Long Term Capital Gain

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Sakshi Shah

Capital Gains
Capital Gains Exemption
Long Term Capital Gain
LTCG

Profit or Gain on the sale of a Capital Asset is a Capital Gain. The taxpayer who earns Capital Gain should report such income in the Income Tax Return and pay the capital gains tax on it at the applicable rate. Thus, income tax is payable in the year in which the capital asset is sold. The income tax rate is different for Long Term Capital Gain and Short Term Capital Gain. To determine the nature of capital gain, the Income Tax Act has defined the period of holding for each capital asset.

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What is Long Term Capital Gain?

The profit or loss on the sale of a capital asset held for more than the specified holding period is a Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL).

Based on the period of holding, here is a summary of Capital Gain on the sale of Capital Assets. Eg: If the listed equity share of a domestic company is sold after 12 months of purchase, the profit or loss is Long Term Capital Gain or Long Term Capital Loss.

Capital Asset Period of Holding
Equity Shares of Domestic Company listed on a recognized stock exchange 12 months
Equity Shares of Domestic Company not listed on a recognized stock exchange 24 months
Equity Shares of Foreign Company whether listed or not 24 months
Equity-oriented Mutual Funds or ETFs (Exchange Traded Funds) 12 months
Debt-oriented Mutual Funds or ETFs (Exchange Traded Funds) 36 months
Debentures or Bonds listed on a recognized stock exchange 12 months
Debentures or Bonds not listed on a recognized stock exchange 36 months
Immovable Property such as land, building or house property 24 months
Movable Property such as jewelry, car, painting, work of art 36 months
Long Term Captial Gain Tax on Shares - Equity Shares & Equity Mutual Funds
Refer to this article to learn more about LTCG tax on shares
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Long Term Captial Gain Tax on Shares - Equity Shares & Equity Mutual Funds
Refer to this article to learn more about LTCG tax on shares
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Income Tax on Long Term Capital Gain

The tax rate of a capital asset is determined on the basis of the nature of capital gain i.e. LTCG or STCG.

Capital Asset STT LTCG STCG
Listed equity share of a domestic company Yes 10% in excess of INR 1 lac u/s 112A 15% u/s 111A
Listed equity share of a domestic company No 10% without indexation slab rate
Unlisted equity share of a domestic company No 20% with indexation slab rate
Listed equity share of a foreign company Yes / No 10% without indexation slab rate
Unlisted equity share of a foreign company Yes / No 20% with indexation slab rate
Equity Mutual Fund or ETF Yes 10% in excess of INR 1 lac u/s 112A 15% u/s 111A
Debt Mutual Fund or ETF No 20% with indexation slab rate
Listed Debentures or Bonds No 10% without indexation slab rate
Unlisted Debentures or Bonds No 20% without indexation slab rate
Land, Building, House Property, Car, Jewellery, Paintings, Art of Work NA 20% with indexation slab rate

Exemption from LTCG

The taxpayer having income from the sale of a long term capital asset can claim an exemption under Section 54 to 54GB of the Income Tax Act if he/she fulfills the conditions.

A taxpayer can claim the exemption by reinvesting the proceeds from the sale into a specified capital asset. Such exemption would lower the capital gains and save taxes on the same. However, the taxpayer must hold the new asset for the specified period as per the relevant section. However, if he/she sells the asset before the specified time period, he/she must report it as an income in the relevant financial year and pay tax at the applicable rate.

The taxpayer has an option to open an account under the Capital Gains Account Scheme and park the sale proceeds in it till the time they invest in the specified asset to claim the Capital Gains exemption.

Capital Gain Exemption
Refer to this article to learn more about the exemptions associated to capital gains
Read More
Capital Gain Exemption
Refer to this article to learn more about the exemptions associated to capital gains
Read More

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