Investing in assets such as real estate, stocks, and mutual funds is a key strategy for wealth creation. Over time, these investments may appreciate in value, leading to capital gains when they are sold. Taxation on these gains plays a critical role in financial planning, influencing investment decisions and portfolio management.
In this article, we will walk you through how long-term capital gains are taxed, including applicable rates, calculation methods, and exemptions.
Long Term Capital Gains Highlights
| Aspect | Old Regime | New Regime |
|---|---|---|
| Tax Rate | 20% with indexation benefit. | 12.5% without indexation benefit. |
| Holding Period | 36 Months | 24 Months |
| Basic Exemption | ₹1,00,000 | ₹1,25,000 |
Calculate Your Long-Term Capital Gains in Seconds—No Surprises at Tax Payment!
What are Long Term Capital Gains?
Long-Term Capital Gains (LTCG) refer to the profit earned from the sale of a capital asset held for a specified minimum period, typically more than 24 months for real estate and 12 months for listed equity shares and mutual funds in India.
These gains are subject to specific tax rates, often lower than short-term capital gains, and may qualify for exemptions or indexation benefits, depending on the asset type and tax regulations.
Long Term Capital Gains Tax Rates: Pre and Post Budget 2024
The 2024 Budget introduced significant changes to the taxation of capital gains, particularly impacting long-term capital gains (LTCG) and short-term capital gains (STCG). The table below outlines the revised tax rates for various financial products before and after the Budget 2024.
| Product | Tax on LTCG (Before Budget 2024) | Tax on LTCG (After Budget 2024) |
|---|---|---|
| Listed equity shares (STT Paid) | 10% on gains above ₹1 lakh | 12.5% on gains above ₹1.25 lakh |
| Unlisted equity shares | 20% with indexation | 12.5% without indexation |
| Listed Preference shares | 20% with indexation or 10% without indexation | 12.5% without indexation |
| Unlisted Preference shares | 20% with indexation | 12.5% without indexation |
| Equity Mutual Funds (If STT Paid) | 10% on capital gain exceeding ₹1 lakh | 12.5% on capital gain exceeding ₹1.25 lakh |
| Equity Mutual Funds (If STT Not Paid) | 20% with indexation | 12.5% without indexation |
| Sovereign Gold Bond (Listed) | 20% with indexation or 10% without indexation | 12.5% without indexation |
| Any other Bond (Listed) | 10% without indexation | 12.5% without indexation |
| Specified Mutual Funds (debt funds) | – | – |
| Other Mutual Funds (gold funds, overseas funds, FOFs) | 20% with indexation | 12.5% without indexation |
| UNITS of AIF: Anything other than listed shares | 20% with indexation | 12.5% without indexation |
Suggested Read: Union Budget 2025 Highlights
Long Term Capital Gain on Sale of Property: Holding Period
If a property is sold after being held for more than 24 months, the profit earned from the sale is considered a long-term capital gain (LTCG).
Long Term Capital Gains Tax Rate on Sale of Property
The tax rates for short-term and long-term capital gains on property differ, making it essential to classify gains accurately. The applicable tax rates are as follows:
| Particulars | STCG on Property | LTCG on Property |
|---|---|---|
| Tax Rate | Taxed as per the applicable income tax slab rate | (i) 20% with indexation (if sold before July 23, 2024) (ii) 12.5% without indexation (if sold on or after July 23, 2024) |
| Special Provision | Not applicable | For the sale of land and buildings after July 23, 2024, taxpayers can choose between the two LTCG tax options, but this choice is available only for properties purchased on or before July 22, 2024. |
suggested Read: Capital Gains Tax on Sale of Property
Long Term Capital Gains Tax Calculation with Indexation
Indexation is the process of adjusting the original purchase price of an asset using the Cost Inflation Index (CII) to account for inflation. This reduces the taxable capital gain and lowers the tax you need to pay.
The Cost Inflation Index (CII) is a number published by the government every year to show how prices are increasing due to inflation. It helps adjust the purchase price of an asset (like real estate or gold) when calculating capital gains tax. The higher the CII, the more expensive the asset appears, reducing the taxable profit.
