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30 Sep, 2026
By Online Legal India
Published On 30 Sep 2026
Updated On 01 Oct 2026
Category Other
Long-term capital gains (LTCG) tax may directly impact how much you actually earn from selling an investment or asset. But with different tax rates, holding-period rules, exemptions and recent tax changes, understanding LTCG tax rates in India might get a bit confusing. In this guide, we’ll break down the applicable LTCG tax rates, how LTCG is calculated, available exemptions and practical ways to understand and plan for applicable tax exemptions and reliefs.
It refers to the profit that you make when you sell a capital asset after holding it for a required minimum time. Now, keep in mind that the applicable rules and the LTCG tax rates on the profit are subject to change depending on how long you own the property/asset/investment.
Now, before we get deeper into the LTCG tax rates, its calculations, & more, let’s understand two things first!
A capital asset may be considered a long-term capital asset when it is held for the applicable prescribed period before its transfer. The applicable holding period depends on the type of asset and the relevant tax provisions. However, certain assets like specific short-term mutual funds or depreciable assets do not qualify as long-term capital assets.
The start date of the holding period is generally considered the day you bought or acquired the asset, and the end date is the date you sell or transfer the asset.
Below is the typical holding period required for different types of assets to be considered long-term capital assets.
LTCG tax in India is the tax levied on profits earned from selling an investment in capital assets held for a specific long-term duration. In this section, we will briefly discuss the applicable tax rates on listed equity & equity mutual funds, real estate, and other assets (e.g., gold, unlisted shares, etc.)
Long-term capital gains (LTCG) tax on equity investments is the tax paid on profits from selling listed shares or equity mutual funds held for over 12 months.
[New Rate: 12.5% flat tax on long-term capital gains without indexation for property held over 24 months.
Long-Term Capital Gains (LTCG) tax for equity and debt investments refers to how profit from selling assets held for a long time is taxed.
→For eligible long-term capital gains covered by Section 112A, the first Rs 1.25 lakh of aggregate such gains in a financial year is subject to the applicable exemption threshold, with the excess generally taxable at 12.5%, subject to applicable conditions.
→The tax treatment of debt-oriented investments depends on the nature of the investment, acquisition date and applicable provisions. Certain specified mutual funds acquired on or after 1 April 2023 may be subject to taxation as short-term capital gains at the applicable rates, irrespective of the holding period.
→ Other debt-related investments may be subject to different capital-gains rules depending on their specific characteristics and the applicable provisions.
The basic applicable rule is to subtract the Cost of Acquisition and transfer expenses from the total sale price.
Section 112A applies to long-term capital gains from the sale of listed equity shares and equity-oriented mutual funds, provided STT is paid.
However, for eligible gains covered by Section 112A, the aggregate LTCG up to Rs 1.25 lakh in a financial year is subject to the applicable threshold, while the excess is generally taxed at 12.5%, subject to applicable conditions.
For assets acquired on or before January 31, 2018, the grandfathering rule applies, with the acquisition cost determined using the prescribed FMV-based calculation.
Section 112 generally applies to long-term capital assets that are not covered by Section 112A. The applicable tax rate and holding period depend on the nature of the asset and the relevant provisions of the Income-tax Act.
However, for certain land or buildings acquired before July 23, 2024, resident individuals and HUFs may opt for 20% tax with indexation if it results in a lower tax liability (subject to specific transitional provisions).
While Chapter VI-A deductions cannot be claimed against LTCG, specific reinvestment exemptions, such as Sections 54 and 54EC, may be available subject to applicable conditions.
Now, you must be wondering, “What is indexation, and what’s the link between this and LTCG. Well, let us clarify your doubts.
Indexation refers to a tax mechanism that adjusts the purchase price of a long-term asset to account for inflation. This also ensures that taxpayers are taxed only on real profits rather than the price increases driven by general inflation.
Let us clarify this for you.
This refers to a statistical number notified annually by the Government via the IT Department to measure YOY price inflation.
The CII helps adjust the original purchase cost of an asset for inflation, forming the basis for calculating its indexed cost of acquisition and determining when indexation benefits apply.
Indexed Cost of Acquisition is the original purchase cost of an asset adjusted for inflation using the Cost Inflation Index (CII). This adjustment, known as indexation, helps account for the rise in asset prices over time and can reduce the taxable long-term capital gain.
