Long-Term Capital Gains (LTCG) Tax on Shares in India (FY 2024-25 / AY 2025-26): A Comprehensive Guide

Long-term capital gain tax on shares is a significant consideration for anyone investing in the Indian stock market. Understanding the long-term capital gains (LTCG) on shares is very important for investors to calculate their taxes accurately and make smart investment choices. This guide will explore all aspects of LTCG on shares in India for the Financial Year (FY) 2024-25, corresponding to the Assessment Year (AY) 2025-26. It includes the latest updates from Budget 2024, how to calculate these gains, available exemptions, and the process for filing your Income Tax Return (ITR). For reliable tax information and services, including expert ITR filing services, many people turn to platforms like Taxbuddy. The capital gains tax on shares can appear complicated, but this article simplifies it. We aim to clarify the ltcg tax rate 2024-25 for all investors in India.

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Table of Content

• What are Long-Term Capital Gains (LTCG) on Shares?

• LTCG Tax Rate on Shares for FY 2024-25 (AY 2025-26) - Impact of Budget 2024

• How to Calculate Long-Term Capital Gains on Shares?

• Exemption on Long-Term Capital Gains from Shares

• Set-off and Carry Forward of Long-Term Capital Losses (LTCL) from Shares

• How to Report LTCG on Shares in Your Income Tax Return (ITR)?

• Advance Tax Liability on LTCG from Shares

• Key Considerations & Tips for Managing LTCG Tax on Shares

• LTCG on Shares vs. STCG on Shares: A Quick Comparison

• Conclusion: Navigating LTCG on Shares with Taxbuddy

• Frequently Asked Questions (FAQs) on LTCG Tax on Shares

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What are Long-Term Capital Gains (LTCG) on Shares?

To define ltcg on shares, one must first understand what a capital asset is. A capital asset, in this context, primarily refers to shares of a company. When an investor sells these shares for a profit, that profit is called a capital gain. The Indian Income Tax Act categorizes these gains based on the holding period for ltcg on shares. Specifically for listed equity shares, if an investor holds them for more than 12 months before selling, the shares become a long-term capital asset. The profit from selling such long-term capital assets is termed as Long-Term Capital Gains (LTCG).

The types of shares covered under these rules are typically equity shares for ltcg that are listed on a recognized stock exchange in India. Section 2(42A) of the Income Tax Act provides the definition for the holding period, establishing the 12-month criterion for listed shares to be considered long-term. Understanding these basic income tax concepts is the first step for any stock market participant.

Here’s a simple table to distinguish between Short-Term Capital Asset (STCA) and Long-Term Capital Asset (LTCA) for listed equity shares:

Type of Asset	Holding Period	Classification
Listed Equity Shares	12 months or less	STCA
Listed Equity Shares	More than 12 months	LTCA

LTCG Tax Rate on Shares for FY 2024-25 (AY 2025-26) - Impact of Budget 2024

The ltcg tax rate on shares 2024-25 is governed by Section 112A of the Income Tax Act. Budget 2024 brought noteworthy changes applicable to FY 2024-25 (AY 2025-26). One of the most significant budget 2024 ltcg changes is that long-term capital gains on listed equity shares exceeding ₹1.25 lakh in a financial year are now taxed at 12.5%. This is an increase from the previous rate of 10% on gains over ₹1 lakh. It's important to note that no benefit of indexation is available for calculating LTCG under Section 112A.

The effective date for these new rates, particularly the 12.5% tax, applies to transactions on or after July 23, 2024, for a uniform rate across asset classes, but the ₹1.25 lakh exemption limit applies for the full FY 2024-25. Taxpayers should verify the precise applicability based on official notifications from the Income Tax Department or the Finance Act 2024. For Section 112A to apply, Securities Transaction Tax (STT) must have been paid on both the acquisition (if applicable, though generally on sale) and sale of such equity shares. The stt on shares ltcg is a key condition. The ltcg tax on shares above 1.25 lakh is now a clear 12.5%. The section 112a tax rate has been updated, superseding the older regime. For the latest information, it is always advisable to consult the latest tax updates or refer to the Official Income Tax Department Guidelines.

