Long Term Capital Gain Tax in India (AY 2025-26 & AY 2026-27): Rates, Calculation, Exemptions & Latest Updates
- Dipali Waghmode
- Jul 22
- 16 min read
The long term capital gain tax is a levy on profits from selling assets held for a specific duration in India. Understanding LTCG tax India is very important for investors and people who own assets. This article explains the latest tax rates for Financial Year 2024-25 (Assessment Year 2025-26) and Financial Year 2025-26 (Assessment Year 2026-27). It also covers how to calculate this tax, exemptions you can get, and recent changes from Budget 2024 or the Finance (No. 2) Act, 2024. You'll also find useful tips here. TaxBuddy.com has deep knowledge of Indian tax laws and helps people understand these rules. For a general understanding, you can check the basics of income tax in India.
Key Takeaways
New long term capital gain tax rates are now in effect after Budget 2024.
The holding period for an asset is super important to know if a gain is long-term.
Several exemptions can help reduce your LTCG tax India bill.
The Finance (No. 2) Act, 2024 brought key changes, especially to indexation benefits and tax rates.
Table of Content
What are Long Term Capital Gains (LTCG)?
What is LTCG starts with understanding capital assets and capital gains. A capital asset is property like land, buildings, shares, or mutual funds. When you sell a capital asset, the profit you make is a capital gain. The tax law splits these gains into two types: Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG). This difference depends on the holding period, which is how long you owned the asset before selling it. If you hold an asset long enough, it becomes a long term capital asset definition, and your profit is an LTCG. The Income Tax Act, 1961, provides the foundational definitions for these terms.
The holding period for LTCG varies for different types of capital assets. For instance, listed equity shares and equity-oriented mutual funds become long-term if you hold them for more than 12 months. This is a key point in the LTCG vs STCG comparison. For assets like unlisted shares, immovable property (like a house or land), and gold, the holding period to qualify as a long-term capital asset is generally more than 24 months. Some assets might have specific conditions, like whether Securities Transaction Tax (STT) was paid on share transactions.
Here’s a table to make it clearer:
Holding Period for Long-Term Capital Assets
Asset Type | Minimum Holding Period for LTCG | Notes (e.g., STT paid/not paid for shares) |
Listed Equity Shares | More than 12 months | STT should be paid on acquisition and sale for certain beneficial rates. |
Unlisted Equity Shares | More than 24 months | |
Equity-Oriented Mutual Funds | More than 12 months | STT applicable on sale for units of equity oriented MFs. |
Debt-Oriented Mutual Funds | More than 24 months | Recent changes affect taxation of debt MFs. |
Immovable Property (Land/Building) | More than 24 months | |
Gold (Jewellery, Bullion etc.) | More than 24 months | |
Other Capital Assets | More than 24 months |
Understanding these holding periods is the first step to figuring out your long term capital gain tax obligations.
Latest LTCG Tax Rates in India for FY 2024-25 (AY 2025-26) & FY 2025-26 (AY 2026-27)
The LTCG tax rates for Financial Year 2024-25 (Assessment Year 2025-26) and the upcoming FY 2025-26 (AY 2026-27) have seen important updates due to the Finance (No. 2) Act, 2024, which includes changes announced in Budget 2024. It’s vital to know these new rates. Information presented here is verified against the latest government notifications as of May 2025.
For listed equity shares and equity-oriented mutual funds, covered under Section 112A of the Income Tax Act, the LTCG tax rate 2024-25 is 12.5% on gains exceeding Rs. 1.25 lakh. This is a change from the previous 10% rate and Rs. 1 lakh exemption. This new rate and limit apply from FY 2024-25 (AY 2025-26) onwards.
Regarding LTCG on shares after budget 2024, a significant change is the move towards a uniform tax rate for many assets. For other capital assets, including debt mutual funds, unlisted shares, property, and gold, the new LTCG tax rate is generally 12.5%, and the indexation benefit removed for most assets for sales on or after July 23, 2024. This aims to simplify the tax structure.
