In the financial year 2024–25, any individual selling a capital asset—whether financial such as shares, or non-financial such as real estate or jewellery—may be liable to pay long-term capital gains tax (LTCG tax). The liability depends on the nature of the asset, the duration of holding, and the date of sale. Certain exemptions can reduce or remove the tax burden if specific conditions are met.
From 23 July 2024 onwards, the long-term capital gains tax rate has been revised to 12.5% for both financial and non-financial assets, replacing earlier rates for most categories. These changes are part of the government’s effort to simplify the capital gains framework and apply a more uniform structure. In this guide, we break down what long-term capital gains mean, how the tax is calculated, applicable rates, key exemptions, and the special provisions that taxpayers must keep in mind for the financial year 2024–25.
This article will explain LTCG, tax rates, calculations, exemptions, and examples, helping you manage your investments wisely.
What is long-term capital gain (LTCG)?
Long-Term Capital Gain (LTCG) refers to profits earned from selling certain assets held over a defined minimum period. The rules vary depending on the type of asset:
- Definition – LTCG is the profit arising from the transfer or sale of a long-term capital asset.
- Holding period for most assets – If an asset is held for more than 24 months, it qualifies as a long-term capital asset.
- Holding period for listed equity and similar instruments – Listed equity shares, units of equity-oriented mutual funds, and units of business trusts are treated as long-term capital assets if held for more than 12 months.
- Applicable sections – LTCG taxation is governed under two provisions:
- Section 112A – Covers listed equity shares, equity-oriented funds, and units of business trusts.
- Section 112 – Applies to all other long-term capital gains not covered under Section 112A.
Budget 2025 long term capital gain tax updates
According to the Union Budget 2025, the government has retained the long-term capital gain tax structure. The tax rate for equities, mutual funds, and stocks remains at 12.5% for profits exceeding Rs. 1.25 lakh per financial year. The policy aims to maintain consistency and encourage long-term investments.
Notable updates:
- A uniform 12.5% tax rate applies across asset classes.
- No changes to existing exemption limits.
- The government continues to monitor capital market trends to make future adjustments if necessary.
Long-term capital gain (LTCG) tax rate for FY 2024-25 (AY 2025-26)
From 23 July 2024, the tax rates for long-term capital gains have been revised under the Finance (No. 2) Bill, 2024. The applicable rate depends on the nature of the asset and the date of sale. For transactions before 23 July 2024, the earlier structure applies, which includes a higher rate for some assets but with the benefit of indexation. For sales made on or after 23 July 2024, the rate is generally 12.5% without indexation, though there are exceptions for certain property transactions.
| Assets sold | Long-term capital gains (LTCG) tax rate | |
| Sold before 23 July 2024 | Sold on or after 23 July 2024 | |
| Listed equity shares, equity-oriented mutual funds, units of business trust | 10% without indexation | 12.5% without indexation |
| Land and building | 20% with indexation | 12.5% without indexation (Option for Individuals/HUF: 20% with indexation or 12.5% without indexation) |
| Other capital assets | 20% with indexation | 12.5% without indexation |
Key aspects of LTCG tax
I. Definition of long-term capital gains
For listed financial assets such as equity shares, equity-oriented mutual funds, and units of business trusts, the asset must be held for more than one year to qualify as a long-term capital asset. For unlisted financial assets and all non-financial assets—such as property, jewellery, or art—the required holding period is more than two years.
II. Exemption limit on certain financial assets
For specified listed financial assets, an exemption of up to Rs. 1.25 lakh is available on long-term capital gains in a financial year.
III. Tax rate on debt-based investments
Debt mutual funds, unlisted bonds and debentures, and market-linked debentures attract capital gains tax at the applicable income tax slab rates, regardless of the holding period.
IV. Short-term capital gains treatment
Short-term gains on specified financial assets are taxed at 20%. For all other financial and non-financial assets, the gains are taxed as per the applicable slab rate.
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V. Effective date of new provisions
The revised capital gains rules took effect from 23 July 2024. Before this date, there were three separate holding period categories. Post-revision, only two holding periods apply—one year for listed securities and two years for all other assets.
VI. Exemption through reinvestment
Gains can be exempt from tax if fully reinvested in a residential property, subject to a cap of Rs. 10 crore. An alternative is to invest up to Rs. 50 lakh in bonds under Section 54EC. If reinvestment is not completed within the financial year, funds must be deposited into a Capital Gains Account Scheme before the ITR filing deadline. For securities-related gains, the exemption is available only if the entire sale proceeds are reinvested.