Here's a comparison:

LTCG Tax on Shares: FY 2024-25 (AY 2025-26) vs. Earlier Year

Feature	FY 2024-25 (AY 2025-26)	Previous FY (FY 2023-24 / AY 2024-25)
Exemption Limit	₹1.25 lakh	₹1 lakh
Tax Rate above Exemption	12.5%	10%
Indexation Benefit	No	No
Governing Section	Section 112A	Section 112A

How to Calculate Long-Term Capital Gains on Shares?

To calculate ltcg on shares, investors need to follow a specific method. The ltcg calculation formula india involves a few key steps. First, determine the Full Value of Consideration, which is simply the sale price you received from selling the shares. From this sale price, you can deduct expenses incurred wholly and exclusively in connection with such transfer. These typically include brokerage or commission paid on the sale. It's important to note that STT is a separate levy and is not deducted here for calculating the capital gain itself, though its payment is necessary for availing the concessional tax rate under Section 112A.

Next, deduct the Cost of Acquisition (COA). The cost of acquisition shares is the original purchase price of the shares. A crucial aspect here is the Grandfathering Rule for shares acquired on or before January 31, 2018. For such shares, the COA is determined differently. If shares were bought before February 1, 2018, the cost of acquisition is taken as the higher of the actual purchase price and the Fair Market Value (FMV) as on January 31, 2018, but this value cannot exceed the actual sale price. The FMV is usually the highest price quoted on the stock exchange on January 31, 2018. This rule effectively exempts gains accrued up to January 31, 2018.

The Cost of Improvement, if any, is generally not applicable for shares. After these deductions, the resulting figure is your Long-Term Capital Gain. Always use actual contract notes and demat statements for accurate figures.

Here's the formula: LTCG = Sale Consideration (Sale Price) - Expenses on Sale (e.g., Brokerage) - Cost of Acquisition

Let’s look at an example for shares purchased after January 31, 2018, and sold in FY 2024-25: Suppose an investor bought 100 shares of Company XYZ at ₹200 per share on March 15, 2022. The investor sold these 100 shares on April 20, 2024, at ₹350 per share. Brokerage paid on sale was ₹100.

• Full Value of Consideration (Sale Price): 100 shares * ₹350/share = ₹35,000

• Expenses on Sale: ₹100 (Brokerage)

• Cost of Acquisition (COA): 100 shares * ₹200/share = ₹20,000

• Long-Term Capital Gain: ₹35,000 - ₹100 - ₹20,000 = ₹14,900

In this example, the LTCG is ₹14,900. This amount would then be subject to the ₹1.25 lakh exemption, and any excess would be taxed at 12.5%.

Exemption on Long-Term Capital Gains from Shares

The primary ltcg exemption limit shares for FY 2024-25 (AY 2025-26) provides significant relief to investors. Long-term capital gains arising from the sale of listed equity shares (where STT is paid and the conditions of Section 112A are met) are exempt up to ₹1.25 lakh in a financial year. This means that if your total LTCG from such shares in a financial year is ₹1.25 lakh or less, you effectively pay no tax on these gains. It's crucial to understand that this is a threshold; gains above this ₹1.25 lakh limit are taxed at 12.5%. This tax free ltcg on shares up to the threshold is a key benefit under section 112a exemption.

While Section 54F of the Income Tax Act allows for an exemption on capital gains if the proceeds are reinvested in a residential house, its application to LTCG from shares is complex and often impractical for most retail share investors who primarily benefit from the ₹1.25 lakh threshold under Section 112A. The conditions for Section 54F are quite specific and typically suit larger, one-off capital gains rather than routine share trading profits. Thus, for most investors in listed equities, the ₹1.25 lakh limit under Section 112A is the main "exemption" to focus on. It is always good to explore various tax saving options available under the law.

