Understanding Long-Term Capital Gains Tax (LTCG) in ITR 2025
Long-Term Capital Gains Tax (LTCG) applies to profits earned from the sale of capital assets held beyond specified holding periods. For the financial year 2024-25 (Assessment Year 2025-26), LTCG rules have been updated to a uniform tax regime that simplifies taxation across asset classes.
What is Long-Term Capital Gains Tax?
Long-Term Capital Gains Tax is charged on gains arising from the sale of capital assets such as stocks, mutual funds, property, or other investments held for a long duration. Gains from such assets become liable for LTCG tax only when the asset is held beyond specific minimum holding periods. For most assets, this means holding for over 24 months; for listed equity shares and equity-oriented mutual funds, the period is 12 months.
LTCG Tax Rates and Exemption Limit for ITR 2025
Uniform Tax Rate: LTCG on all assets is taxed at a flat rate of 12.5% without indexation benefits. This change from prior years simplifies tax calculation.
Exemption Limit: Gains up to Rs. 1.25 lakh from listed equity shares, equity-oriented funds, and units of business trusts are exempt from LTCG tax annually. Gains exceeding this threshold are taxed at 12.5%.
For Other Assets (Land, Buildings, Unlisted Shares): The LTCG tax is also 12.5%, with an option for individuals and Hindu Undivided Families (HUF) to opt for 20% with indexation (adjustment for inflation) instead of 12.5% without indexation.
Holding Periods for LTCG
Listed Equity Shares & Equity Mutual Funds: Minimum 12 months holding period to qualify as LTCG.
Other Capital Assets (Real Estate, Debt Funds, Unlisted Shares, etc.): Minimum 24 months holding period.
The budget has standardized holding periods into two categories, replacing multiple periods from previous years for clarity and uniformity.
Exemptions and Reliefs on LTCG Tax
LTCG from the sale of listed equity shares and mutual funds is exempt up to Rs. 1.25 lakh annually.
Taxpayers can claim exemption under various sections for reinvestment of capital gains:
Section 54: Reinvestment in residential property (up to Rs. 10 crores exemption limit)
Section 54EC: Investment in specified bonds (up to Rs. 50 lakhs)
Section 54F: Reinvestment in residential property if gains are from other than residential property.
Income tax provisions allow utilizing unutilized basic exemption limits against LTCG for individuals whose taxable income excluding LTCG is below the tax-exempt slab (Rs. 2.5 lakh or Rs. 3 lakh depending on regime).
Key Changes in LTCG Tax – Budget 2024 & 2025
Uniform LTCG rate introduced at 12.5% on all capital assets, replacing varied rates of 10%, 20% and options of indexation.
Indexation benefits removed for listed equity shares and equity-oriented funds, potentially increasing taxable gains.
Basic exemption limit increased from Rs. 1 lakh to Rs. 1.25 lakh for LTCG gains on listed shares and mutual funds.
Holding periods simplified to two: 12 months and 24 months for all assets.
No major changes were introduced in Budget 2025 over the 2024 framework.
Frequently Asked Questions (FAQ)
What is the exemption limit for LTCG tax in 2025?
The exemption limit is Rs. 1.25 lakh annually on LTCG from listed equity shares and equity-oriented mutual funds. Gains above this limit are taxed at 12.5% without indexation.
What is the tax rate on LTCG for various assets?
A uniform LTCG tax rate of 12.5% applies to all capital assets without indexation. For land and buildings, individuals and HUF have an option to pay 20% with indexation.
What is the minimum holding period for long-term capital gains?
12 months for listed equity shares and equity mutual funds; 24 months for other capital assets like property and unlisted shares.
Can I claim any exemption on LTCG if I reinvest?
Yes. Exemptions under Sections 54, 54EC, and 54F are available for reinvestment in specified assets like residential property and bonds.
Are indexation benefits available now on equities?
No, indexation benefits for listed equity shares and equity-oriented funds have been removed as per the Budget 2024 changes.
Does LTCG get taxed if my total income is below the basic exemption limit?
If total income excluding LTCG is below the basic exemption limit, exemptions and rebates may apply to LTCG as well, potentially reducing the tax liability.
Published on: July 27, 2025
Published by: Selvi
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