Long Term Capital Gains explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Long Term Capital Gains Tax (LTCG) in India: Complete Guide (2025-26)
Long Term Capital Gains (LTCG) tax is levied on profits from selling a capital asset held for more than the specified period. The Budget 2024 brought significant changes — LTCG on equity and equity mutual funds was raised from 10% to 12.5% and the exemption limit was increased from ₹1 lakh to ₹1.25 lakh. Understanding LTCG is critical for investors in stocks, mutual funds, real estate, and bonds.
- LTCG on equity/equity MF: 10%  12.5% (no indexation)
- Exemption limit: ₹1 lakh ÔåÆ ₹1.25 lakh per year
- LTCG on property/debt MF: 20% with indexation  12.5% without indexation
- Holding period for immovable property LTCG: Unchanged at 24 months
What is Long Term Capital Gain?
A capital gain is classified as Long Term Capital Gain (LTCG) when the asset is held beyond the specified minimum period before selling. The holding period varies by asset type:
| Asset Type | Minimum Holding Period for LTCG |
|---|---|
| Listed equity shares | More than 12 months |
| Equity-oriented mutual funds | More than 12 months |
| Immovable property (land, building) | More than 24 months |
| Unlisted shares | More than 24 months |
| Debt mutual funds (acquired before 1 Apr 2023) | More than 36 months |
| Debt mutual funds (acquired after 1 Apr 2023) | All gains taxed as STCG |
| Gold / Gold ETF / Gold MF | More than 24 months |
| Bonds / Debentures (listed) | More than 12 months |
| Foreign currency bonds / unlisted bonds | More than 36 months |
LTCG Tax Rates for FY 2025-26 (AY 2026-27)
| Asset Type | LTCG Tax Rate | Indexation | Section |
|---|---|---|---|
| Listed equity shares (STT paid) | 12.5% (exempt up to ₹1.25L) | No | 112A |
| Equity mutual funds (STT paid) | 12.5% (exempt up to ₹1.25L) | No | 112A |
| Immovable property | 12.5% | No (from FY 2024-25) | 112 |
| Unlisted shares (residents) | 12.5% | No | 112 |
| Debt mutual funds (pre Apr 2023) | 12.5% | No | 112 |
| Gold, Gold ETF, Gold MF | 12.5% | No | 112 |
| Unlisted shares (NRI) | 12.5% | No | 112 |
| Listed bonds/debentures | 12.5% | No | 112 |
Note: Surcharge on LTCG under Section 112A is capped at 15% regardless of income level. For other LTCG, normal surcharge rates apply.
Indexation Benefit — Removed for Most Assets
Prior to FY 2024-25, LTCG on property and gold attracted 20% tax WITH indexation benefit (using Cost Inflation Index). From FY 2024-25, indexation has been removed for most assets. However, a grandfathering clause allows:
- For property purchased before 23 July 2024: Taxpayer can choose the lower of (a) 12.5% without indexation or (b) 20% with indexation — whichever results in lower tax.
How to Calculate LTCG Tax
Formula for LTCG
LTCG = Sale Price - (Cost of Acquisition + Cost of Improvement + Transfer Expenses)
For grandfathered equity (purchased before 31 Jan 2018), the cost of acquisition is the higher of actual cost and the fair market value as on 31 January 2018.
Example 1: LTCG on Listed Equity Shares
| Particulars | Amount |
|---|---|
| Sale price of shares | ₹8,00,000 |
| Cost of acquisition | ₹5,50,000 |
| LTCG (gross) | ₹2,50,000 |
| Less: Exemption under Section 112A | ₹1,25,000 |
| Taxable LTCG | ₹1,25,000 |
| LTCG tax @ 12.5% | ₹15,625 |
| Add: 4% health and education cess | ₹625 |
| Total tax payable | ₹16,250 |
Example 2: LTCG on Property (purchased after 23 July 2024)
| Particulars | Amount |
|---|---|
| Sale price of flat | ₹80,00,000 |
| Stamp duty value (SDV) | ₹82,00,000 (sale considered at ₹82L) |
| Cost of acquisition (FY 2022-23) | ₹55,00,000 |
| Cost of improvement | ₹3,00,000 |
| LTCG (gross) | ₹24,00,000 |
| LTCG tax @ 12.5% | ₹3,00,000 |
| Add: 4% cess | ₹12,000 |
| Total LTCG tax | ₹3,12,000 |
Example 3: Property Purchased Before 23 July 2024 (Grandfathering)
| Particulars | Option A (12.5%, no indexation) | Option B (20%, with indexation) |
|---|---|---|
| Sale price | ₹1,20,00,000 | ₹1,20,00,000 |
| Cost (FY 2015-16) | ₹40,00,000 | ₹40,00,000 |
| Indexed cost (CII: 348/254) | — | ₹54,80,000 |
| LTCG | ₹80,00,000 | ₹65,20,000 |
| Tax rate | 12.5% | 20% |
| LTCG tax | ₹10,00,000 | ₹13,04,000 |
| Better option | Yes — pay ₹10L | Pay more |
For older properties with high indexation benefit, Option B (20% + indexation) can still be better. Calculate both and choose the lower tax option.
