LTCG and STCG Tax in India — Complete Guide with Rates, Examples & Tax-Saving Tips
Capital gains tax confuses most investors. The rules differ by asset class, holding period, and even by budget year. This guide covers all major asset classes — shares, mutual funds, unlisted shares, and property — with simple examples.
What Are Capital Gains?
When you sell an asset for more than you paid for it, the profit is called a Capital Gain. The Indian government taxes this gain. The tax rate depends on two factors: (1) what type of asset it is, and (2) how long you held it before selling.
Short Term vs Long Term — The Holding Period Rules
| Asset Class | Short Term (STCG) | Long Term (LTCG) |
|---|---|---|
| Listed Shares / Equity MF | Held ≤ 12 months | Held > 12 months |
| Unlisted Shares | Held ≤ 24 months | Held > 24 months |
| Debt Mutual Funds | Held ≤ 24 months | Held > 24 months |
| Real Estate / Property | Held ≤ 24 months | Held > 24 months |
| Gold (physical/ETF) | Held ≤ 24 months (physical), 12m ETF | Held > 24 months |
Tax Rates — Post Budget 2024 (Effective July 23, 2024)
| Asset Class | STCG Rate | LTCG Rate | LTCG Exemption |
|---|---|---|---|
| Listed Equity Shares / Equity MF | 20% (up from 15%) | 12.5% (up from 10%) | ₹1.25 lakh/year |
| Unlisted Shares | At slab rate | 12.5% (no indexation) | None |
| Debt MF (post April 2023) | At slab rate | At slab rate | None |
| Real Estate | At slab rate | 12.5% (no indexation) or 20% with indexation | Section 54 relief |
| Gold ETF | At slab rate | 12.5% | None |
Important — Budget 2024 Change
Budget 2024 raised STCG on listed equity from 15% to 20% and LTCG from 10% to 12.5%. The LTCG exemption was also raised from ₹1 lakh to ₹1.25 lakh per year. For unlisted shares, indexation was removed — now taxed at flat 12.5% for LTCG.
Practical Examples
Example 1: Listed Share — LTCG
Bought 100 shares of Reliance at ₹2,000 in Jan 2024. Sold at ₹2,800 in March 2025 (held 14 months — qualifies as LTCG).
Total gain = ₹80,000. LTCG exemption = ₹1.25 lakh. Taxable gain = ₹0 (gain is under exemption). Tax = ₹0.
Example 2: Listed Share — LTCG above exemption
Sold shares with ₹3,00,000 total LTCG in a year. Exemption = ₹1,25,000. Taxable LTCG = ₹1,75,000. Tax at 12.5% = ₹21,875.
Example 3: Unlisted Share — LTCG
Bought NSE unlisted shares at ₹1,800 in Jan 2022. Sold at ₹2,500 in March 2025 (held 38 months — LTCG). Gain = ₹700/share. On 25 shares = ₹17,500 total gain. Tax at 12.5% = ₹2,187.
Example 4: STCG on Equity
Sold Nifty 50 ETF units for ₹50,000 profit after holding 8 months (STCG). Tax at 20% = ₹10,000.
How to Report Capital Gains in ITR
- Capital gains are reported in Schedule CG of your Income Tax Return
- Use ITR-2 if you have capital gains from shares/MF but no business income
- Use ITR-3 if you have business income + capital gains
- Your broker's annual tax statement (available on Zerodha Console, Groww Tax, etc.) gives you the exact figures
- For unlisted shares, keep purchase agreement + payment receipt + Demat holding statement
Tax Loss Harvesting — Legal Way to Reduce Tax
Tax loss harvesting means strategically selling loss-making investments to offset capital gains from profitable ones. Rules:
- Short-term losses can offset both short-term and long-term gains
- Long-term losses can only offset long-term gains
- Losses can be carried forward for up to 8 years (file ITR on time to preserve this benefit)
- You can buy back the same fund/share after selling — there's no wash-sale rule in India unlike the US
Section 54 — Save Tax on Property Sale
If you sell property and invest the LTCG into another property or into Capital Gain Bonds (NHAI/REC bonds under Section 54EC), you can reduce or eliminate the capital gains tax. Maximum bond investment: ₹50 lakh per year. Lock-in: 5 years. Interest: approximately 5.25% (taxable).
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