Investing is a journey, and like any journey, it’s smoother when you know the map. Today, let’s navigate the landscape of Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG) with real-life examples, making tax season less daunting for FY 2025-26.
The Basics: LTCG vs. STCG Refresher
Before we dive into examples, remember the golden rule: holding period matters.
- Short-Term Capital Gains (STCG): Profits from selling assets held for a short duration.
For listed equity shares: 20%.
For other assets: Taxed according to the individual’s income tax slab rates.
2. Long-Term Capital Gains (LTCG): Profits from selling assets held for a longer duration (specific durations vary).
For listed equity shares and equity-oriented mutual funds: 12.5% (over and above Rs. 1.25 lakh).
For other assets there are variations, and in some cases indexation can be used.
Let’s Get Practical: Real-World Scenarios
Scenario 1: The Stock Market Investor
Imagine you’re a savvy stock market enthusiast.
- The Long Haul: You bought 100 shares of “TechGiant Inc.” on January 1, 2024, at ₹100 each. You patiently held them and sold them on March 15, 2025, at ₹150 each. That’s a gain of ₹5,000. Since you held them for over 12 months, it’s LTCG, taxed at 12.5% on gains exceeding ₹1.25 lakh.
- The Quick Flip: Now, if you had sold those same shares on July 1, 2024, it would be STCG, and that gain would be taxed at 15%.
- Mutual Fund Example: You also invested ₹50,000 in an equity mutual fund on July 1, 2024, and redeemed it on October 10, 2025, for ₹60,000. This ₹10,000 gain is LTCG, subject to the same 12.5% rate on gains over ₹1.25 lakh.
Scenario 2: The Real Estate Owner
Real estate investments have their own rules.
- You bought a property on April 1, 2020, for ₹50 lakh and sold it on May 1, 2025, for ₹80 lakh. The ₹30 lakh profit is LTCG, as you held it for over 24 months. However, remember that real estate LTCG involves indexation benefits, which adjust for inflation. Always consult a tax pro!
Scenario 3: The Debt Fund Investor
Debt funds add another layer.
- You invested ₹1 lakh in a debt mutual fund on January 1, 2024, and redeemed it on March 1, 2026, for ₹1.15 lakh. That ₹15,000 gain is LTCG if held over 36 months, and taxed after indexation. If redeemed sooner, it’s STCG, taxed as per your income slab.
Key Takeaways:
- Holding periods are the compass guiding LTCG vs. STCG.
- Asset classes have unique holding periods and tax rates.
- Indexation can significantly impact LTCG on specific assets.
- Always check the current tax rules for your specific investments.
Tax laws are complex and require thorough understanding. Consult us for detailed understanding of tax laws and related guidance regarding compliance with Capital Gains Taxation.