provisions apply to certain listed equity shares and equity-oriented mutual funds acquired before the specified cut-off date. These rules help determine the cost of acquisition for eligible investments while calculating LTCG.
Indexation Benefit on Long-Term Capital Gains
Indexation is a tax adjustment mechanism used to revise the cost of acquisition of a long-term capital asset based on inflation.
It is calculated with reference to the Cost Inflation Index (CII) notified by the Income Tax Department.
By applying indexation, the indexed cost of acquisition increases, which may reduce the taxable long-term capital gain.
After the Budget 2024 amendment, many long-term capital gains are taxable at 12.5% without indexation benefit.
However, for land or building acquired before 23 July 2024, a resident individual or HUF may be eligible to choose between:
12.5% tax without indexation, or
20% tax with indexation
This option is subject to the conditions prescribed under the Income Tax Act.
Therefore, while computing LTCG on property, taxpayers should check the asset type, date of acquisition, date of transfer, and eligibility for indexation before finalising the tax liability.
Exemptions Available on Long-Term Capital Gains
Certain LTCG exemptions are available when the capital gain or sale proceeds are reinvested in eligible assets within the prescribed time limit. These exemptions are subject to conditions under the Income Tax Act.
Exemption Section | Asset Sold | Investment Required | Maximum Benefit |
Section 54 | Residential house property | New residential house property | Subject to prescribed limit |
Section 54EC | Land or building | Specified bonds such as eligible infrastructure bonds | Up to ₹50 lakh |
Section 54F | Any long-term capital asset other than residential house | New residential house property | Based on proportion of investment |
Section 112A | Listed equity shares, equity mutual funds, business trust units | No reinvestment required | Exemption up to applicable limit |
These exemptions should be claimed carefully while filing the Income Tax Return, as each section has different conditions, timelines, and investment requirements.
LTCG Calculation Example: With and Without Indexation
Let’s understand long-term capital gains with a fresh example. Suppose Arjun bought a residential house in 2006 for ₹18,00,000 and sold it in August 2025 for ₹72,00,000. If he is eligible to choose between indexation and without indexation, the LTCG calculation may differ.
Example 1: LTCG Calculation With Indexation
Particulars | Amount |
Sale value of house property | ₹72,00,000 |
Less: Transfer expenses | ₹1,00,000 |
Net sale consideration | ₹71,00,000 |
Less: Indexed cost of acquisition | ₹57,84,615 |
Less: Indexed cost of improvement | Nil |
Long-Term Capital Gain | ₹13,15,385 |
Less: Eligible exemption, if any | Nil |
Taxable LTCG | ₹13,15,385 |
When indexation is applied, the purchase cost is adjusted for inflation, which reduces the taxable capital gain. The applicable tax rate should be checked as per the relevant provisions.
Example 2: LTCG Calculation Without Indexation
Particulars | Amount |
Sale value of house property | ₹72,00,000 |
Less: Transfer expenses | ₹1,00,000 |
Net sale consideration | ₹71,00,000 |
Less: Original purchase cost | ₹18,00,000 |
Less: Cost of improvement | Nil |
Long-Term Capital Gain | ₹53,00,000 |
Less: Eligible exemption, if any | Nil |
Taxable LTCG | ₹53,00,000 |
Without indexation, the original purchase cost is deducted directly from the net sale value. This usually results in a higher taxable capital gain, but the applicable tax rate may differ depending on the tax rule selected.
Capital Gains Account Scheme for Claiming Exemption
If the taxpayer wants to claim an LTCG exemption but cannot reinvest the amount before the ITR filing due date, the unutilised amount may be deposited in the Capital Gains Account Scheme. This helps preserve the exemption claim, subject to the prescribed conditions and timelines.
LTCG Tax on Different Assets
Long-term Capital Gain Tax on Shares
Listed equity shares qualify as Long-Term Capital Assets if held for at least 12 months. It is determined by subtracting the purchase price from the sale price of shares held for over a year.
In contrast, gains from unlisted equity shares are categorized as Long-Term only if the holding period is a minimum of 24 months.
The gain reflects the investor's net profit from the sale of the shares.
Long-term Capital Gain Tax on Property
Long-Term Capital Gain arises from selling property held for more than 24 months.
The tax rate shall be 12.5% without the indexation benefit.
There are certain exemptions available to further reduce your LTCG chargeable to tax.
