Long term Capital Gains – hiked to 12% (2024-25)
What these terms means is mentioned below:
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LTCG – Long-term capital gain tax is a tax on the profit earned from the sale of assets held for a longer period.
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STCG – its briefly explained as Gains from equity shares listed on a recognized stock exchange having a holding period of less than or equal to 12 months are considered short-term capital gains.
Tax Rates on Long term capital gains (LTGC) in the last budget in the year 2023-2024 – Equity and equity-related instruments: 10% on gains exceeding ₹1 lakh in a financial year, but as per the latest Budget year 24-25 has been increased to 12% which is quite high.
| Asset Type | Holding Period | Tax Rate | Indexation Benefit |
| Equity Shares | More than 1 year | 12% | No |
| Equity Mutual Funds | More than 1 year | 12% | No |
| Debt Mutual Funds | More than 3 years | 20% | No |
| Real Estate (Property) | More than 2 years | 20% | Yes |
| Gold/ Precious Metals | More than 3 years | 20% | Yes |
How to calculate Long-term gains?
To calculate the long-term capital gains accurately, follow the steps mentioned below:
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1: Determine the Full value of consideration
It’s basically the total amount received from the transfer of capital assets. It includes the monetary payment received or fair market value in certain specified circumstances.
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2: Determine the Net value of consideration
Its the net value of consideration is determined by deducting expenses related to transfer such as commission, brokerage, etc.
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3: Calculate the cost of acquisition
In case of the purchase price of the asset is to be determined, and in the case of assets which get indexation benefits (like immovable property), we have to adjust the cost of acquisition using the cost inflation index, which the government notifies every year.
The formula for calculating the indexed cost of acquisition is:
Indexed cost of acquisition = Cost of acquisition x (CII of the year of transfer\CII of the year of acquisition)
Note: The benefit of indexation is not available in respect of LTCG taxable u/s 112A and LTCG from the transfer of bonds and debentures.
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4: Deduct exemptions under section 54/54B/54D/54EC/54F
There are certain types of long-term capital gains may be applicable for exemptions under specific conditions (e.g., reinvestment in certain assets like residential property).
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5: Long-term capital gains chargeable to tax
The long-term capital gains chargeable to tax formula is:
LTCG chargeable to tax = Net sale consideration – (Indexed cost of acquisition + Indexed cost of improvement) – exemptions under Section 54/54B/54D/54EC/54F.
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Short-Term Capital Gains (STCG)
If equity shares listed on a stock exchange are sold within 12 months of purchase, the seller may make a short-term capital gain (STCG) or incur a short-term capital loss (STCL). The seller makes short-term capital gains when shares are sold at a price higher than the purchase price. Short-term capital gains are taxable at 20% as per new Budget 2024-25.
Calculation of short-term capital gain = Sale price minus Expenses on Sale minus the Purchase price.
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