Long-Term Capital Gains (LTCG) Tax in India: Rates, Exemption, and How to Save
The first Rs 1.25 lakh of LTCG per financial year is tax-free. Gains above that are taxed at 12.5%. Here's how the rules work — and how to use them.
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What is LTCG tax in India?
Long-term capital gains tax applies to profits from selling listed equity shares or equity-oriented mutual funds that you held for more than 12 months.
| LTCG Amount | Tax Rate |
|---|---|
| Up to Rs 1.25 lakh per year | 0% (fully exempt) |
| Above Rs 1.25 lakh per year | 12.5% |
The Rs 1.25 lakh exemption is per investor, per financial year. It does not roll over. If you don't use it in a given year, it resets to zero on April 1.
How to use the Rs 1.25 lakh exemption: gain harvesting
Most investors leave this exemption unused because they haven't realized any gains yet. Here's the opportunity: you can deliberately book up to Rs 1.25 lakh of long-term gains before March 31 each year — paying zero tax — and reset your cost basis to the current price.
This is called gain harvesting. Done annually, it can significantly reduce the LTCG liability you accumulate over a long holding period.
Example
You bought Reliance shares for Rs 2,000 in 2022. They're now worth Rs 3,000. You have Rs 1 lakh in unrealized LTCG.
If you sell and repurchase, you realize the gain tax-free (under the Rs 1.25L limit), and your new cost basis becomes Rs 3,000. Future gains are now calculated from the higher price.
Tax paid: Rs 0. Future taxable gain: reduced.
How losses reduce your LTCG tax
Your LTCG tax is calculated on net gains, not gross gains. Losses can bring the number down — or eliminate it entirely.
Short-Term Capital Loss (STCL)
Can offset both STCG and LTCG — the most flexible type of loss.
Long-Term Capital Loss (LTCL)
Can only offset LTCG. Cannot be used against short-term gains.
Example
You have Rs 2 lakh in LTCG. You also hold a stock with Rs 80,000 in unrealized long-term losses.
If you sell the losing stock, your net LTCG drops to Rs 1.2 lakh — fully covered by the Rs 1.25L exemption.
Tax owed: Rs 0. Without harvesting: Rs 9,375 (12.5% on Rs 75,000).
See the full picture of offset rules on the tax loss harvesting guide.
How your LTCG is actually calculated (FIFO method)
India uses the FIFO method: when you sell shares, the first shares you bought are treated as sold first. Your gain is the difference between the current sale price and the oldest purchase price.
If you've made multiple purchases of the same stock at different prices over the years, calculating your true LTCG — and whether your position even qualifies as long-term — requires tracing each lot individually.
TaxHarvestLab does this automatically from your Zerodha or Groww tradebook, so you see the correct gain before deciding to sell.
What this page covers — and what it doesn't
This guide covers listed equities and equity-oriented mutual funds only — the asset class most retail investors hold through Zerodha or Groww. Different rules apply to:
- Unlisted sharesDifferent rates apply (typically 20% with indexation)
- Debt mutual fundsTaxed as per income slab, not at 12.5%
- Real estateSeparate LTCG rules with indexation benefit
- Gold and sovereign gold bondsDifferent holding period and tax treatment
See how much of your Rs 1.25L exemption remains this year
TaxHarvestLab calculates your current LTCG position, shows how much exemption is left, and identifies which holdings to sell before March 31.
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Common LTCG questions
Is the Rs 1.25 lakh exemption per person or per household?
Per person. Each investor gets the Rs 1.25 lakh exemption independently. Couples with separate demat accounts each get the full exemption every financial year.
Do I need to declare LTCG in my ITR even if it's below Rs 1.25 lakh?
Yes. You must report all capital gains in your ITR, even if no tax is owed. The exemption applies automatically to the calculation, but the transaction must still be disclosed.
Can LTCG losses carry forward to future years?
Yes. Long-term capital losses can be carried forward for up to 8 years, provided you file your ITR on time. They can only offset LTCG, not STCG.
What is the LTCG tax rate for FY 2024-25?
LTCG on listed equities and equity-oriented mutual funds is taxed at 12.5% on gains above Rs 1.25 lakh per financial year. The first Rs 1.25 lakh is fully exempt.
From the Blog: LTCG Tax & Gain Harvesting
LTCG Tax in India: Rates & Rules
Complete guide for FY 2025-26
Rs 1.25 Lakh Exemption: Use It or Lose It
Annual exemption strategy explained
LTCG Gain Harvesting Strategy
Book profits tax-free before March 31
Grandfathering Clause: Still Valid?
Pre-2018 shares cost basis rules
LTCG After Budget 2024
What changed for investors
Cost Basis Reset Strategy
Save tax for years through gain harvesting