In case of a sale of land and building made after 23rd July 2024, the taxpayer will have the option to pay tax at 20% with indexation benefit and at 12.5% without indexation benefit if such land/building had been acquired on or before 22nd July 2024.
Clarifications on Treatment of Certain Assets
It was clarified that ULIPs with premiums exceeding 10% of the policy’s sum assured, alongside those with annual premiums above Rs. 2.5 lakh - the maturity proceeds should be treated as capital gains.
It is proposed to amend Section 2(14) to clarify that securities held by investment funds under Section 115UB, will be treated as capital assets.
Long-Term vs Short-Term Capital Gains: Key Differences
Capital gains are mainly classified based on how long the asset is held before sale. The holding period, tax rate, indexation benefit, exemption options, and reporting treatment may differ for long-term and short-term capital gains.
Basis | Long-Term Capital Gains (LTCG) | Short-Term Capital Gains (STCG) |
Meaning | Profit earned from selling a capital asset after the prescribed long-term holding period | Profit earned from selling a capital asset within the prescribed short-term holding period |
Holding period | Generally more than 12 months for listed equity and equity mutual funds; more than 24 months for many other assets | Generally 12 months or less for listed equity and equity mutual funds; 24 months or less for many other assets |
Indexation benefit | Available only in specified cases, subject to applicable rules | Not available |
Grandfathering rule | May apply to eligible listed equity investments acquired before the prescribed cut-off date | Generally not applicable |
Tax rate | Depends on the asset type and applicable LTCG provisions | Section 111A gains are taxed at 20%; other STCG is usually taxed as per slab rate |
Exemptions | More exemption options may be available, subject to conditions | Exemptions are limited and apply only in specific cases |
How to Report Long-Term Capital Gains in ITR-2
Long-term capital gains should be reported in Schedule CG of the applicable Income Tax Return form. In ITR-2, taxpayers need to enter asset-wise capital gain details, including sale value, purchase cost, expenses, exemptions, and taxable gain. The final capital gains amount is then reflected in the total income schedule of the return.
Conclusion
Long-term capital gains tax depends on the asset type, holding period, tax rate, exemption eligibility, and reporting accuracy. Holding an asset for the required period may help taxpayers qualify for long-term tax treatment. Proper planning can also help reduce tax liability through eligible exemptions and correct ITR reporting.
FAQs
Q1. What is the current LTCG tax rate in India?
The LTCG tax rate depends on the type of asset sold. Listed equity shares and equity-oriented mutual funds are generally taxed at 12.5% after the applicable exemption limit. For certain property cases, taxpayers should check whether the 12.5% rate or the 20% rate with indexation option applies.
Q2. How much LTCG on listed shares is exempt?
Long-term capital gains on listed equity shares, equity-oriented mutual funds, and eligible business trust units are exempt up to ₹1.25 lakh in a financial year. Gains above this limit are taxable as per applicable rules.
Q3. Is the basic exemption limit available for LTCG?
Yes. Resident individuals can use the unused basic exemption limit against long-term capital gains, subject to applicable conditions under the Income Tax Act.
Q4. How is LTCG on property taxed in India?
LTCG on land or building generally arises when the property is sold after being held for more than 24 months. The tax treatment depends on the date of acquisition, date of sale, and whether indexation or special tax options are available.
Q5. Can LTCG tax be reduced legally?
Yes. LTCG tax can be reduced by claiming eligible exemptions such as Section 54, Section 54B, Section 54EC, or Section 54F, if the taxpayer meets the required conditions and reinvestment timelines.
Q6. Is Section 112A exemption available under both tax regimes?
Yes. The exemption available under Section 112A can generally be claimed irrespective of whether the taxpayer chooses the old tax regime or the new tax regime.
Q7. Can NRIs claim Section 112A exemption?
Yes. Non-residents may also claim the applicable exemption under Section 112A, subject to the conditions of the Income Tax Act.
Q8. Is indexation benefit available on LTCG?
Indexation benefit is available only in specified cases. Taxpayers should check the type of asset, purchase date, and applicable rules before using indexation for LTCG calculation.
Q9. Which ITR form should be used for LTCG?
Individuals with capital gains generally need to file ITR-2 if they do not have business or professional income. If they have business or professional income along with capital gains, ITR-3 may be applicable.
Q10. Can long-term capital loss be adjusted against other income?
No. Long-term capital loss cannot be adjusted against salary, business income, or other income. It can generally be adjusted only against long-term capital gains, subject to applicable rules.
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