Why LTCG tax is back in focus: What the 12.5% rate and ₹1.25 lakh exemption mean for investors

LTCG tax is back in focus after SBI Research proposed scrapping the tax on equity investments. Here are the latest LTCG tax rates, the ₹1.25 lakh exemption on eligible equity gains, property taxation rules and what investors need to know.

Long-term capital gains (LTCG) tax is back in focus after SBI Research reportedly recommended scrapping the tax on equity investments, arguing that the move could help attract foreign capital and encourage longer-term investment.

Finance Minister Nirmala Sitharaman was also reported to have declined to commit to changes in LTCG tax or securities transaction tax (STT) ahead of the next Union Budget. The discussion has renewed investor interest in whether the government could review the tax regime.

For investors, the issue goes beyond stock market profits. LTCG tax applies to gains from several types of assets, including shares, mutual funds, property and gold, although the applicable rates, holding periods and exemptions differ. The Union Budget 2024 changed the rules significantly, raising the tax rate on eligible equity LTCG from 10% to 12.5% while increasing the annual exemption threshold from ₹1 lakh to ₹1.25 lakh.

What is LTCG tax and what are the rates for different investments?

Capital gains are profits earned when you sell or transfer a capital asset for more than its acquisition cost, after accounting for eligible expenses and adjustments. The gain is classified as short-term or long-term depending on how long the asset was held before its sale.

For transfers made on or after 23 July 2024, the broad tax treatment for common investments is as follows.