Long-term capital gains arise when you sell an asset held for longer than the threshold set for its type. Under current rules, that threshold is more than 12 months for listed equity shares, equity-oriented mutual funds and other listed securities such as listed bonds, and more than 24 months for most other assets, such as property and unlisted shares.
Why it matters
Long-term gains are often taxed at a lower rate than short-term gains, which rewards patience and affects when it makes sense to redeem.
How to read it
Under current rules, for transfers on or after 23 July 2024:
- Listed equity shares and equity-oriented funds: long-term gains above ₹1.25 lakh in a year are taxed at 12.5%, plus applicable surcharge and cess. Gains up to ₹1.25 lakh are exempt.
- Listed bonds and other listed securities held more than 12 months: 12.5%, without indexation.
- Debt mutual funds bought on or after 1 April 2023: no long-term treatment — gains are taxed at your slab rate whatever the holding period.
- Unlisted bonds and debentures: gains are taxed at slab rates whatever the holding period.
Common misconceptions
- “Long-term gains on equity are tax-free.” Only the first ₹1.25 lakh a year is exempt; the rest is taxable.
- “Indexation still applies.” It was removed for most assets from 23 July 2024, with limited transitional options for some property.
- “My SIP is long-term from the first instalment.” Each instalment has its own purchase date and holding period.
In India: The Union Budget presented on 1 February 2026 left the equity LTCG rate and the ₹1.25 lakh exemption unchanged. Tax law changes regularly; consult a tax professional before acting.
Formula
Taxable LTCG on listed equity = Long-term gains in the year − ₹1,25,000 exemption. Tax = Taxable LTCG × 12.5%, plus surcharge and cess
Worked example
For illustration, assume you redeem equity fund units held for two years with a long-term gain of ₹2,00,000, and have no other equity gains that year. Taxable gain = ₹2,00,000 − ₹1,25,000 = ₹75,000. Tax = 12.5% × ₹75,000 = ₹9,375, plus cess.
Figures are for illustration only — not a forecast or a recommendation.
Related terms
Capital gains
The profit made when you sell or redeem an investment for more than it cost; taxed as short- or long-term depending on how long you held it.
STCG
Short-Term Capital Gains
Gains on assets sold within a set holding period; for listed shares and equity-oriented funds, gains on holdings of 12 months or less.
ELSS
Equity Linked Savings Scheme
An equity mutual fund with a three-year lock-in whose investments can qualify for a tax deduction under the old tax regime, within limits.
Equity
Ownership in a company through its shares; equity investors share in the company’s growth and profits, and bear the risk of losses.
TDS
Tax Deducted at Source
Tax withheld by the payer — an employer, bank or fund house — before paying you, and credited against your final tax for the year.