Set-off and Carry Forward of Long-Term Capital Losses (LTCL) from Shares

Rules for set off long term capital loss shares are quite specific. A Long-Term Capital Loss (LTCL) from shares can only be set off against Long-Term Capital Gains (LTCG) in the same assessment year. This means if you have an LTCL from shares, you cannot use it to reduce your Short-Term Capital Gains (STCG) or any other income like salary or business income. The ltcg loss adjustment is restricted to LTCG.

If you cannot set off the entire LTCL in the current assessment year because your LTCG is insufficient, the unabsorbed LTCL can be carried forward. You can carry forward ltcl on shares for up to eight assessment years immediately succeeding the assessment year in which the loss was incurred. However, there's a critical condition: to be eligible to carry forward these losses, the Income Tax Return (ITR) for the year in which the loss was incurred must be filed by the due date. Missing the ITR filing deadline means losing the ability to carry forward that year's capital losses. Knowing the income tax return due dates is therefore very important.

Summary of Set-Off Rules for LTCL from Shares:

Type of Loss	Can be Set Off Against	Carry Forward Duration
Long-Term Capital Loss (LTCL)	Only Long-Term Capital Gains (LTCG)	Up to 8 Assessment Years

How to Report LTCG on Shares in Your Income Tax Return (ITR)?

To report ltcg in itr, you need to use the correct ITR form. For individuals and Hindu Undivided Families (HUFs) who do not have income from a business or profession, ITR-2 is usually the applicable form if they have capital gains. If you do have income from a business or profession, then ITR-3 would be required. For FY 2024-25 (AY 2025-26), there's a welcome update: the revised ITR-1 (Sahaj) may allow individuals to report LTCG under Section 112A if the total gain is up to the exemption limit of ₹1.25 lakh and there are no carried forward losses or losses to be set off. This simplifies filing for many small investors.

The schedule 112a itr filing is mandatory for reporting LTCG on the sale of listed equity shares or units of an equity-oriented fund or units of a business trust, where Section 112A applies. This schedule requires scrip-wise details. The details you will need to enter in Schedule 112A typically include:

• ISIN (International Securities Identification Number) of the share/unit

• Name of the Share/Unit

• Number of Shares/Units sold

• Sale Price per Share/Unit

• Cost of Acquisition (COA) per Share/Unit

• Fair Market Value (FMV) as on January 31, 2018, per Share/Unit (if applicable due to grandfathering)

• Date of Purchase and Date of Sale

The schedule cg capital gains is another important schedule in the ITR form. This schedule summarizes all capital gains, including different types of short-term and long-term capital gains. The LTCG figures calculated in Schedule 112A flow into Schedule CG. It is essential to reconcile the capital gains figures with statements provided by your broker and your Annual Information Statement (AIS) available on the Income Tax Department Portal. Ensure scrip-wise details are accurately entered as per your demat/broker statements. Verify details with your AIS on the Income Tax Department Portal. For assistance, many taxpayers seek a comprehensive ITR filing guide through expert services. The itr form for ltcg on shares will depend on your overall income profile, but Schedule 112A is key for these specific gains. Learning how to declare ltcg in itr accurately is vital for compliance.

Advance Tax Liability on LTCG from Shares

The topic of advance tax on ltcg shares is important for many investors. If your total estimated tax liability for the financial year (including tax on LTCG) is likely to be ₹10,000 or more, then advance tax provisions become applicable. Capital gains, especially LTCG from shares, can be unpredictable as they depend on market movements and your decision to sell. Therefore, the law allows that if such gains arise, you can pay advance tax for capital gains in the subsequent advance tax installments that are due.

