Open DBS Treasures Account
Capital gains refer to the profits an investor incurs when they sell or redeem their capital assets. It is important to be aware of Long-Term Capital Gain Tax on different types of capital assets.
In this article, we will cover the latest LTCG tax as per the budget 2025, tax brackets based on the holding period and the investments that are exempted from tax.
The Income Tax Act of 1961's Section 45 defines LTCG as the profit from the sale of a capital asset held for a predetermined amount of time. Although it varies according to the asset type, this period usually lasts between 12 to 36 months. LTCG is taxable as "Capital Gains" and is regarded as income in the year of the asset's transfer.
One of the benefits of Long-Term Capital Gains is the benefit of indexation, however after July 23,2024, indexation benefits have been narrowed down to a few capital assets.
For investors looking to manage and grow their capital gains efficiently, a DBS Treasures Premium Savings Account offers a seamless and privileged banking experience.
With the recent budget rules, long term capital gain (LTCG) tax in India applies to assets which include shares, mutual funds, property, gold, bonds, and more. Here’s a list of capital assets that qualify for LTCG.
Asset Type
Long-Term Holding Period
Listed equity shares
>12 months
Equity-oriented mutual funds
Units of business trusts
Unlisted company shares
>24 months
Immovable property (land/buildings)
Debt mutual funds
Gold and other precious metals
Bonds and debentures
For listed equity shares, the capital gains tax on shares is based on the holding period of the securities. Here is the following LTCG tax rate on shares as per the latest provisions:
Criteria
Tax Treatment
Holding Period
More than 12 months
Long-Term Capital Gains (LTCG)
Taxed at 12.5% on gains exceeding INR 1.25 lakh per year (for listed equities/equity mutual funds); applies to all assets without indexation.
Short-Term Capital Gains (STCG)
Taxed at 20% if held for 12 months or less (for listed equities/equity mutual funds); otherwise, taxed as per slab rates for other assets
If you plan to sell your property after 24 months, the gains will be taxed under the long-term capital gain tax for property. After July 2024, there have been several changes to how property gains are taxed, indexation benefits and exemptions.
Tax Rate & Treatment
More than 24 months
Property acquired on/after 23 July 2024
Taxed at 12.5% (without indexation); surcharge and cess extra
Property acquired before 23 July 2024
Taxed at lower of:- 12.5% (without indexation)- 20% (with indexation); surcharge and cess extra
Indexation
Available only for properties acquired before 23 July 2024 (if choosing 20% rate)
Exemptions
Sections 54, 54EC, and 54F allow exemption if gains are reinvested in another house or specified bonds
The long-term capital gains tax on mutual funds are applicable to the gains from units that are held beyond specified periods. Here are the different long-term capital gain tax brackets for various types of mutual funds.
Fund Type
LTCG Tax Rate
Exemption
Equity-oriented
12.5% (if held >12 months)
INR 1.25 lakh tax-free per year
Debt funds
12.5% (if held >24 months, no indexation)
No exemption; entire gain taxable
Hybrid funds
12.5% (based on equity or debt portion)
Exemption applies only on equity portion gains
Calculating long-term capital gains (LTCG) is a straightforward process when you follow the right formula and understand the components involved. Here’s how you can do it:
LTCG Formula: Sale Price− (Indexed Purchase Price+ Indexed Improvements +Transfer Costs)
For some investments such as real property or unlisted equity shares, indexation is employed to account for the cost of acquisition and value addition for inflation.
This is achieved by employing the Cost Inflation Index (CII) released by the Income Tax Department. The indexed cost is calculated as:
Indexed Cost=Original Cost × (CII of Purchase Year / CII of Sale Year)
This change makes you liable to pay tax only on actual gains, not the part lost due to inflation.
Example:
If you purchased a property in 2010 for INR 10,00,000 (CII in 2010: 167) and sold it in 2025 for INR30,00,000 (CII in 2025: 363). You incurred INR2,00,000 in improvements in 2015 (CII in 2015: 254), and transfer charges were INR 1,00,000.
Under the Income Tax Act, investors can claim several exemptions as well as deductions to reduce their tax liability on long term capital gains tax. Some of the key provisions for deductions include:
Section
Reinvestment Conditions
Exemption Limit and Key Provisions
Section 54
Sale of a residential house; reinvest in one or two residential properties in India within the prescribed timeline
Up to INR10 crore (from April 1, 2023); benefit for two properties allowed once in a lifetime; applicable only for long-term assets
Section 54F
Sale of any long-term capital asset (excluding residential house); reinvest full sale consideration in a residential house in India
Up to INR10 crore (from April 1, 2024); exemption is proportionate; not available if more than one residential property is owned on the date of transfer
Section 54EC
Sale of land or building; invest the capital gain in notified bonds (e.g., NHAI, REC, PFC, IRFC) within six months
Maximum of INR50 lakh per financial year; bonds have a mandatory lock-in period of 5 years
Section 54GB
Sale of a residential property; reinvest in equity shares of eligible startups or SMEs
No specified monetary cap; the investee company must utilize the amount to acquire new assets within one year
Additional Points
The Capital Gains Account Scheme (CGAS) is a scheme introduced by the Government of India. This scheme states that if you sell a capital asset for long term gains but cannot reinvest the gains for long term capital gain tax exemption before filing for income tax return, you can deposit the unutilized profits in a Capital Gains Account.
Investors can opt between a savings account or term deposit account for CGAS. It is important to note that withdrawals from this account can only be done for reinvestment purposes.
Filing your long-term capital gains (LTCG) tax correctly is crucial for smooth processing, avoiding notices, and expediting refunds. Recent changes have made the process more streamlined for small investors.
No changes have been made to the long-term capital gains (LTCG) tax rate or the holding period requirements for FY 2025-26. The uniform 12.5% LTCG tax rate and the revised 12/24-month holding periods remain in effect.
Opening a DBS Treasures NRI savings account allows NRIs to manage their foreign income seamlessly, enjoy full repairability of funds, and earn tax-free interest in India, making it an efficient solution for global wealth management.
Long term capital gains tax can reduce your investment profits if not managed well. By understanding holding periods, leveraging exemptions like Section 54 or 54EC, and choosing tax rates wisely, you can save money. Budget 2025 keeps most rules steady, making it a great time to plan. For tailored advice, explore DBS Treasures Wealth Management Services to optimize your investments.
