LTCG on Equity explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Long-Term Capital Gains (LTCG) on listed equity shares and equity-oriented mutual funds are taxed under a special regime in the Income Tax Act 2025. The key rule: gains above Rs. 1,25,000 per Tax Year are taxed at 12.5% without indexation, provided Securities Transaction Tax (STT) was paid on both purchase and sale.
Eligibility Conditions
- Asset must be a listed equity share or unit of an equity-oriented mutual fund
- STT must have been paid at the time of both acquisition and transfer
- Holding period must exceed 12 months
- The 12.5% rate applies only to the amount exceeding Rs. 1.25 lakh
Calculation Example
| Scenario | LTCG Amount | Tax Payable |
|---|---|---|
| LTCG = Rs. 80,000 | Below Rs. 1.25L threshold | Nil |
| LTCG = Rs. 2,50,000 | Taxable gain = Rs. 1,25,000 | Rs. 15,625 + cess |
| LTCG = Rs. 5,00,000 | Taxable gain = Rs. 3,75,000 | Rs. 46,875 + cess |
No Indexation Benefit
Unlike LTCG on property (which historically used Cost Inflation Index), LTCG on equity under ITA 2025 has no indexation benefit. The gain is simply sale price minus original purchase price (plus any transfer expenses).
Grandfathering (Pre-February 2018 Gains)
For shares/units acquired before 1 February 2018, the deemed cost is the higher of (a) actual cost and (b) FMV as on 31 January 2018. This grandfathering ensures gains accrued before the LTCG regime was introduced are not taxed. ITA 2025 preserves this grandfathering benefit.
STCG on Equity: 20% Rate
If equity shares or equity MF units are sold within 12 months (short-term), the gain is taxed at 20% (STT paid condition applies). STCG has no threshold exemption — the full gain is taxable at 20%.
Equity-Oriented Mutual Funds — Definition
A mutual fund is equity-oriented if at least 65% of its portfolio is invested in equity shares of domestic companies. Hybrid funds below this threshold are taxed differently (like debt funds at slab rate for LTCG).
Debt Mutual Funds — No LTCG Benefit
Debt mutual funds and fund-of-funds with less than 65% equity allocation are taxed at slab rates for both short-term and long-term gains (effective from 1 April 2023 amendment carried into ITA 2025). No 12.5% LTCG benefit applies.
ELSS Funds and LTCG
Equity Linked Savings Scheme (ELSS) funds have a mandatory 3-year lock-in. Gains on redemption after 3 years qualify as LTCG. Under the default regime of ITA 2025, the 80C deduction for ELSS is not available, but gains on ELSS are still taxed at 12.5% LTCG rate above Rs. 1.25 lakh.
ITR Reporting of LTCG
LTCG on equity must be reported in Schedule CG of ITR-2 (for individuals with capital gains) or ITR-3 (for business income). Statement of financial transactions (SFT) from brokers/depositories is reflected in AIS for cross-verification.
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Key Facts About LTCG on Equity
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What is the LTCG rate on equity shares under ITA 2025?
12.5% on LTCG exceeding Rs. 1.25 lakh per Tax Year. The first Rs. 1.25 lakh of LTCG on listed equity (STT paid) is exempt.
Is indexation available for equity LTCG?
No. LTCG on listed equity shares and equity mutual funds is computed without indexation under ITA 2025.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
LTCG on Equity: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.
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Why This Matters
Staying compliant with Indian regulations protects your business from penalties, interest and unnecessary legal trouble. It is always wise to maintain proper records and documentation so that any future scrutiny can be handled smoothly. Rules and thresholds in capital gains are revised periodically, so it helps to review your obligations at the start of each financial year. Professional guidance from a qualified CA, CS or advocate ensures that filings are accurate and submitted well before the due date.