Now, before we get deeper into the LTCG exemption and tax reliefs, let’s learn about the factors affecting LTCG tax calculation so that you may know what you can subtract to decrease your final taxable profit, get better insight into better sale timing reducing your tax rate, understand threshold rules to plan sales across FY, learn about specific reinvestment rules, and handle losses properly to offset future gains.
Categorises what you sold and sets the specific tax rate applied to your net gains.
The holding period defines whether a profit is short-term or long-term and, based on this, the asset holding thresholds and rates may vary.
The CII is used for calculating indexed cost where indexation is permitted under the applicable tax provisions.
They reduce the total amount of profit that is subject to that tax rate. Applicable exemptions or deductions may reduce the taxable capital gain, subject to the conditions and limits prescribed under the relevant provisions.
The acquisition date determines whether an asset qualifies for Long-Term Capital Gains (LTCG) instead of Short-Term Capital Gains (STCG) based on the holding period, and it sets the baseline for specific tax rates, grandfathering rules, and indexation options under Indian tax law.
Certain provisions provide specific thresholds or exemptions for eligible capital gains, subject to the applicable conditions.
Now, you must know one thing.
Taxpayers in India can save on the LTCG tax rate in different ways. So, let’s discuss the applicability and relevant rules.
Under Section 54 of the Income Tax Act, individuals and Hindu Undivided Families (HUFs) are allowed to claim an exemption on long-term capital gains arising from the sale of a residential house property by reinvesting the capital gains into purchasing one residential house in India (within 2 years after or 1 year before the sale) or constructing one within 3 years.
However, if capital gains do not exceed Rs 2 crore, they are allowed to invest in two residential houses. (only once in a lifetime) However, the maximum deduction/reinvestment value eligible for exemption is capped at Rs 10 Crore.
Section 54F allows individuals and HUFs to claim LTCG tax exemption when selling a long-term capital asset (other than a residential house) by reinvesting the entire net sale consideration in a new residential property in India. The exemption is proportionate to the net consideration invested, subject to conditions including ownership restrictions and a maximum investment limit of Rs 10 crore.
If you earn eligible LTCG from the transfer of land or building, you may claim an exemption under Section 54EC by investing the capital gain in specified bonds within six months of the transfer, subject to applicable conditions. The investment is subject to a maximum limit of Rs 50 lakh in a financial year.
Rural agricultural land in India is generally not treated as a capital asset for income-tax purposes, subject to the applicable definition and conditions. Therefore, gains from its transfer are generally outside the capital-gains tax provisions.
Certain exemptions may also be available for eligible transfers of agricultural land under Section 54B, subject to prescribed conditions relating to use of the land and reinvestment in another agricultural land.
The Capital Gains Account Scheme (CGAS), 1988, is a government-backed framework under the Income Tax Act, which allows taxpayers to temporarily park unutilized capital gains from the sale of long-term assets (such as property or land) to claim tax exemptions/relief under Sections 54, 54B, 54D, 54F, 54G, and 54GB when they cannot purchase or construct the mandatory new asset before the due date of filing their ITR.
They need to deposit the unutilized capital gains into an authorised Capital Gains Account with a public sector bank, a designated private sector bank, or a specified scheduled bank before filing the ITR and must withdraw their deposited money and utilise it within the original 2-year (purchase) or 3-year (construction) window to prevent it from becoming fully taxable.
Offset long-term capital losses only against long-term capital gains, while short-term capital losses can be adjusted against both short- and long-term capital gains. Any unadjusted capital losses can be carried forward for up to 8 subsequent assessment years.
Effective capital loss planning can definitely help reduce your overall tax liability. But the best part is you will know how these losses can be set off against your Long-Term Capital Gains (LTCG). So, let’s understand how capital losses are adjusted against LTCG.
Under Indian tax law, LTCG can be reduced using capital losses through specific intra-head adjustment rules.
If your capital losses exceed your gains in a year, the unadjusted loss can be carried forward for up to 8 assessment years.
Now, understanding the adjustment of capital losses becomes important when distinguishing between Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG), as the tax treatment of losses differs based on the nature of the capital gain.
