Long-term Capital Gain (LTCG)

What is Long-term Capital Gain?

The full form of LTCG is Long Term Capital Gain. The meaning of long-term capital gains is the profit that comes from the sale of capital assets like properties, stocks, etc., which are held for a duration of more than 24 months. This time is 12 months in case of the listed shared and equity funds. 

Importance and Benefits of LTCG

The long-term capital gain tax impacts the returns of the investment. The rates of the assets can be different, as it depends on the asset type and how long you have had it. The investors should have an understanding of the LTCG because it helps in making better strategies. LTCG is important to make the government revenue and helps in shaping the financial policies and making budget plans.

The tax on long-term gains is lower than the tax on short-term capital gains. It encourages investors to invest and hold their investments for a longer time. For some specific exemptions, it helps in reducing the tax burden. The indexation benefit is also available, which helps in lowering the taxable portion and reducing tax liability.

LTCG Tax Rates for different Assets

For all the capital assets, the tax rate on the long-term capital gains is 12.5%. For the listed equity-oriented funds, equity shares, and business trusts, if the long-term capital gains exceed Rs 1.25 lakhs, then they will be taxed at the rate of 12.5% flat.

The LTCG taxation is categorized into two sections:

1. Section 112A: It applies to assets like units of equity-oriented funds, units of business trusts, and equity shares in a listed company.
2. Section 112: It covers all the remaining assets of LTCG that are not covered in Section 112A.

Here is the tabled information on the tax rates and holding period for different types of assets: