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LTCG Tax Rate FY 2026-27 - Long Term Capital Gains Rules, and Exemptions
In summary
Long-term capital gains tax applies when you sell or transfer an eligible asset after holding it for the period required for long-term treatment. The tax depends on the asset, purchase date, holding period, and applicable rules.
- Eligible equity LTCG above Rs. 1.25 lakh is taxed at 12.5% in FY 2026-27.
- Listed equity shares and equity-oriented mutual funds generally use a 12-month holding period.
- Many other assets use a 24-month holding period for long-term treatment.
- Indexation has been removed for most assets under the current rules.
- Debt fund taxation depends partly on when the units were purchased.
- ELSS has a three-year lock-in, but its equity LTCG treatment follows the applicable equity rules.
- The Bajaj Broking website can help you explore mutual fund investments.
The Rs. 1.25 lakh equity LTCG exemption applies across eligible equity gains in a financial year, not separately to each investment.
In summary
Long-term capital gains tax applies to profits from selling eligible assets after the required holding period. For FY 2026-27, the main LTCG rate for eligible equity-oriented investments is 12.5% on gains above Rs. 1.25 lakh in a financial year.
The key points are:
- Listed shares and eligible equity mutual funds generally use a 12-month holding period for LTCG treatment.
- Many other assets use a 24-month holding period.
- Eligible equity LTCG above Rs. 1.25 lakh is taxed at 12.5%.
- Eligible debt fund units bought before 1 April 2023 and held for more than 24 months are taxed at 12.5% without indexation.
- Debt fund units bought on or after 1 April 2023 are generally taxed at the applicable slab rate.
- Indexation has been removed for most assets, with a specific property-related exception for eligible purchases made before 23 July 2024.
- ELSS has a three-year lock-in, while its equity LTCG treatment follows the applicable equity tax rules.
- The Bajaj Broking website can be used to explore mutual fund investment options, but tax treatment depends on the investment and applicable tax rules.
Capital gains must be reported correctly in the applicable income tax return.
Understanding the asset type, holding period, purchase date, sale value and applicable exemption can help you calculate LTCG more accurately. Always check the current tax rules before filing or making a tax-related decision.
What is long-term capital gains tax?
Long-term capital gains tax is the Income Tax payable on profit from selling or transferring an asset after the applicable long-term holding period.
For example, if you buy an investment for Rs. 3 lakh and later sell it for Rs. 4.5 lakh, your capital gain is Rs. 1.5 lakh before applying the relevant tax rules.
Whether the gain is long-term depends on the type of asset and how long you held it. Therefore, you should identify the asset and its purchase date before calculating the tax.
When is a capital gain treated as long-term?
The holding period required for long-term treatment varies by asset.
| Asset | General long-term holding period |
|---|---|
| Listed shares | More than 12 months |
| Equity-oriented mutual funds and ELSS | More than 12 months |
| Many other assets, including gold and unlisted shares | More than 24 months |
| Eligible land or buildings | More than 24 months |
Last updated: September 2026
These are broad categories. The applicable period can depend on the nature of the asset, acquisition date, and specific tax provisions.
Do not confuse a tax holding period with a product lock-in period. For example, ELSS has a three-year lock-in, but its equity LTCG classification uses the applicable equity holding-period rule.
How is LTCG taxed on mutual funds?
The tax treatment depends mainly on the type of mutual fund and, for certain debt funds, when you purchased the units.
Equity mutual funds
Eligible equity-oriented mutual fund units generally qualify for long-term treatment after being held for more than 12 months.
For FY 2026-27, eligible equity LTCG above Rs. 1.25 lakh in a financial year is taxed at 12.5%, without indexation, subject to applicable conditions.
The Rs. 1.25 lakh threshold applies to eligible equity LTCG in the financial year as a whole. It is not a separate exemption for every mutual fund or transaction.
ELSS
ELSS is an equity-oriented mutual fund with a three-year lock-in.
The lock-in determines when you can normally redeem the investment. It is separate from the tax holding period used to determine whether the gain is long-term.
Eligible ELSS LTCG follows the applicable equity tax rules. Any Income Tax benefit associated with Section 80C is separate from the tax treatment of gains when you redeem the units.
Debt funds
Debt fund taxation depends on the purchase date and the applicable classification.
Units of debt funds purchased on or after 1 April 2023 are generally taxed at the applicable Income Tax slab rate, regardless of how long they are held.
Eligible debt fund units purchased before 1 April 2023 and held for more than 24 months can qualify for LTCG treatment at 12.5% without indexation.
How do you calculate LTCG tax?
Start by calculating the capital gain:
Capital gain = Sale value − Cost of acquisition
For an eligible equity investment where indexation does not apply, the purchase cost is generally used to calculate the gain.
Consider Rahul, who buys eligible equity investments for Rs. 3 lakh and later sells them for Rs. 4.5 lakh.
His capital gain is:
Rs. 4.5 lakh − Rs. 3 lakh = Rs. 1.5 lakh
If the Rs. 1.25 lakh annual equity LTCG exemption applies, the amount above the exemption is:
Rs. 1.5 lakh − Rs. 1.25 lakh = Rs. 25,000
At 12.5%, the tax on this amount would be:
Rs. 25,000 × 12.5% = Rs. 3,125
This is a simplified illustration before applicable surcharge and cess. Your actual tax can differ depending on your investment, transactions, exemptions, and other applicable provisions.
What factors affect your LTCG calculation?
Several details can change how much tax you may need to pay.
Type of asset
The asset determines the applicable holding period, tax rate, exemptions, and other conditions.
Purchase and sale dates
These dates help establish whether the asset meets the required holding period for long-term treatment. Keep records of both dates when calculating your gain.
Purchase cost
Your acquisition cost is important when calculating the capital gain. Keep transaction statements and other investment records to support the calculation.
Applicable exemption
Eligible equity investments have an annual LTCG exemption of Rs. 1.25 lakh. It applies to the eligible equity gains you have in that financial year, rather than separately to each investment.
Indexation rules
Indexation adjusts an asset's acquisition cost for inflation. The benefit has been removed for most assets under the current rules, although specific property-related provisions apply to eligible assets acquired before 23 July 2024.
What exemptions or reliefs may apply?
Some tax provisions can reduce the taxable amount when their conditions are met.
For eligible equity shares and equity-oriented mutual funds, LTCG up to Rs. 1.25 lakh in a financial year is exempt.
For eligible property transactions, provisions such as Sections 54, 54F, and 54EC may provide relief when their specific conditions are satisfied. These provisions should not be treated as general exemptions for every type of investment.
Capital losses may also be available for set-off against eligible capital gains, subject to the applicable rules.
How can you plan for LTCG tax?
Tax planning should begin with identifying which investments you hold and when you purchased them.
For eligible equity investments, you may consider the Rs. 1.25 lakh annual exemption when planning redemptions. However, unused exemption cannot simply be carried forward to another financial year.
Keep records of your purchase dates, purchase costs, sale values, and sale dates. This makes it easier to calculate gains and report them correctly.
If you are unsure about the tax treatment of a particular transaction, consider obtaining professional tax advice.
How do you report capital gains?
If you need to report capital gains in your Income Tax Return, provide the relevant transaction details in the appropriate capital gains section of the applicable return form.
The information can include the asset type, sale consideration, acquisition cost, and other transaction details. The appropriate return form depends on your circumstances.
The Income Tax Department's current guidance shows that ITR-1 and ITR-4 have specific eligibility conditions relating to Section 112A LTCG, including the Rs. 1.25 lakh threshold.
Always check the latest Income Tax Department instructions before filing because return forms and requirements can change.
Conclusion
LTCG tax depends on the asset, purchase date, holding period, gain, and applicable exemptions or reliefs. For FY 2026-27, eligible equity LTCG above Rs. 1.25 lakh is generally taxed at 12.5%, while other assets and certain older investments can follow different rules. Keep accurate transaction records and verify the applicable Income Tax provisions before selling investments or filing your return.
Last reviewed: September 2026
Mutual funds are subject to market risk. Please read the scheme-related documents carefully before investing.
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How much long-term capital gain is tax-free?
For eligible listed equity shares and equity-oriented mutual funds, LTCG up to Rs. 1.25 lakh in a financial year is exempt, subject to applicable conditions. Gains above this amount are generally taxed at 12.5%. The threshold applies to eligible equity LTCG for the financial year as a whole.
Is LTCG automatically deducted when I sell an investment?
LTCG is not simply deducted automatically from every investment sale. You need to account for the applicable capital gains when calculating and reporting your Income Tax liability. Keep your transaction records and check the applicable reporting requirements.
How is LTCG calculated on mutual funds?
First calculate the capital gain by comparing the sale value with the applicable acquisition cost. Then apply the rules for the particular mutual fund. Eligible equity LTCG above Rs. 1.25 lakh is generally taxed at 12.5%, while other mutual fund categories can have different tax treatment.
Does ELSS have a separate LTCG exemption?
No separate LTCG exemption applies simply because an investment is ELSS. Eligible ELSS gains follow the applicable equity LTCG rules. The three-year ELSS lock-in and the Rs. 1.25 lakh annual equity LTCG exemption are separate matters.
Are senior citizens automatically exempt from LTCG tax?
No. Being a senior citizen does not by itself provide a general exemption from LTCG tax. The applicable tax treatment depends on the asset, transaction, gains, and specific provisions that apply to the taxpayer.
Does indexation still apply to LTCG?
Indexation has been removed for most assets under the current rules. Specific property-related provisions can apply to eligible land or buildings acquired before 23 July 2024, subject to the prescribed conditions.
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