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LTCG (Long-Term Capital Gains) refers to gains arising from the transfer of a long-term capital asset -- one held beyond the applicable holding-period threshold defined in Section 2(42A) of the Income Tax Act, 1961. The Finance Act, 2024 (enacted 23 July 2024) materially revised LTCG rates and exemptions effective from that date.
Holding-Period Thresholds (Post Finance Act 2024)
| Asset class | Holding period for LTCG | FA 2024 change? |
|---|---|---|
| Listed equity shares / equity MF units | More than 12 months | Unchanged |
| REIT / InvIT units | More than 12 months | Unchanged |
| Real estate (residential / commercial) | More than 24 months | Unchanged |
| Physical gold / gold ETF / gold fund | More than 24 months | Reduced from 36m to 24m |
| Debt MF (equity less than 35%) | N/A (slab rate regardless) | N/A -- FA 2023 change still applies |
LTCG Rates (FY 2025-26)
| Asset | LTCG rate | Exemption | Indexation? |
|---|---|---|---|
| Listed equity / equity MF / REIT / InvIT | 12.5% | Rs 1.25 lakh/year (Section 112A) | No |
| Physical gold / gold ETF | 12.5% | None | No |
| Real estate (acquired post 23-Jul-2024) | 12.5% | None | No |
| Real estate (acquired pre 23-Jul-2024) | 12.5% or 20% + indexation, taxpayer choice | None | Optional (20% rate if chosen) |
| Unlisted equity | 12.5% | None | No (post FA 2024) |
| Debt MF (equity less than 35%) | Slab rate | None | N/A |
Source: Sections 112, 112A, Income Tax Act 1961; Finance Act 2024.
The Rs 1.25 Lakh Annual LTCG Exemption
Under Section 112A, LTCG on listed equity shares, equity-oriented MF units and REIT/InvIT units is completely exempt up to Rs 1.25 lakh per financial year. Gains above Rs 1.25 lakh are taxed at 12.5%. The exemption was raised from Rs 1 lakh to Rs 1.25 lakh by Finance Act 2024 effective 23 July 2024. The exemption is per person per year -- it does not carry forward.
Grandfathering (Pre-31 January 2018 Acquisitions)
For equity shares and equity MF units acquired before 31 January 2018, the Cost of Acquisition is set at the higher of: (a) actual purchase price, or (b) FMV as on 31 January 2018 (highest traded price that day). This locks in the pre-February-2018 gains as permanently exempt. Finance Act 2024 did not alter this grandfathering clause.
Source: Section 112A(2), Income Tax Act 1961; CBDT Circular No. 2/2018.
Surcharge on LTCG
For LTCG taxed under Section 112A, surcharge is capped at 15% regardless of total income (Finance Act 2022). The effective maximum rate including 15% surcharge and 4% cess is: 12.5% x 1.15 x 1.04 = 14.95%.
LTCG and Tax Harvesting
The annual Rs 1.25 lakh exemption can be used systematically each year by booking LTCG up to that threshold and repurchasing -- resetting the cost basis. India has no wash-sale restriction that would invalidate such immediate repurchases.
Related terms: STCG, STT, Indexation Benefit, Capital Gains Tax on Stocks, How to Reduce LTCG Tax, Tax on Investments in India.