13.2What is long-term capital gains (LTCG) tax?
Time-sensitive: 12.5% LTCG and ₹1.25 lakh exemption apply from 23 July 2024; unchanged for FY 2026-27. Checked November 2026 for FY 2026-27. Verify on incometaxindia.gov.in, NSE, BSE or SEBI before filing or trading. Rules and rates change, so check the official source before acting.
1What is it?
Tax on profit from listed equity shares or equity mutual funds held for more than 12 months, where STT was paid.
2Why does it exist?
Lower rate rewards long-term investing. The first ₹1.25 lakh of total LTCG each financial year is exempt.
3Calculation
LTCG tax = (Total LTCG − ₹1,25,000) × 12.5% (+ cess)
- Total LTCG in the year = ₹3,00,000.
- Taxable = ₹1,75,000.
- Tax = ₹21,875 + 4% cess = ₹22,750.
LTCG tax ≈ ₹22,750.
4Practical use
Tax harvesting: some investors sell and rebuy holdings each year to use the ₹1.25 lakh exemption, raising their cost price. Consider charges and rules before doing this.
5Quick revision
- Held > 12 months.
- 12.5% above ₹1.25 lakh per year.
- No indexation for listed equity.
6Knowledge check
Q1. LTCG exemption per year?Show answer
₹1.25 lakh.
Q2. LTCG rate?Show answer
12.5% (+ cess).
Q3. LTCG of ₹1,00,000 in a year. Tax?Show answer
Nil (below exemption).