What is LTCG (Long-Term Capital Gains - India)?
Long-Term Capital Gains (LTCG) tax in India applies to assets held beyond the qualifying period (12 months for listed shares, 24 months for most others). From July 2024, listed-share LTCG above INR 1.25 lakh per year is taxed at 12.5%; other assets are also taxed at 12.5%, without indexation.
Detailed definition
LTCG taxation in India was significantly overhauled by the Finance (No. 2) Act 2024, effective 23 July 2024. The rates were standardised across asset classes at 12.5% (down from 20% for non-equity assets), but the indexation benefit was removed for most assets, a trade-off that creates winners and losers depending on holding period and asset appreciation. The Cost Inflation Index that taxpayers used to gross up their cost base is now retired for transactions after 23 July 2024, except for real estate acquired before that date where it remains available under a transitional choice.
Listed equity and equity mutual fund gains have their own regime under Section 112A. They are long-term after 12 months of holding and taxed at 12.5% on gains exceeding INR 1.25 lakh per financial year (raised from INR 1 lakh in Budget 2024). The lower threshold means low-volume retail investors often pay no LTCG; for a salaried investor making 10% returns on a INR 12.5 lakh equity portfolio, the entire annual gain still falls within the exemption. STT must have been paid on both acquisition and sale to qualify for the 12.5% concessional rate; off-market transfers and bonus issues without STT use the 20% (not 12.5%) rate under Section 112.
Other assets including real estate, gold, debt funds, and unlisted shares are long-term after 24 months. Under the new July 2024 rules they are taxed at 12.5% flat, without indexation. For real estate transactions where the property was acquired before 23 July 2024, the seller can choose between the new 12.5% without indexation or the old 20% with indexation, whichever produces a lower tax bill; the comparison favours the old regime when annual appreciation is below roughly 9% to 10% and the new regime for higher growth.
Specific exemptions remain. Section 54 lets you reinvest residential-property gains into another residential property within 2 years (or under construction within 3 years). Section 54F covers gains from any non-residential asset reinvested into a single residential property. Section 54EC allows up to INR 50 lakh of any long-term gain to be parked in REC, NHAI, or IRFC notified bonds within 6 months. The Budget 2024 changes did not touch these reinvestment exemptions, which remain the single most important LTCG planning tool for property sellers.
Formula
LTCG Tax (Listed Equity) = max(0, Gains - INR 1.25 lakh) x 12.5%
- Gains = Sale price minus cost of acquisition (with grandfathering for pre-Feb 2018 listed equity)
- INR 1.25 lakh = Annual LTCG exemption on listed equity from Budget 2024 (raised from INR 1 lakh)
- 12.5% = LTCG rate from 23 July 2024 (raised from 10% for listed equity)
Worked example
Suppose you sold listed equity shares in FY 2024/25 with a total LTCG of INR 3 lakh. You bought them in 2020.
- Total LTCG from listed equity: INR 3,00,000
- Annual exemption: INR 1,25,000
- Taxable LTCG: INR 3,00,000 - INR 1,25,000 = INR 1,75,000
- LTCG tax rate: 12.5%
- LTCG tax (plus 4% cess): INR 1,75,000 x 12.5% x 1.04 = INR 22,750
Related terms
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Frequently asked questions
What is the holding period for LTCG in India?
12 months for listed equity shares, equity mutual funds, and listed REIT/InvIT units. 24 months for most other assets including real estate, unlisted shares, gold, and debt mutual funds (from July 2024).
What is the LTCG tax rate after Budget 2024?
12.5% on listed equity gains above INR 1.25 lakh per year (raised from 10% above INR 1 lakh). 12.5% on most other assets without indexation (replacing 20% with indexation for many).
Is there an LTCG exemption?
Yes for listed equity - INR 1.25 lakh per financial year per individual is exempt under Section 112A. There is no specific exemption for real estate or other asset classes, though Section 54 and 54F reinvestment exemptions remain available.
Can I still use indexation on real estate?
Only for properties acquired before 23 July 2024. The seller can choose between 12.5% without indexation or 20% with indexation, whichever produces a lower tax bill. Properties acquired after that date use 12.5% without indexation.
How can I save LTCG on real estate?
Section 54 (reinvest gains in another residential property) and Section 54EC (invest gains up to INR 50 lakh in specified bonds within 6 months) remain valid. Both provide partial or full exemption from LTCG tax on real estate gains.
Are LTCG gains added to slab income?
No. LTCG is taxed at the special 12.5% (or pre-July 2024 rate) regardless of your slab. However, if your total income (excluding LTCG) is below the basic exemption limit, the unused exemption can be applied to reduce taxable LTCG.
Can I offset LTCG with capital losses?
Yes. Long-term capital losses can be set off only against long-term capital gains in the same year. Any unutilised long-term loss can be carried forward for 8 assessment years and set off against future long-term gains, provided you file the ITR by the due date. Short-term capital losses are more flexible: they can be set off against either short-term or long-term gains.
Does LTCG apply to ESOPs and RSUs?
Yes, after vest and exercise. ESOP perquisite value at exercise is taxed as salary, and any subsequent appreciation between the FMV-on-exercise and the sale price is a capital gain. If the underlying is a listed Indian equity held over 12 months, the gain qualifies as LTCG at 12.5% above the INR 1.25 lakh threshold; foreign-listed shares use the 24-month threshold and 12.5% without indexation.