Sneha bought ₹40,000 of an IT stock 14 months ago. Last week she sold it for ₹62,000. Net gain ₹22,000. Her broker WhatsApp'd "Don't forget LTCG". She has no idea what that means.
Spoiler: she owes ₹0 on that trade. But the rules change a lot by what she sold and how long she held it.
- STCG = Short-Term Capital Gain (sold within holding limit). Higher tax.
- LTCG = Long-Term Capital Gain (sold after holding limit). Lower tax.
- Equity (shares / equity MF): > 12 months = long. STCG 15%, LTCG 10% above ₹1L.
- Property / gold / unlisted shares: 24–36 months. STCG slab, LTCG 20% with indexation.
- Crypto / VDAs: flat 30% regardless of period. No deductions. 1% TDS on transfer.
The holding period decides everything
Equity / Equity MF
STT-paid
Sneha's case: 14-month hold, LTCG = ₹22k. Within the ₹1L exemption → tax ₹0.
Property / Gold
Real / physical
Indexation lets you adjust cost upward for inflation. Significantly lower effective tax for older holdings.
Crypto / VDA
The harsh regime
No long-term concept. Plus 1% TDS on every transfer. The strictest regime in Indian tax.
How the gain is computed
The basic formula:
Gain = Sale price − Cost of acquisition − Cost of improvement − Selling expenses
For LTCG with indexation: cost is adjusted upward by inflation (CII — Cost Inflation Index) before subtracting. The longer you held, the larger the inflation adjustment, the lower the taxable gain.
Worked: house bought ₹40L in 2010, sold ₹1.2 cr in 2025
CII 2010-11: 167. CII 2025-26: ~363 (illustrative).
Without indexation that same gain would have been taxed on ₹80 lakh (₹1.2 cr − ₹40 lakh). Indexation cut the bill nearly in half.
Equity-specific rules (the ones beginners need)
The ₹1 lakh LTCG exemption (Sec 112A)
First ₹1 lakh of LTCG on listed equity / equity MFs in a year is exempt. Tax only kicks in on the excess at 10%.
Sneha's ₹22k LTCG is well under ₹1L → tax ₹0 this year. Good first investing experience.
Grandfathering (31 Jan 2018)
For equity held before 31 Jan 2018, cost is the higher of:
👉 Actual purchase cost, OR
👉 Fair Market Value on 31 Jan 2018 (highest quoted price), but not more than sale price
This grandfathers pre-2018 gains — only the appreciation after 31 Jan 2018 is taxed.
Crypto — the strict regime (since FY 22-23)
👉 Flat 30% + 4% cess (effective 31.2%)
👉 Only cost of acquisition is deductible — no other expenses
👉 Losses cannot be set off against any other income
👉 Losses cannot be carried forward
👉 1% TDS on every transfer (threshold ₹50K/year individuals, ₹10K businesses)
Real estate — the three big exemptions
Sold a residential property. Reinvest LTCG in another residential property within 2 years (purchase) or 3 years (construction). Property must be in India. Capped at ₹10 cr from FY 23-24.
For LTCG on non-residential assets (shares, gold, etc.). Invest net sale consideration (not just gain) in one residential property in India.
Invest LTCG (only from land / building) in NHAI / REC / PFC / IRFC bonds within 6 months. Max ₹50L/FY. 5-year lock. ~5% interest.
Losses — set-off & carry-forward
Short-term loss
More flexible
Set off against any STCG or LTCG. Carry forward 8 years.
Long-term loss
Restricted
Set off against LTCG only. Carry forward 8 years.
Crypto losses — can't set off against anything, can't carry forward. Just lost.
The gain is the easy part. The exemption you forgot to claim — that's the expensive part.
Tax-loss harvesting — the legal lever
Late in the financial year, look at your portfolio:
👉 Sold winners at a profit? Net gain > ₹1L? You owe LTCG.
👉 Have losers you've been holding? Sell them, book the loss, repurchase after 1 day. The loss now offsets your gain.
👉 Don't have current-year losses? Check if you carry forward losses from earlier years (up to 8 years back).
Saves real tax legally. Most retail investors never do it.
Quick answers
Selling crystallises the gain — tax applies. Reinvestment of the cash later isn't the same as Section 54-style "deemed reinvestment". To avoid tax, use the specific exemption sections within the prescribed time and asset.
No TDS on equity sale proceeds (STT is collected separately). For crypto — 1% TDS on transfer above threshold. For property > ₹50L — 1% TDS by the buyer (Sec 194-IA).
Dividends are taxed at your slab rate (added to "Income from Other Sources"). No special rate. TDS @ 10% if dividend in a year > ₹5,000.
Schedule CG in ITR-2 or ITR-3. Brokers usually issue a capital-gains statement annually that maps directly to the schedule.
Yes — within 15 days of the quarter when the gain arose (some special rules for last-quarter gains). Missing this triggers Section 234C interest.
When you might want help
Equity gains under the ₹1L LTCG exemption are DIY simple. Where it gets non-trivial: property sales (Section 54/54F/54EC planning), bunching of gains across financial years, tax-loss harvesting in December–March, and crypto reporting (the 1% TDS reconciliation can be a mess).
Selling something big this year?
Pre-sale planning saves more tax than post-sale optimisation. We work the math before you transact.