The due dates for advance tax installments are typically June 15th, September 15th, December 15th, and March 15th of the financial year. If you realize significant LTCG after one or more installment dates have passed, you should pay the applicable advance tax in the next available installment. Accurate estimation and timely payment of advance tax can help avoid interest under Section 234B (for default in payment of advance tax) and Section 234C (for deferment of advance tax installments). You might find an online tool for Advance Tax payment useful.

Key Considerations & Tips for Managing LTCG Tax on Shares

One of the best tips for ltcg tax is to maintain meticulous records. Proper record keeping, including contract notes for purchase and sale, and demat account statements, is fundamental for accurate LTCG calculation and ITR filing. Understanding the impact of STT is also crucial, as its payment is a prerequisite for the concessional tax rate under Section 112A. Investors holding shares acquired before February 1, 2018, must be acutely aware of the grandfathering rules to correctly determine their cost of acquisition and resultant capital gains.

Managing capital gains tax on shares effectively also involves timely ITR Filing. Filing your income tax return by the due date is especially important if you have capital losses that you wish to carry forward to future years. Some investors consider tax-loss harvesting, which involves selling loss-making shares to offset taxable capital gains. However, this strategy must be used carefully, keeping in mind all the rules regarding set-off of losses. If your share transactions are complex or the capital gains are substantial, it's always wise to consult a tax advisor. Professional tax advice can help you optimize your tax liability and ensure full compliance. To reduce ltcg tax legally and efficiently, you can Consult with a Taxbuddy expert.

LTCG on Shares vs. STCG on Shares: A Quick Comparison

Understanding the ltcg vs stcg on shares is key for tax planning. The primary difference between long term short term capital gains on listed equity shares lies in the holding period and the applicable tax rates for FY 2024-25 (AY 2025-26).

Basis of Difference	LTCG on Listed Shares (Sec 112A)	STCG on Listed Shares (Sec 111A)
Holding Period	More than 12 months	12 months or less
Tax Rate (FY 2024-25)	12.5% on gains exceeding ₹1.25 lakh (if STT paid)	15% (if STT paid) (Note: Some sources indicate a Budget 2024 proposal to increase this to 20%, this needs careful verification from the final Finance Act for FY 2024-25. For now, 15% is the widely understood rate under 111A). Update: Budget 2024 did propose changes, STCG on listed equity shares under Sec 111A taxed at 15%, however, some reports mentioned a hike to 20% for general STCG. For listed equity with STT, 15% is the prevailing rate for Sec 111A. Some sources mention 20% for STCG on equity from July 23, 2024. This specific point needs utmost care and verification from latest official documents for precise STCG rate under 111A.
Basic Exemption Limit	₹1.25 lakh on total LTCG under Sec 112A	Not specifically applicable to STCG under Sec 111A (overall income slab benefits apply)
Indexation Benefit	No	No

Conclusion: Navigating LTCG on Shares with Taxbuddy

The landscape of LTCG on shares in India involves careful attention to detail. Key takeaways include that for AY 2025-26, such gains exceeding ₹1.25 lakh are taxed at 12.5% if STT is paid, the crucial role of the grandfathering provisions for older shares, the necessity of accurate calculation, and the importance of timely ITR filing for tax compliance. While these tax rules can seem a bit intricate, a clear understanding is fundamental for every investor in the stock market.

Navigating these complexities doesn't have to be a solitary journey. For accurate LTCG tax help, correct calculation of your capital gains, and seamless file itr with ltcg, consider using expert services. Platforms like Taxbuddy capital gains services are designed to assist taxpayers in ensuring full compliance and achieving peace of mind.

Frequently Asked Questions (FAQs) on LTCG Tax on Shares

• What is the LTCG tax rate on shares for FY 2024-25 (AY 2025-26)?

  The LTCG tax rate on listed equity shares for FY 2024-25 (AY 2025-26) is 12.5% on gains exceeding ₹1.25 lakh, provided Securities Transaction Tax (STT) has been paid.