Short-Term and Long-Term Capital Gains refer to the taxes on profits from selling investments. But without knowing what types of assets they apply to, the applicable holding periods and the tax rates, you might fail to calculate your tax liability, comply with the Income Tax Department of India, and optimise your investment returns.
So, in this section, let’s discuss them.
|
Key Differentiating Factors |
STCG Tax Rate |
LTCG Tax Rate |
|
Holding Period |
Listed equity and equity mutual funds: Held for 12 months or less
Real estate and unlisted shares: Held for 24 months or less |
Listed equity and equity mutual funds: Held for more than 12 months.
Real estate and unlisted shares: Held for more than 24 months |
|
Applicable Tax Rate |
Listed equity shares and equity mutual funds (with STT paid): Flat 20%.
Other assets (debt funds, gold, property): Taxed according to your individual income tax slab rates |
Listed equity shares and equity mutual funds: Flat 12.5% for gains exceeding Rs 1,25,000 in a financial year.
Other capital assets (like real estate or gold): Flat 12.5% without indexation benefit. |
|
Exemption & Rules |
Does not offer any basic exemption threshold |
LTCG on equities provides an annual exemption limit of Rs 1,25,000 |
Note: Indexation benefits are removed for most long-term asset classes under the current tax framework.
With recent tax reforms changing LTCG rates and investment rules, it is equally important to understand how they might affect your capital gains tax liability and investment decisions.
Rate changes may directly affect investors by reducing or increasing post-tax returns, influencing long-term financial planning and investment planning. On one hand, higher rates may discourage short-term gains; on the other hand, increased exemption limits (e.g., Rs 1.25 lakh equity threshold) may provide significant relief to small investors. Changes across asset classes can also reshape the tax burden and impact investment choices between financial assets and physical assets like real estate.
Earlier, indexation using the Cost Inflation Index (CII) helped adjust the purchase cost for inflation, ensuring tax was charged on real gains rather than inflation-driven price increases. With indexation removed, even nominal gains eroded by inflation may be taxable. Although the tax rate has dropped from 20% to 12.5%, the actual tax burden depends on the asset’s holding period and growth. The change has also sparked mixed views, with concerns about its impact on long-term property owners and arguments that it could discourage real estate speculation and encourage investment in financial markets.
Recent LTCG tax reforms have significantly changed the tax appeal of different asset classes. The removal of indexation for real estate and commodities may reduce their attractiveness, while the uniform 12.5% LTCG tax rate across several long-term assets simplifies tax treatment. As a result, investors need to reassess asset allocation, holding periods, and tax exposure to optimise post-tax returns.
By providing transitional provisions for certain assets acquired before specified cut-off dates, such as January 31, 2018, for specified equity assets and July 23, 2024, for eligible land or buildings, the tax framework provides for specific grandfathering treatment subject to applicable conditions.
Currently, LTCG on many eligible assets is generally taxed at 12.5%, subject to the applicable provisions, while certain assets and specific acquisition dates may have different rules or benefits. Therefore, understanding the LTCG tax rate is crucial before selling a long-term investment or asset, as the tax payable can significantly impact your final returns.
So, make sure you consider the holding period, cost of acquisition, applicable exemptions, deductions, and prevailing LTCG tax rules to estimate your actual post-tax gains. Planning the sale and exploring eligible tax-saving options in advance will not only help you make more informed financial decisions but also make it easier for you to avoid unexpected tax liabilities.
Ans: Whether LTCG is taxable when your total income is below the basic exemption limit depends on your tax regime, age, residential status, type of capital gain and the applicable provisions. The basic exemption limit is not uniformly Rs 2.5 lakh for all taxpayers.
Ans: For eligible long-term capital gains from listed equity shares and equity-oriented mutual funds covered by Section 112A, the applicable LTCG tax rate is generally 12.5% on gains exceeding the Rs 1.25 lakh aggregate threshold in a financial year, subject to applicable conditions, surcharge and cess.
Ans: For eligible long-term gains from land or buildings, the applicable LTCG tax rate is generally 12.5% without indexation. For land or buildings acquired before July 23, 2024, a resident individual or HUF may, subject to applicable conditions, be able to apply the 20% rate with indexation where it results in a lower tax liability.
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