Long-Term Capital Gain (LTCG) is the profit earned from selling a capital asset after holding it for more than the prescribed long-term holding period.
For listed equity shares and equity-oriented mutual funds, the holding period is more than 12 months.
Meaning
If an investor buys listed shares or equity mutual fund units and sells them after more than 12 months, the profit is treated as LTCG.
For equity assets, LTCG applies when:
- listed equity shares are held for more than 12 months
- equity-oriented mutual funds are held for more than 12 months
- units of business trusts are held for more than 12 months
Tax Treatment
For listed equity shares and equity-oriented mutual funds where STT is paid, LTCG is taxed under Section 112A.
After Budget 2024 changes:
- LTCG up to ₹1.25 lakh per year is exempt
- LTCG above ₹1.25 lakh is taxed at 12.5%
- indexation benefit is not available for such equity LTCG
Example
If shares are bought for ₹2,00,000 and sold after 14 months for ₹3,80,000, the gain is ₹1,80,000.
Since the shares were held for more than 12 months, this is LTCG.
Out of ₹1,80,000:
- ₹1.25 lakh is exempt
- ₹55,000 is taxable
- tax applies at 12.5% on ₹55,000
STCG vs LTCG for Equity
STCG applies when listed equity shares or equity mutual funds are sold within 12 months. It is taxed under Section 111A at 20%.
LTCG applies when listed equity shares or equity mutual funds are sold after more than 12 months. It is taxed under Section 112A at 12.5% on gains above ₹1.25 lakh.