  
  

• What is the minimum holding period for shares to be considered long-term?

  For listed equity shares, the minimum holding period to qualify as a long-term capital asset is more than 12 months.

  
  

• Is indexation benefit available for LTCG on listed shares under Section 112A?

  No, the benefit of indexation is not available for calculating LTCG on listed equity shares taxable under Section 112A.

  
  

• How does the grandfathering clause for LTCG on shares work?

  For shares acquired on or before January 31, 2018, the Cost of Acquisition for calculating LTCG is taken as the higher of the actual purchase price and the Fair Market Value (FMV) as on January 31, 2018 (but not exceeding the sale price). This exempts gains accrued up to that date.

  
  

• What is the exemption limit for LTCG on shares for AY 2025-26?

  The exemption limit for LTCG on listed equity shares under Section 112A for AY 2025-26 is ₹1.25 lakh per financial year.

  
  

• Do I need to pay STT for the concessional LTCG rate to apply?

  Yes, Securities Transaction Tax (STT) must have been paid (usually at the time of sale, and on acquisition where applicable as per specific notifications) for the concessional LTCG tax rate under Section 112A to apply.

  
  

• How do I report LTCG from shares in my ITR?

  You report LTCG from shares via Schedule 112A (for scrip-wise details) and Schedule CG (Capital Gains) in your ITR. Typically, ITR-2 or ITR-3 is used. For AY 2025-26, ITR-1 may be used for LTCG up to ₹1.25 lakh if no losses are carried forward.

  
  

• Can I set off Long-Term Capital Loss from shares against Short-Term Capital Gains?

  No, a Long-Term Capital Loss (LTCL) from shares can only be set off against Long-Term Capital Gains (LTCG). It cannot be set off against Short-Term Capital Gains (STCG).

  
  

• How many years can I carry forward LTCL from shares?

  You can carry forward unabsorbed Long-Term Capital Loss from shares for up to 8 assessment years.

  
  

• What is the Cost of Acquisition for bonus shares for LTCG calculation?

  For bonus shares allotted on or after April 1, 2001, the Cost of Acquisition is generally considered Nil. However, if original shares (based on which bonus shares were issued) were acquired before Jan 31, 2018, and bonus shares were also allotted before this date, the grandfathering FMV rule might apply to those bonus shares upon their sale. If bonus shares are allotted after Jan 31, 2018, their cost is Nil.

  
  

• Is LTCG on ESOPs taxed differently?

  For Employee Stock Option Plans (ESOPs), the taxation occurs at two stages. First, as perquisite when shares are allotted (difference between FMV on exercise date and exercise price). This perquisite value becomes the Cost of Acquisition for capital gains. The holding period starts from the date of allotment. When these shares are later sold, normal LTCG/STCG rules apply based on holding period and type of share (listed/unlisted).

  
  

• Do I have to pay advance tax on LTCG from shares?

  Yes, if your total tax liability (including tax on LTCG) is expected to be ₹10,000 or more in a financial year, you need to pay advance tax.

  
  

• What documents do I need for calculating LTCG on shares?

  You need contract notes for purchase and sale, demat account statements, and your broker’s capital gains statement.

  
  

• Are the LTCG rules different for unlisted shares?

  Yes, the rules for unlisted shares are different. For unlisted shares, the holding period to qualify as long-term is more than 24 months. The LTCG tax rate for unlisted shares was previously 20% with indexation benefits. Budget 2024 proposed changes to make the LTCG rate 12.5% without indexation for unlisted shares too, effective from July 23, 2024. This article primarily focuses on listed shares.

  
  

• Where can I find the FMV of shares as on Jan 31, 2018?

  You can usually find the Fair Market Value (FMV) as on January 31, 2018, from your broker's statements for that period, financial news portals, or the official websites of the BSE (Bombay Stock Exchange) and NSE (National Stock Exchange). It is the highest price quoted on that day.