LTCG Tax on Stocks in India FY 2025-26: Complete Guide

Every financial year, the rules for LTCG tax on Indian stocks either change or don't -- but confusion about what the current rules are persists. This guide covers the exact LTCG tax rules for FY 2025-26 (Assessment Year 2026-27), with the Budget 2024 changes incorporated, and the practical implications for investors selling stocks or equity mutual funds this year.

LTCG Tax Rate for FY 2025-26

The Finance Act 2024 (Budget 2024) changed LTCG tax rates effective August 23, 2024. The rules that apply for the full FY 2025-26 (April 1, 2025 to March 31, 2026) are:

Asset	Holding Period	LTCG Rate	Exemption
Listed equity shares (NSE/BSE)	More than 12 months	12.5% (Section 112A)	First ₹1.25L per FY
Equity mutual funds	More than 12 months	12.5% (Section 112A)	First ₹1.25L per FY
Debt mutual funds (post Apr 2023)	Any period	Slab rate	None
Unlisted equity shares	More than 24 months	12.5% (no indexation)	None
Immovable property	More than 24 months	12.5% (no indexation from Budget 2024)	None (Section 54 exemption applies separately)
REITs / InvITs	More than 12 months	12.5%	None

Add 4% Health and Education Cess on the tax amount. No surcharge applies to LTCG under Section 112A for individual taxpayers.

The ₹1.25 Lakh Exemption: How It Works

The annual exemption of ₹1.25 lakh under Section 112A applies to total LTCG from listed equity shares and equity mutual funds combined in a financial year. It is per taxpayer (not per asset or per transaction).

Practical examples:

• Total LTCG = ₹80,000: Tax = ₹0 (fully within exemption)
• Total LTCG = ₹1,25,000: Tax = ₹0 (exactly at exemption limit)
• Total LTCG = ₹2,00,000: Taxable gain = ₹2,00,000 - ₹1,25,000 = ₹75,000. Tax = ₹75,000 x 12.5% = ₹9,375. Add 4% cess = ₹9,750 total.
• Total LTCG = ₹5,00,000: Taxable gain = ₹3,75,000. Tax = ₹46,875. After cess = ₹48,750.

The exemption does not carry forward. If your LTCG this year is ₹80,000, the remaining ₹45,000 exemption does not add to next year's exemption.

Budget 2024 Changes: What Changed and What Didn't

Budget 2024 made significant changes. What changed:

• LTCG rate on equity: Increased from 10% to 12.5% effective August 23, 2024
• LTCG exemption: Increased from ₹1 lakh to ₹1.25 lakh (partially offsetting the rate increase)
• STCG rate on equity: Increased from 15% to 20%
• Property LTCG: Rate cut to 12.5% but indexation benefit removed (big change for property holders)

What did not change:

• 12-month holding period for equity LTCG
• Section 112A applicability (STT must be paid on the transaction)
• Grandfathering provision for pre-February 2018 purchases
• Debt mutual fund rules (slab rate for purchases after April 2023)

STCG vs LTCG: The 12-Month Rule in Practice

Equity held for more than 12 months is LTCG at 12.5%. Equity held for 12 months or less is STCG at 20%. The one-day difference -- selling on day 365 vs day 366 -- changes the tax rate by 7.5 percentage points.

On ₹1 lakh of gains: STCG tax = ₹20,000. LTCG tax (assuming gains above the ₹1.25L exemption) = ₹12,500. Difference = ₹7,500 saved per ₹1 lakh of gain.

For investors with significant unrealised gains approaching the 12-month mark, waiting an extra few weeks is one of the highest-return activities in portfolio management.

Grandfathering: The Pre-February 2018 Rule

For equity shares or equity mutual fund units purchased before February 1, 2018, the grandfathering provision applies. The deemed cost of acquisition is the higher of:

• Your actual purchase price
• The Fair Market Value (FMV) on January 31, 2018 (highest traded price that day)

But there is a cap: the deemed cost cannot exceed the actual selling price. So grandfathering reduces your taxable gain but cannot create a taxable loss where none exists.

Example: Bought 100 shares at ₹200 in 2015. Jan 31, 2018 FMV was ₹600. Sold in FY 2025-26 at ₹800. Deemed cost = ₹600 (higher of ₹200 actual and ₹600 FMV). Taxable gain = ₹800 - ₹600 = ₹200 per share. Without grandfathering, gain would be ₹600 per share -- you save tax on ₹400 per share of pre-2018 appreciation.

How LTCG Interacts with Other Income

LTCG under Section 112A is calculated separately from regular income. You cannot offset LTCG with deductions under Chapter VIA (like 80C, 80D). The ₹1.25L exemption applies directly to the LTCG before tax calculation, regardless of your income bracket.

However, if your total income (including LTCG) is below the basic exemption limit of ₹2.5 lakh (under old regime) or ₹3 lakh (under new regime), you can set off the shortfall against your LTCG. For example, if your only income is LTCG of ₹2 lakh and your basic exemption is ₹2.5 lakh, you pay zero tax.

Advance Tax on LTCG

If your estimated LTCG tax liability for the year exceeds ₹10,000, advance tax applies. Key dates:

• June 15: 15% of estimated annual tax
• September 15: 45% cumulative
• December 15: 75% cumulative
• March 15: 100% cumulative

Missing advance tax installments attracts 1% per month interest under Sections 234B and 234C. For investors who book large LTCG in Q3 or Q4, the December 15 installment is the critical one to track.

How to Report LTCG in Your ITR

LTCG from listed equity is reported in Schedule CG of the ITR. Use ITR-2 if you have capital gains income. Do not use ITR-1 if you have any capital gains -- it is not applicable. Your broker's Tax P&L statement (Zerodha Console, ICICI Direct tax report, etc.) breaks down all LTCG and STCG transactions for the year. Use this as your source document for Schedule CG.