Long-Term Capital Gains Tax Rate 2025: Latest Rules & How to Save More

You have just made gains from your investments, but wait – before you cash out, it is important to understand how long-term capital gains (LTCG)tax could impact your returns in 2025. Whether you are investing in stocks, property, or mutual funds, knowing the latest rules can save you a major chunk of your profits.

What is a Capital Asset?

A capital asset, as defined under Section 2(14) of the Income Tax Act, includes tangible or intangible, movable or immovable property held by an assessee. Common examples include land, buildings, jewellery, and investments in gold, equities, and mutual funds. Certain holdings do not qualify as capital assets. These are:

●    Any inventory, such as raw materials or stocks, you wish to use for business purposes.
●    Goods such as furniture that you use for a personal purpose.
●    Agriculture land in rural regions. The definition of a rural region varies based on the population and distance from the municipality.
 

Long-Term Capital Gains Tax on Different Asset Classes

Long-term capital gains tax in India varies significantly based on the type of capital asset you have sold. Here are the details.

LTCG on Equity Shares

Listed shares are publicly traded on recognised exchanges such as the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). If you hold listed stocks for at least 12 months, they qualify for LTCG.

Unlisted shares are held by investors such as venture capitalists, employees, board members, promoters, and other private investors. They are not traded on exchanges but are transacted over the counter. Proceeds from the sale of these assets qualify as LTCG only if the holding period is at least 24 months.

Whether listed or unlisted shares, long-term capital gains tax is 12.5% without the indexation benefit. However, no tax is levied if the gain amount is below ₹1.25 lakh.

Note: Indexation refers to the adjustment in the cost of an asset for inflation.

Also Read :  Direct Tax & Indirect Tax: Differences, Types, and Benefits

LTCG on Real Estate Property

Long-term capital gains tax on property applies if you sell a property after two years from the date of acquisition.

If you purchase and sell a property on or after July 23, 2024, you will have to pay LTCG tax at 12.5% without any indexation benefit. If the purchase and sale happen before this date, the LTCG tax increases to 20%, but the indexation benefit applies. However, if the purchase date is before July 23, 2024, and the sale date is after that, you can choose between the two LTCG rates.

LTCG on Mutual Funds

The long-term capital gains tax on mutual funds depends on the type of scheme in which you have invested. A debt-oriented fund is one where more than 65% of the assets under management consist of commercial papers, bonds, or treasury bills. Conversely, an equity-oriented scheme requires a minimum investment of 65% in company stocks.

If you have debt fund investments and redeem your units (after 36 months of holding) before April 1, 2023, the LTCG tax rate will be 20% with indexation. Any transaction after this date attracts a tax rate based on your slab rate.

For equity schemes (with a holding period of over 12 months), a 10% LTCG tax rate applies with an exemption limit of ₹1.25 lakhs if you redeem your units on or before July 23, 2024. Units redeemed after this date are subject to a 12.5% tax rate without the indexation benefit. If you have invested in an Equity-Linked Savings Scheme (ELSS), the LTCG taxation will be the same as an equity scheme, but it applies after completing the 36-month lock-in period.

Also Read : All You Need To Know About the New Income Tax Return Forms

How to Save on Long-Term Capital Gains Tax?

There are several sections under the Income Tax Act of 1961, that allow you to save on long-term capital gains tax.

Section 54

According to this section, you can claim an exemption from the LTCG tax if you reinvest the proceeds from a residential property sale to purchase up to two residential properties. The condition to claim an exemption for reinvestment in two properties is that the sale proceeds must not exceed ₹2 crores. However, this limit is removed if you reinvest in one residential property.

Section 54F

This section allows you to claim exemption on the LTCG from selling capital assets such as bonds, shares, gold, or jewellery. However, residential properties do not qualify under this category. To qualify, you must invest in purchasing a new residential property one year before or two years after you sell the asset. In the case of construction, it must be completed within three years of the asset's sale.

Also Read : How to File Income Tax Return Online in India

Section 54EC

This section allows you to reinvest the proceeds from the sale of the first house property into bonds issued by the Rural Electrification Corporation, the National Highways Authority of India, the Indian Railway Finance Corporation, or the Power Finance Corporation. The maximum investment limit is ₹50 lakhs, and the investment must be made within six months of selling the property. 

Capital Gains Account Scheme (CGAS)

If you cannot invest the proceeds under the above sections, you can park your gains in bonds approved under CAGS. The amount must be invested within six months of selling the asset, and the minimum you need to invest here is ₹25 lakhs. It is important to mention that the investment is subject to a lock-in period of three years.

Also Read : What is Rebate in Income Tax?

Conclusion 

Knowing the applicable tax rates and exemptions on long-term capital gains is crucial for effective financial planning—whether you're dealing with equity shares, real estate, or mutual funds. Depending on your current financial needs, you may consider using provisions like Section 54 and Section 54F for reinvestment exemptions, or opt for the Capital Gains Account Scheme to save on taxes.

Frequently Asked Questions

Is LTCG tax applicable for inherited property or shares?

Yes, LTCG tax applies when inherited property or shares are sold. If applicable, the acquisition cost is the original acquisition price or fair market value as of April 1, 2001. Indexation benefits can reduce taxable gains. No tax is levied during the inheritance period itself.

What is the new exemption limit for LTCG?

The exemption limit for LTCG on listed securities has been raised by ₹25,000 to ₹1.25 lakh for FY 2024-25.

Are there exemptions for LTCG?

Yes, exemptions under Sections 54, 54EC, and 54F apply if gains are reinvested in specified assets like bonds or residential property.

How are Sovereign Gold Bonds taxed?

Sovereign Gold Bonds (SGBs) enjoy LTCG tax exemption if held until maturity (8 years). Premature redemption during RBI's window is also tax-free. However, selling SGBs in the secondary market attracts LTCG tax at 12.5% without indexation.
 

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