LTCG Exemptions: Sections 54, 54EC, 54F
Section 54 — Residential Property to Residential Property
- Who: Individual or HUF
- Asset sold: Residential house property (LTCG)
- Investment: Purchase or construct 1 new residential house in India
- Time limit: Purchase — 1 year before or 2 years after sale; Construction — 3 years after sale
- Exemption: LTCG amount or cost of new house, whichever is lower
- Cap: Only 1 house property (from FY 2019-20, capped at ₹2 crore for claiming 2 houses)
- Lock-in: New property must not be sold within 3 years
Section 54EC — Investment in Capital Gain Bonds
- Asset sold: Any long-term capital asset
- Investment: NHAI or REC bonds (Capital Gain Bonds)
- Time limit: Within 6 months of sale
- Maximum exemption: ₹50 lakh per financial year
- Lock-in: 5 years — cannot redeem before 5 years
- Interest: Taxable, currently around 5.25% per annum
Section 54F — Any LTCG into Residential Property
- Asset sold: Any long-term capital asset other than residential house
- Investment: Full net consideration (not just LTCG) must be invested in a residential house
- Time limit: Same as Section 54
- Condition: Taxpayer must not own more than 1 residential house on date of transfer (other than the new one)
- Exemption: Proportional if partial investment made
Capital Gains Account Scheme (CGAS)
If you are unable to invest the LTCG before the ITR filing due date, deposit the amount in a Capital Gains Account Scheme bank account. The deposited amount is treated as invested and exemption is preserved.
LTCG on Mutual Funds: Detailed Rules
Equity Mutual Funds
- Definition: Funds with 65%+ in Indian equity
- Holding period for LTCG: More than 12 months
- Tax rate: 12.5% on gains above ₹1.25 lakh
- LTCG harvesting: Redeem gains of ₹1.25 lakh every year to avoid accumulation (tax-free) — then reinvest
Debt Mutual Funds
- Purchased on or after 1 April 2023: No LTCG — all gains added to income and taxed at slab rate regardless of holding period
- Purchased before 1 April 2023: LTCG after 36 months — taxed at 12.5% without indexation (Budget 2024 change)
LTCG Tax Filing: Which ITR Form?
- ITR-2: For individuals with capital gains (no business income)
- ITR-3: For individuals with business income + capital gains
- Schedule CG: Fill details of each asset sold, purchase price, sale price, exemptions claimed
- Form 26AS: Check TDS deducted (if any) on property sale or other assets
TDS on LTCG
- Property sale (resident): Buyer deducts 1% TDS under Section 194-IA if sale price ÔëÑ ₹50 lakh
- Property sale (NRI): Buyer deducts TDS at 12.5% + surcharge + cess (NRI can apply for Lower Deduction Certificate)
- Listed equity/MF: No TDS for resident Indians
Set-off and Carry-Forward of LTCG Losses
- LTCG loss can be set off against LTCG only (not against STCG or salary income)
- Unabsorbed LTCG loss can be carried forward for 8 assessment years
- STCG loss can be set off against both STCG and LTCG
- Must file ITR by due date to carry forward losses
Key Facts About Long Term Capital Gains
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What is Long Term Capital Gains?
Long Term Capital Gains is an important compliance and legal topic for businesses and individuals in India. This guide explains its meaning, applicability and key requirements in simple language so you can understand and stay fully compliant.
Who needs to know about Long Term Capital Gains?
Business owners, startups, professionals, and taxpayers dealing with Long Term Capital Gains should understand the applicable rules. Requirements can vary by turnover, entity type and activity, so it is best to confirm your specific case before proceeding.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
Long Term Capital Gains: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.