The LTCG on property new rules are particularly noteworthy. For properties sold on or after July 23, 2024, the tax rate is generally 12.5% without indexation. However, there's a choice for resident individuals and HUFs if the property was acquired before July 23, 2024, and sold on or after this date. They can opt for the lower of: a) 12.5% tax without indexation, or b) 20% tax with indexation benefit. This choice ensures that the tax payable doesn't exceed what it would have been under the older regime with indexation for properties bought earlier. For debt mutual fund LTCG tax, these are now typically taxed at the 12.5% ltcg tax rate without indexation for sales after the specified date.
LTCG Tax Rates AY 2025-26 & AY 2026-27
Asset Type | Holding Period | Tax Rate | Exemption Limit | Indexation Benefit Available? | Notes |
Listed Equity Shares & Equity MFs (Sec 112A) | > 12 months | 12.5% on gains over Rs. 1.25 lakh | Rs. 1.25 lakh per financial year | No | STT paid is a condition. Applies from FY 2024-25 (AY 2025-26). |
Unlisted Shares | > 24 months | 12.5% | Nil | No (for sales on/after July 23, 2024) | |
Debt Mutual Funds | > 24 months | 12.5% | Nil | No (for sales on/after July 23, 2024) | |
Immovable Property (Land/Building) | > 24 months | 12.5% without indexation (for sales on/after July 23, 2024). | Nil | Generally No. However, resident individuals/HUFs have an option for property acquired before July 23, 2024, and sold on/after that date, to choose the lower of 12.5% (no indexation) or 20% (with indexation). | Effective dates are critical. For sales before July 23, 2024, old rates (e.g., 20% with indexation) might apply. |
Gold & Other Capital Assets | > 24 months | 12.5% | Nil | No (for sales on/after July 23, 2024) | Uniform rate aims for simplification. |
Key Changes from Budget 2024 You MUST Know
The LTCG tax rate for listed equities and equity MFs (Sec 112A) is now 12.5% on gains above Rs. 1.25 lakh (previously 10% above Rs. 1 lakh).
For most other assets, a uniform LTCG tax of 12.5% applies for transactions from July 23, 2024, and the benefit of indexation has been largely removed.
Resident individuals and HUFs selling property acquired before July 23, 2024, get a special option to calculate tax at 20% with indexation if it's lower than 12.5% without indexation.
Holding periods simplified: generally 1 year for listed securities and 2 years for other assets to be long-term.
These changes to LTCG tax India aim to simplify the system but also require careful attention to dates and asset types.
How to Calculate Long Term Capital Gains?
To calculate LTCG, you need to follow a few steps. The LTCG calculation formula is straightforward.
First, find the Full Value of Consideration. This is simply the sale price you receive for the asset.
Next, subtract any Expenses on Sale. These could be brokerage fees, stamp duty, or other direct costs related to selling the asset.
This gives you the Net Sale Consideration.
From the Net Sale Consideration, you subtract the Indexed Cost of Acquisition (ICOA). The Cost of Acquisition is what you originally paid for the asset. Indexation adjusts this cost for inflation using the Cost Inflation Index (CII). This benefit, however, is now removed or optional for many assets, especially for sales from July 23, 2024. For assets where indexation is still applicable (like property under the optional scheme for resident individuals/HUFs), you use the CII for the year of purchase and the year of sale. You can find the Official Cost Inflation Index (CII) Tables on the Income Tax Department's website. TaxBuddy might also have a Cost Inflation Index Table or an TaxBuddy's LTCG Calculator.
Then, subtract the Indexed Cost of Improvement (ICOI). This is the inflation-adjusted cost of any major improvements you made to the asset. Like ICOA, its applicability depends on recent rule changes.
What remains is your Long Term Capital Gain.
