Is LTCG up to ₹1 lakh really tax-free?

Yes, for equity shares and equity mutual funds, LTCG up to ₹1 lakh per financial year is exempt from tax. Gains above ₹1L are taxed at 10%.

Physical gold/gold ETF: STCG ( 3 years) at 20% with indexation. Sovereign Gold Bonds: Tax-free if held to maturity (8 years).

Can I set off capital losses?

STCL can offset against both STCG and LTCG. LTCL can only offset against LTCG. Unabsorbed losses can be carried forward for 8 years.

Capital Gains Tax in India — How to Calculate

Capital gains tax applies when you sell an asset for more than its purchase price. Understanding the rules helps you minimize tax and maximize after-tax returns.

STCG vs LTCG

Short-Term Capital Gains (STCG): If held below the defined period. Long-Term (LTCG): If held above. For equity/equity MF: Short-term = <1 year (15% tax), Long-term = >1 year (10% above ₹1L exemption). For debt MF/real estate: Short-term = <3 years (slab rate), Long-term = >3 years (20% with indexation).

Indexation Benefit

For long-term gains on debt funds, real estate, and gold, you can use indexation — adjusting purchase price for inflation using CII (Cost Inflation Index). This significantly reduces taxable gains. Example: Bought property for ₹50L in 2015 (CII 254), sold for ₹90L in 2024 (CII 363). Indexed cost = 50L × 363/254 = ₹71.5L. LTCG = ₹18.5L (not ₹40L).

Tax-Saving Strategies

Harvest LTCG: Sell and rebuy equity investments each year to book ₹1L tax-free gains. Hold debt funds for 3+ years for indexation. Use Section 54/54F exemptions for reinvesting real estate gains. Time your sales to spread gains across financial years.