Understanding Long-Term Capital Gains (LTCG) Tax and Calculations

Guide to Long-Term Capital Gains (LTCG) Tax Rules for FY 2025–26

Updated as per Union Budget 2024 & effective post–July 23, 2024

If you’re selling property, shares, mutual funds, gold, or other capital assets, the LTCG tax landscape has changed. With new rules around holding periods, tax rates, indexation, and exemptions, it's important to plan ahead and file correctly.

What Is Long-Term Capital Gain?

Long-Term Capital Gain (LTCG) arises when you sell a capital asset held for a specified minimum period:

Asset Type	Minimum Holding Period
Listed equity shares, equity MFs, business trusts	> 12 months
Real estate, gold, bonds, unlisted shares, debt MFs	> 24 months

Relevant Tax Sections

• Section 112A: For listed equity shares, equity mutual funds, business trusts
• Section 112: For all other assets (property, debt MFs, gold, unlisted shares, etc.)

What’s New in LTCG Taxation (Post 23 July 2024)

Asset Type	Sold Before 23 Jul 2024	Sold On/After 23 Jul 2024
Listed equity/equity MFs	10% (above ₹1L), no indexation	12.5% (above ₹1.25L), no indexation
Land/building	20% with indexation	12.5% without indexation OR 20% with (choose lower)
Unlisted shares, gold, debt MFs	20% with indexation	12.5%, no indexation

Note: Indexation is now disallowed for most post–23 July 2024 acquisitions.

How to Calculate LTCG

1. Full Sale Value → Price you received or are entitled to

2. Less: Transfer Expenses → Brokerage, legal fees, stamp duty, etc.

3. Less: Cost of Acquisition & Improvement →

   • With indexation: Use indexed cost
   • Without indexation: Use actual cost

4. Less: Exemptions under Section 54/54F/54EC etc.

5. Final LTCG = Taxable Amount

Example: Selling Real Estate in FY 2025–26

Case A: With Indexation (Property bought pre–23 Jul 2024)

• Sale Price: ₹65,00,000
• Indexed Cost: ₹62,05,128
• Gain: ₹2,94,872
• Tax @20%: ₹58,974

Case B: Without Indexation (Same asset, post–23 Jul rule)

• Actual Cost: ₹20,00,000
• Gain: ₹45,00,000
• Tax @12.5%: ₹5,62,500

Key Exemptions to Save LTCG Tax

Section	Applies to	Relief Type
54	Sale of house → Purchase of new house	Full/partial exemption
54F	Sale of any asset → Buy 1 house	Full (if entire net sale proceeds used)
54EC	Sale of land/building → Invest in NHAI/REC bonds within 6 months	Up to ₹50 lakh limit
Others	54B (agricultural land), 54D (compulsory acquisition), etc.	Asset-specific

Reporting LTCG in ITR (FY 2025–26)

• Use ITR-2 or ITR-3, depending on your income.
• Schedule CG: Report asset type, sale/purchase dates, cost, sale value, exemptions claimed.
• For equity gains: Only LTCG above ₹1.25 lakh is taxable under Section 112A.

Surcharges & Exemptions

• Basic Exemption Limit Applies to LTCG: If you’re a resident individual and total income (including LTCG) is within the threshold (e.g., ₹2.5L for <60 years), you pay no tax.

• Surcharge: LTCG surcharge is capped at 15%, even if your total income exceeds ₹50 lakh.

Asset-Wise Summary (Post–23 July 2024)

Asset	LTCG Tax Rate	Indexation Allowed?	Exemption Threshold
Listed shares, equity MFs	12.5%		₹1.25 lakh
Property (pre–23 Jul)	12.5% or 20%*		None
Property (post–23 Jul)	12.5%		None
Unlisted shares, bonds, gold	12.5%		None

*Choose between 12.5% without or 20% with indexation—whichever results in lower tax.

Key Tips for Tax Planning

• Sold a property acquired before July 2024? Calculate LTCG both ways (indexed and non-indexed) to choose the lower tax burden.

• Maintain thorough records of:

  • Purchase price, sale deeds
  • Cost of improvements
  • Brokerage & legal charges
  • Capital gain bond investments, if applicable

• Reinvest wisely under sections like 54, 54F, 54EC to save significant tax.

Frequently Asked Questions

Q: Is LTCG taxed if I have no other income? A: No, if your total income (including LTCG) is under the basic exemption, you may not owe tax.

Q: Can NRIs claim indexation? A: Yes, but only for eligible assets acquired before 23 July 2024.

Q: Is STT payment mandatory for equity LTCG exemption? A: Yes—Securities Transaction Tax (STT) must be paid on acquisition/sale to claim Section 112A benefits.

Q: Can I carry forward LTCG losses? A: Yes, for 8 assessment years, provided the loss was declared in a filed return within the due date.

Final Thought

The revised LTCG regime is leaner, sharper, and aimed at curbing indexation misuse—but it also means higher tax outgo for many. Planning ahead, keeping records, and exploring exemption routes can make a big difference in your final tax liability.