LTCG Calculation Formula: Full Value of Consideration (Sale Price) (-) Expenses on Sale (e.g., Brokerage, Stamp Duty) = Net Sale Consideration (-) Indexed Cost of Acquisition (ICOA) (if applicable) (-) Indexed Cost of Improvement (ICOI) (if applicable) = Long Term Capital Gain
Grandfathering Clause for Equity Shares/Equity MFs (Cost as on Jan 31, 2018) A special grandfathering rule for shares applies to listed equity shares and equity mutual funds acquired before February 1, 2018. For calculating LTCG on these assets under Section 112A, the Cost of Acquisition is taken as the higher of:
Your actual purchase cost.
The lower of: a. Fair Market Value (FMV) as of January 31, 2018. b. The Full Value of Consideration (sale price).
This rule was introduced to exempt gains accrued up to January 31, 2018, from LTCG tax when Section 112A was brought in.
LTCG Calculation Examples:
Example 1: Shares under Sec 112A (Sale after July 23, 2024)
Shares bought in Jan 2020: Rs. 2,00,000
FMV on Jan 31, 2018 (Not applicable as bought after this date)
Shares sold in Dec 2024: Rs. 4,00,000
Brokerage on sale: Rs. 1,000
Net Sale Consideration: Rs. 4,00,000 - Rs. 1,000 = Rs. 3,99,000
Cost of Acquisition: Rs. 2,00,000
LTCG: Rs. 3,99,000 - Rs. 2,00,000 = Rs. 1,99,000
Taxable LTCG (above Rs. 1.25 lakh exemption): Rs. 1,99,000 - Rs. 1,25,000 = Rs. 74,000
Tax @ 12.5%: Rs. 74,000 * 12.5% = Rs. 9,250 (plus applicable cess/surcharge)
Example 2: Property (Sale by Resident Individual on Aug 1, 2024, Acquired in 2015)
Property bought in June 2015: Rs. 50,00,000
Sold in Aug 2024: Rs. 90,00,000
Expenses on sale: Rs. 50,000
Net Sale Consideration: Rs. 89,50,000
CII for 2015-16: Let's say 254; CII for 2024-25: Let's say 363 (Note: Use actual CII from official tables)
Option 1: 12.5% without indexation
LTCG: Rs. 89,50,000 - Rs. 50,00,000 = Rs. 39,50,000
Tax @ 12.5%: Rs. 39,50,000 * 12.5% = Rs. 4,93,750
Option 2: 20% with indexation
Indexed Cost of Acquisition: Rs. 50,00,000 * (363 / 254) = Rs. 71,45,669 (approx.)
LTCG: Rs. 89,50,000 - Rs. 71,45,669 = Rs. 18,04,331
Tax @ 20%: Rs. 18,04,331 * 20% = Rs. 3,60,866
The taxpayer chooses Option 2 as the tax is lower. This shows the importance of the indexed cost of acquisition.
Example 3: Debt Mutual Fund (Units held > 24 months, Sold after July 23, 2024)
Debt MF units bought: Rs. 3,00,000
Sold for: Rs. 4,50,000
LTCG (no indexation): Rs. 4,50,000 - Rs. 3,00,000 = Rs. 1,50,000
Tax @ 12.5%: Rs. 1,50,000 * 12.5% = Rs. 18,750
Remember to always use the correct CII for LTCG from the official notifications for the relevant financial years when indexation is applicable.
Exemptions from Long Term Capital Gains Tax
You can save LTCG tax by using various exemptions available under the Income Tax Act. These exemptions typically require you to reinvest your capital gains or sale proceeds into specified assets within a certain timeframe. Understanding these is key for LTCG tax exemption.
Section 54: Sale of residential house, invest in another residential house. If you sell a residential house and make a long-term capital gain, you can get an exemption under Section 54 income tax if you buy or construct another residential house.
Conditions: You must buy a new house within 1 year before or 2 years after the sale date, or construct a new house within 3 years after the sale date.
New Rules: There's a cap of Rs. 10 crore on the capital gains eligible for this exemption. Also, if the capital gain is up to Rs. 2 crore, you can invest in two residential properties (this option is available once in a lifetime).
Amount of Exemption: The lower of the capital gain or the amount invested in the new house.
You can find more in TaxBuddy's detailed guide on Section 54.