Historical Data of CII
| Financial year | Cost Inflation Index |
|---|---|
| 2024-25 | 363 |
| 2023-24 | 348 |
| 2022-23 | 331 |
| 2021-22 | 317 |
| 2020-21 | 301 |
| 2019-20 | 289 |
| 2018-19 | 280 |
| 2017-18 | 272 |
| 2016-17 | 264 |
| 2015-16 | 254 |
| 2014-15 | 240 |
| 2013-14 | 220 |
| 2012-13 | 200 |
| 2011-12 | 184 |
| 2010-11 | 167 |
| 2009-10 | 148 |
| 2008-09 | 137 |
| 2007-08 | 129 |
| 2006-07 | 122 |
| 2005-06 | 117 |
| 2004-05 | 113 |
| 2003-04 | 109 |
| 2002-03 | 105 |
| 2001-02 | 100 |
Mr. Rajesh Sharma, a resident of Mumbai, purchased a residential property in 2007 for ₹25,00,000. Over the years, the property appreciated in value due to the city’s booming real estate market. Here are the transaction details:
Property Purchase Details:
- Purchase Price: ₹25,00,000
- Year of Purchase: 2007
Property Sale Details:
- Sale Price: ₹75,00,000
- Date of Sale: June 2024
| Steps | Formula | Calculation | Result |
|---|---|---|---|
| Calculate the CII | CII of sale year/ CII of purchase year | 363/ 129 | 2.814 |
| Inflation Adjusted Price | Purchase Price*Indexation Factor | ₹25,00,000 * 2.814 | ₹70,35,000 |
| Profit/ Long Term Capital Gains | Sale Price – Inflation Adjusted Price | ₹75,00,000 – ₹70,35,000 | ₹4,65,000 |
| Long Term Capital Gains Tax | Profit * 20% | ₹4,65,000 * 20% | ₹93,000 |
Suggested Read: TDS on Sale of Property
Long Term Capital Gains without Indexation Example
Mr. Rajesh Sharma, a resident of Mumbai, purchased a residential property in 2007 for ₹25,00,000. Over the years, the property appreciated in value due to the city’s booming real estate market. Here are the transaction details:
Property Purchase Details:
- Purchase Price: ₹25,00,000
- Year of Purchase: 2007
Property Sale Details:
- Sale Price: ₹75,00,000
- Date of Sale: September 2024
| Steps | Formula | Calculation | Result |
|---|---|---|---|
| Profit/ Long Term Capital Gains | Sale Price – Purchase Price | ₹75,00,000 – ₹25,00,000 | ₹50,00,000 |
| Long Term Capital Gains Tax | Profit * 12.5% | ₹50,00,000 * 12.5% | ₹6,25,000 |
Long Term Capital Gains: Exemptions
Long-term capital gains (LTCG) from the sale of property can be reduced or exempted if the proceeds are reinvested as per specific provisions under the Income Tax Act. The key sections providing these exemptions are:If you’re looking to invest in property, our team is here to assist you every step of the way. Choosing Credit Dharma for your home loan simplifies the process. We offer expert advice and personalized assistance to make everything hassle-free. You’ll receive timely updates on your loan application and disbursement progress.
From the initial application to the final disbursement, we provide comprehensive support. Enjoy clear and honest communication at every stage, with no hidden surprises.
| Section | Applicability | Reinvestment Requirement | Timeline for Reinvestment | Lock-in Period | Additional Notes |
|---|---|---|---|---|---|
| 54 | Sale of a residential property | Reinvest only the capital gain (not the total sale proceeds). Can invest in up to two residential properties, but the total capital gain must not exceed ₹2 crore. | Buy within 1 year before or 2 years after sale, or construct within 3 years from sale. | If the new property is sold within 3 years, the exemption is revoked, and the earlier capital gain becomes taxable. | The two-property benefit is allowed only once. If unable to reinvest before filing the tax return, deposit funds in the Capital Gains Account Scheme (CGAS). |
| 54F | Sale of any long-term capital asset (other than residential property) | Must reinvest the entire sale proceeds (not just the gains) for full exemption. Partial exemption if only part of the proceeds is reinvested. | Buy within 1 year before or 2 years after sale, or construct within 3 years from sale. | If the new property is sold within 3 years, the exemption is revoked, and the earlier capital gain becomes taxable. | Up to two residential properties can be purchased for claiming exemption. |
| 54EC | Sale of a residential property | Invest up to ₹50 lakh of gains in specified bonds issued by NHAI or REC. | Invest within 6 months of sale or before filing the income tax return. If not invested immediately, deposit in CGAS and invest within 2 years. | Bonds have a mandatory 5-year lock-in period. | If the bond investment is not made within 6 months (or before ITR filing), the gain is taxed. If funds remain in CGAS but are not reinvested within 2 years, the gain is considered short-term in that year. |
| 54B | Sale of agricultural land (outside specified rural areas) | Reinvest the gains in new agricultural land. | Purchase the new agricultural land within 2 years of selling the old land. Alternatively, deposit in CGAS before filing the tax return and utilize it within 2 years. | If the new agricultural land is sold within 3 years, the exemption is withdrawn, and tax must be paid on the earlier gain. | The definition of rural land depends on distance from a municipality/cantonment (2/6/8 km) and population criteria. If the investment is not made within 2 years, the gain is considered short-term in that year. |
Conclusion
If you’re looking to invest in property, our team is here to assist you every step of the way. Choosing Credit Dharma for your home loan simplifies the process. We offer expert advice and personalized assistance to make everything hassle-free. You’ll receive timely updates on your loan application and disbursement progress.
From the initial application to the final disbursement, we provide comprehensive support. Enjoy clear and honest communication at every stage, with no hidden surprises.
Frequently Asked Questions
Long-term capital gain (LTCG) is calculated as:
LTCG = Sale Price – Indexed Cost of Acquisition – Indexed Cost of Improvement – Expenses on Sale
Indexation adjusts the purchase cost for inflation using the Cost Inflation Index (CII), reducing taxable gains.
Under Section 54, LTCG exemption is available if reinvested in up to two residential properties (if the gain is ≤ ₹2 crore). Under Section 54EC, up to ₹50 lakh can be invested in specified bonds.
The property must be held for more than 24 months to qualify as long-term capital gain.
From July 23, 2024, LTCG on property is taxed at 12.5% without indexation. However, for properties bought on or before July 22, 2024, taxpayers can opt for 20% tax with indexation.
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