How are long-term capital gains calculated on property?

For calculating a property's LTCG gain, start by subtracting the cost of acquisition and improvement costs from its sale price. Then deduct any allowable expenses and exemptions to find the taxable capital gains.

Is there any tax on LTCG for senior citizens?

Yes, senior citizens are subject to the same LTCG tax regulations as regular taxpayers. However, they can benefit from the basic exemption limit based on their income slab before LTCG tax applies.

How much long-term capital gain on listed shares is tax-free?

LTCG on listed shares and equity mutual funds is exempt up to ₹1,25,000 in a single financial year.

What is Long-term Capital Gains Tax in India: Tax Rates, Formula and Exemptions

Any profit earned from transferring assets such as property, bonds, and shares is subject to income tax under capital gains. When these assets are held for more than 24 months before being sold, they are classified under long-term capital gains tax.

However, certain exceptions apply. For instance, equity-oriented funds and listed securities qualify as long-term assets if held for more than 12 months before being sold.

In this blog, we will discuss long-term capital gains tax in detail, understanding its calculation and its contribution towards tax savings.

What is Long-term Capital Gain (LTCG)?

When you sell a long-term asset for a profit, that profit is a long-term capital gain. The Income Tax Act addresses these gains in two main ways: Section 112A and Section 112.

Specifically, Section 112A governs gains from the sale of:

Shares of publicly traded companies
Units of equity-focused investment funds
Units of business trusts.

Section 112 is applicable for all additional cases of LTCG taxation that are not covered by Section 112A.

🧮 How to Calculate Long-Term Capital Gains (LTCG) Tax on Property– Simple Example

Let’s say you bought equity funds in 2016 for ₹25,00,000 and sold them in 2025 for ₹60,00,000. Here's how you calculate the LTCG tax step-by-step:

Step-by-Step Example

Let’s say:

You bought a property in 2016 for ₹25,00,000
You sold it in 2025 for ₹60,00,000
You spent ₹1,00,000 on selling expenses (like brokerage)
You also spent ₹5,00,000 on home improvements in between
You qualify for ₹10,00,000 tax exemption under Section 54

Step 1: Calculate the Net Sale Value

Sale Price - Selling Expenses
= ₹60,00,000 - ₹1,00,000
= ₹59,00,000

Step 2: Calculate Indexed Cost of Purchase

Use Cost Inflation Index (CII)

Let’s assume:

CII for 2016 = 254

CII for 2025 = 363

Indexed Cost = ₹25,00,000 × (363 ÷ 254)

= ₹25,00,000 × 1.4291 ≈ ₹35,72,750

Step 3: Calculate Indexed Cost of Improvement

Assume improvement was done in 2020

CII for 2020 = 301

Indexed Cost = ₹5,00,000 × (363 ÷ 301)
= ₹5,00,000 × 1.206 ≈ ₹6,03,000

Step 4: Calculate LTCG Before Exemption

LTCG = Net Sale Value - (Indexed Purchase + Indexed Improvement)
= ₹59,00,000 - (₹35,72,750 + ₹6,03,000)
= ₹59,00,000 - ₹41,75,750
= ₹17,24,250

Step 5: Apply Exemption under Section 54

LTCG after Exemption = ₹17,24,250 - ₹10,00,000
= ₹7,24,250

Step 6: Calculate LTCG Tax Payable

LTCG on property is taxed at 20% with indexation

Tax = ₹7,24,250 × 20% = ₹1,44,850

Summary Table

Item	Amount (₹)
Sale Price	60,00,000
Less: Selling Expenses	-1,00,000
Net Sale Value	59,00,000
Indexed Purchase Cost (2016)	35,72,750
Indexed Improvement Cost (2020)	6,03,000
Total Indexed Cost	41,75,750
Capital Gain before Exemption	17,24,250
Less: Section 54 Exemption	-10,00,000
Taxable LTCG	7,24,250
LTCG Tax @20%	₹1,44,850

Let us understand the calculation of long-term capital gains tax on Stocks:

At present, the long-term capital gain tax on shares is 12.5% provided that your profits exceed ₹1.25 Lakhs in a single financial year.

For straightforward LTCG tax calculation, you can apply this method:

Suppose, you had earlier invested ₹25 Lakhs in equity funds in 2019. By 2025, your investments will collectively produce ₹41 Lakhs. As per this scenario, let us examine the long-term capital gains tax liability to the Income Tax Department, after the Union Budget 2024 announcement:

LTCG Tax = (LTCG - Exemption Amount) * Rate of Tax

As per the new rate, your LTCG tax liability will be:

₹[(41,00,000 - 25,00,000) - Exemption] * 12.5%

= ₹(16,00,000 - 1,25,000) * 12.5%

= ₹1,83,750

As evident from the Union Budget 2024 updates, the LTCG tax rate for listed securities has been increased to 12.5%, without any indexation benefits. Investors looking for an alternative passive income stream, consider exploring FD monthly income plans.

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What are the Exemptions on Long-term Capital Gains Tax?

Understanding the available rebates on long-term capital gains tax can help investors optimise their tax liabilities. The Income Tax Act, of 1961 allows several LTCG tax advantages to investors who strive to save their long-term capital gains. Here are some key exemptions:

Under Section 54 of the IT Act, you can claim exemptions on the LTCG tax if you reinvest the gains from selling a residential property into another residential property within the specified time frame of one year before the sale, or two years after the sale.
As per Section 54EC, you may avail tax exemption on capital gains of up to ₹50 Lakhs upon selling a long-term asset. For this, you have to re-invest that amount in certain bonds within a timeframe of 6 months.
Capital gains earned from the sale of equity shares and mutual funds are exempt from tax up to ₹1.25 lakh in a single financial year.

Each exemption comes with specific eligibility criteria and conditions. Understanding these aspects is crucial to maximise tax savings and ensure compliance with the latest tax regulations.

Final Words

Long-term capital gains tax applies to various investment types and must be carefully considered to accurately assess returns. Investors whose income exceeds the basic tax exemption limit should explore legitimate strategies to minimise their LTCG tax liability.

For more such informative blogs on investment strategies and tax planning, you can follow the blog section of Stable Money. If you are looking for high-return fixed deposit options, do not forget to download our app.