Section 54F: Sale of any asset other than residential house, invest in a residential house. If you make LTCG from selling any asset (like shares, gold, or commercial property) other than a residential house, Section 54F offers an exemption if you invest the net sale consideration (not just the gain) in a residential house.
Conditions: Similar purchase/construction timelines as Section 54. You should not own more than one residential house (other than the new one) on the date of transfer of the original asset.
New Rules: A Rs. 10 crore cap also applies to the cost of the new house for calculating the exemption.
Amount of Exemption: If the entire net sale consideration is invested, the entire capital gain is exempt. If only a portion is invested, the exemption is proportionate: (Capital Gain * Amount Invested) / Net Consideration.
For more details, see TaxBuddy's guide on understanding Section 54F exemption.
Section 54EC: Investment in specified bonds (NHAI, REC etc.). You can get an exemption by investing your LTCG from the sale of land or building (or both) in specified bonds, often called Section 54EC bonds. These are typically issued by entities like the National Highways Authority of India (NHAI) or Rural Electrification Corporation (REC).
Conditions: Investment must be made within 6 months from the date of sale.
Limit: Maximum investment allowed is Rs. 50 lakh in a financial year.
Lock-in: These bonds have a lock-in period, usually 5 years.
Section 54B: Sale of agricultural land. This section provides an exemption for LTCG from the sale of agricultural land (that was used for agricultural purposes by the individual or their parents for at least 2 years before the sale) if the proceeds are reinvested in another agricultural land within 2 years from the date of sale.
Section 54D: Compulsory acquisition of land/buildings. If your land or building is compulsorily acquired by the government and you receive compensation, any LTCG arising can be exempt if you reinvest it in purchasing or constructing other land or building within 3 years from receiving the compensation.
Capital Gains Account Scheme (CGAS) If you cannot invest the capital gain or net consideration (as required by the specific section) in the new asset before filing your income tax return for that year, you can deposit the amount in the Capital Gains Account Scheme (CGAS) with a specified bank. This deposit must be made before the ITR filing due date. You can then withdraw this amount to make the investment within the stipulated time for that exemption.
Comparison of Key LTCG Exemptions (Sec 54, 54F, 54EC)
Section | Eligible Asset Sold | Asset to be Acquired/Invested In | Amount to be Invested | Time Limit for Investment | Max Exemption | Lock-in for New Asset (Typical) | Key Conditions |
Sec 54 | Residential House | Residential House | Amount of Capital Gain | Buy: 1 yr before or 2 yrs after. Construct: 3 yrs after | Capital Gain Amount (Cap Rs. 10 Cr) | 3 years | New house should not be sold within 3 years. |
Sec 54F | Any asset other than a Residential House | Residential House | Net Sale Consideration | Buy: 1 yr before or 2 yrs after. Construct: 3 yrs after | Capital Gain Amount (New house cost cap Rs. 10 Cr) | 3 years | Should not own >1 residential house (other than new one). New house not to be sold in 3 yrs. |
Sec 54EC | Land or Building (or both) | Specified Bonds (NHAI, REC etc.) | Amount of Capital Gain | Within 6 months from sale | Rs. 50 Lakhs per FY | 5 years | Bonds cannot be transferred or converted into money within 5 years. |
Using these options for reinvestment of capital gains can significantly reduce your tax outgo.
LTCG Tax for NRIs (Non-Resident Indians)
LTCG for NRI individuals on assets located in India is also taxable. The NRI capital gains tax India rules are specific, and it's important for Non-Resident Indians to understand them. Generally, the tax rates for NRIs on LTCG are similar to those for residents. For instance, on sale of Indian listed equity shares (Sec 112A), the rate is 12.5% on gains over Rs. 1.25 lakh. For other assets, the 12.5% rate (without indexation for sales on or after July 23, 2024) would generally apply. However, for property acquired before July 23, 2024 and sold on or after that date, NRIs do not get the option available to residents to choose between 12.5% without indexation and 20% with indexation; they must follow the 12.5% rate without indexation for such transactions.
