Long-Term Capital Gain (LTCG) refers to the profit earned from the sale of a capital asset that has been held for a specified period—typically more than 36 months for most assets, or more than 12 months in the case of listed shares, mutual funds, and a few other securities. In India, LTCG is a key component of income under the "Capital Gains" head as defined by the Income Tax Act.
LTCG is taxed differently from short-term capital gains. For listed equity shares and equity mutual funds, LTCG above ₹1 lakh in a financial year is taxed at 10% without the benefit of indexation. For other assets like real estate or gold, LTCG is generally taxed at 20% with indexation benefits, which adjust the purchase cost for inflation, thus reducing the taxable gain.
Understanding LTCG is crucial for small business owners, investors, and professionals because it impacts financial planning, tax liability, and compliance. For instance, if a business sells a long-held property or investments, the resulting gain must be reported while filing income tax returns, and the correct tax must be paid to avoid penalties.
LTCG also plays an important role during business restructuring, mergers, or asset liquidation. Knowing how it works helps in making informed decisions about asset retention and sale timelines.
For guidance on how LTCG affects your income tax planning or compliance, you can explore practical solutions at FinTax24’s Income Tax Services.
In summary, LTCG is not just a tax term—it directly affects your financial outcomes and must be accounted for carefully during tax filing and long-term planning.