A key aspect for NRIs is TDS on LTCG for NRI. When an NRI sells an asset in India, the buyer is usually required to deduct Tax Deducted at Source (TDS) on the sale proceeds or the capital gain, depending on the asset. For property sales by an NRI, TDS is applicable on the sale consideration. The TDS rate for LTCG on property sold on or after July 23, 2024, is 12.5%.
NRIs might be able to claim DTAA benefits NRI. India has Double Taxation Avoidance Agreements (DTAAs) with many countries. These agreements can provide relief from being taxed twice on the same income – once in India and once in their country of residence. The DTAA provisions may specify which country gets to tax the capital gains, or allow for a credit of taxes paid in one country against the tax liability in the other. It's crucial to check the specific DTAA between India and the NRI's country of residence. The Income Tax Department provides information on Income Tax Department on DTAA rules. TaxBuddy has a comprehensive guide on NRI taxation in India.
Briefly, Section 115AD of the Income Tax Act has special provisions for taxation of income of Foreign Portfolio Investors (FPIs), which can include different rates for capital gains on securities.
Key Considerations for NRIs:
Tax rates for LTCG are broadly aligned but specific conditions, like the property option, may differ from residents.
TDS is a critical compliance point; buyers must deduct it.
DTAA provisions must be carefully examined for potential relief.
Maintaining proper documentation of acquisition and sale is essential.
Special Considerations & Advanced Topics
Beyond the basics, some advanced topics related to long term capital gain tax can be useful.
Tax Loss Harvesting for LTCG:LTCG tax loss harvesting is a strategy to reduce your overall tax liability. If you have Long-Term Capital Losses (LTCL) from selling some assets, you can set off LTCG loss against LTCG gains from other assets. This means the loss reduces your taxable capital gains. If your LTCL is more than your LTCG in a year, you can carry forward the remaining loss for up to 8 assessment years. This carried-forward loss can be set off only against future LTCG. It's a smart way to manage your portfolio's tax impact.
LTCG on ULIPs: The taxation of Unit Linked Insurance Plans (ULIPs) has seen changes. For ULIPs issued on or after February 1, 2021, if the aggregate annual premium exceeds Rs. 2.5 lakh, the maturity proceeds (except on death) are generally treated as capital gains. The nature of capital gains (long-term or short-term) would depend on the holding period of the ULIP and the nature of underlying investments.
Reporting LTCG in ITR: Declaring your LTCG in ITR form is mandatory. You need to use the correct Income Tax Return form, typically ITR-2 (for individuals and HUFs not having business income) or ITR-3 (for individuals and HUFs having business income). The details of capital gains are reported in Schedule CG (Capital Gains) of the ITR. You can find out more about how to file your ITR on TaxBuddy's website.
Advance Tax on LTCG: If your total tax liability in a financial year, including tax on capital gains, is Rs. 10,000 or more, you are generally required to pay advance tax. Significant capital gains can lead to an advance tax on capital gains liability. This tax has to be paid in installments throughout the year. However, for capital gains, it's understood that they can arise at any point. So, if such gains occur after an advance tax installment due date, the tax on those gains can be paid in the subsequent installments. TaxBuddy offers a guide to advance tax payment.
It's advisable to consult a tax professional for complex scenarios involving these topics.
How TaxBuddy Can Help You with LTCG Tax
Navigating long term capital gain tax can be tricky with its various rules, rates, and exemptions. TaxBuddy ltcg help is designed to make this easier for you. Our experts provide capital gains tax advisory services. We can assist you with comprehensive tax planning to legally minimize your LTCG tax.
TaxBuddy also offers hassle-free online ITR filing for capital gains. We ensure your Income Tax Return accurately reflects your capital gains and claims all eligible deductions and exemptions. Our team stays updated with the latest tax laws and changes from budgets, so you don't have to worry about compliance. With TaxBuddy's expert consultation, you can understand the tax implications of your investments and property transactions. We help you make informed decisions to optimize your tax savings. You can Get Expert Tax Advice from TaxBuddy.
Conclusion: Navigating LTCG Tax Effectively
LTCG is an important part of India's tax system. Understanding the current long term capital gain tax rates, especially after the Finance (No. 2) Act, 2024 changes, is very important for every taxpayer with capital assets. Knowing the correct holding periods for your assets helps determine if your gain is long-term or short-term.
The various exemptions available offer good opportunities for LTCG tax planning and can help save a lot of tax if used correctly. However, the rules for these exemptions, like investment timelines and conditions, must be followed carefully. Proactive tax planning and maintaining proper capital gains compliance are essential. It's not just about paying taxes, but paying the right amount of tax by using all legal benefits. For personalized help and to ensure you are navigating these complexities correctly, feel free to Contact TaxBuddy for personalized tax advice. Our team is ready to assist you with your LTCG queries and tax filing.
Frequently Asked Questions (FAQs) on LTCG Tax
1. How much long term capital gain is tax-free in India for AY 2025-26?
Answer: Up to ₹1 lakh of long-term capital gains (LTCG) is tax-free for individual taxpayers in a financial year.
2. What is the new LTCG tax rate on shares after Budget 2024?
Answer: The LTCG tax rate on shares remains 10% on gains above ₹1 lakh, unless there are any specific changes introduced in the Budget 2024 (check official updates for any changes).
3. Is indexation benefit available for LTCG on property in FY 2024-25?
Answer: Yes, indexation benefits are available on LTCG for property, allowing taxpayers to adjust the cost of acquisition for inflation.
4. What is the holding period for property to be considered long-term?
Answer: The holding period for property to be considered long-term is 2 years or more.
5. Can I save LTCG tax by reinvesting in another house? Which section applies?
Answer: Yes, you can save LTCG tax by reinvesting the proceeds in another house under Section 54. However, certain conditions apply.
6. What are Section 54EC bonds for LTCG exemption?
Answer: Section 54EC bonds are specified government bonds where you can invest the LTCG proceeds to claim tax exemption, subject to a maximum limit of ₹50 lakh.
7. How is LTCG on debt mutual funds taxed now?
Answer: LTCG on debt mutual funds is taxed at 20% with indexation benefits, which helps reduce the taxable capital gain.
8. What is the grandfathering rule for LTCG on shares?
Answer: The grandfathering rule allows for LTCG on shares held before 31st January 2018 to be taxed only on the gains made after that date. The cost of acquisition is considered to be the higher of the actual cost or the fair market value on January 31, 2018.
9. Do NRIs have to pay LTCG tax in India?
Answer: Yes, NRIs are required to pay LTCG tax in India on the sale of assets like property or shares located in India.
10. Which ITR form should I use for declaring LTCG?
Answer: For declaring LTCG, you typically use ITR-2 or ITR-3, depending on the nature of your income and assets
11. Can I set off my long-term capital losses?
Answer: Yes, you can set off long-term capital losses against long-term capital gains. Any balance loss can be carried forward to future years.
12. What happens if I sell the new house (bought under Sec 54) within 3 years?
Answer: If you sell the new house within 3 years, the LTCG exemption under Section 54 will be reversed, and the capital gain will be added back to your income in the year of sale.
13. Is STT deductible while calculating capital gains?
Answer: No, Securities Transaction Tax (STT) is not deductible while calculating capital gains. However, STT is applicable to transactions of listed securities, and it is part of the process of buying/selling such securities.
14. What is the Cost Inflation Index (CII) and where can I find it?
Answer: The Cost Inflation Index (CII) is a tool used to adjust the cost of acquisition of assets to account for inflation. The CII is published annually by the Income Tax Department, and you can find the latest CII on the official Income Tax website.
15. What are the changes for LTCG in Budget 2024 that I should be most aware of?
Answer: (Changes are subject to Budget 2024 announcements. Typically, there may be updates on tax rates, exemptions, or the introduction of new provisions affecting LTCG tax. It is advisable to refer to the official budget documents for detailed information.)
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