LTCG Tax Calculation with Formula – Long Term Capital Gains Tax

ltcg tax calculation 2025-26

LTCG Tax Calculation can be easily done with the help of simple mathematical formula. The LTCG profits above Rs. 1.25 Lakh in financial year is taxed at 12.5%, irrespective of tax bracket you belong to. So, if you make Rs. 3 Lakh as LTCG profits in a financial year, Rs. 1.25 Lakh will be tax free, and the remaining Rs. 1.75 Lakh will be taxed at 12.5%, which is around Rs. 21,875 excluding cess of 4%.

Let us understand the LTCG tax calculation in detail with the help of video.

Table of Contents

LTCG Tax Calculation Examples Video

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What is LTCG?

  • LTCG full form is Long Term Capital Gains
  • When you make profits in equity mutual funds or stocks after holding them for more than 1 year, the profits are called long term capital gains or LTCG
  • On the contrary, when the profits are made within 1 year, than it is called Short Term Capital Gains or STCG
  • You don’t have to pay tax on LTCG profits up to Rs. 1.25 Lakh in a financial year
  • This means, if your LTCG profits are within Rs. 1.25 Lakh after selling equity mutual funds or stocks, you pay Zero Income Tax
  • And if the profits made are above Rs. 1.25 Lakh in financial year, only the profits above Rs. 1.25 Lakh will be taxable

LTCG Tax Rate

  • LTCG tax rate is 12.5% on profits made above Rs. 1.25 Lakh in a financial year
  • Let us understand LTCG tax calculation with example using below formula
LTCG Profits = Rs. 4 Lakh
Exempted amount = Rs. 1.25 Lakh
Taxable Amount = Rs. 2.75 Lakh

LTCG Tax Calculation = Taxable Amount from LTCG * 12.5% / 100
LTCG Tax Calculation = Rs. 2.75 Lakh * 12.5% / 100
LTCG Tax Calculation = Rs. 34,375

As seen above using LTCG tax calculation formula, the LTCG tax will be Rs. 34,375. An additional cess of 4% needs to be paid on this tax amount while filing Income Tax Return (ITR).

How to Save LTCG Tax?

  • You can save LTCG tax by using tax harvesting concept
  • This means, the first 1.25 lakh profit is non taxable with LTCG profits every financial year
  • So the idea is to, book the profits from LTCG within 1.25 Lakh every year, and this will help you book profits every year without paying any tax
  • This concept needs some calculation and you need to decide the number of mutual fund units to be sold to make the profits within 1.25 Lakh in the year

Below is the video with examples of Tax Harvesting in LTCG profits

Save Income Tax on LTCG – Video

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How much amount of LTCG is tax free?

  • Rs. 1.25 Lakh of profits made via LTCG is tax free in a financial year
  • This means, if you make profits anywhere between Rs. 1 to Rs. 1.25 Lakh in a financial year, by selling equity mutual funds or stocks that are held for more than 1 year, your tax on LTCG will be zero
  • And this tax free amount is irrespective of which tax bracket you belong to

What is the formula for calculating LTCG?

Below is the formula to calculate LTCG Tax:

LTCG Tax Calculation = Taxable Amount from LTCG * 12.5% / 100

In above formula, “Taxable Amount from LTCG” is the amount after deducting Rs. 1.25 Lakh from the total LTCG profits made, 12.5% is the tax rate on LTCG profits.

Note that if total LTCG amount is within Rs. 1.25 Lakh then “Taxable Amount from LTCG” will be set as Rs. 0.

How can I avoid Ltcg tax?

You can avoid LTCG tax by using tax harvesting concept, in which case you book profits within 1.25 lakh every financial year for upcoming years. In this way, you’ll be booking profits after selling mutual funds and also not pay any income tax on profits.

ALSO READ: Save Income Tax on STCG and LTCG

How to Calculate LTCG on SIP Investments – Video

LTCG profits made via SIP is something that you have to track based on the SIP investment dates. Let us understand this with the help of below video:

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So based on above video, every SIP date will be considered to calculate the tenure while selling the mutual fund units. If the units held are for more than 1 year, the profits will be long term capital gains and if the profits made are within a year then they are short term capital gains, and accordingly the tax will be calculated based on LTCG and STCG tax rates.

You should try to keep the mutual fund units bought via SIP for more than 1 year to save maximum income tax.

LTCG Tax with No Other income

  • There are many viewers on my YouTube Channel who ask – What will be LTCG tax when they have no other income?
  • So based on Budget 2025, from FY 2025-26 in new tax regime, you don’t have to pay any income tax on income up to Rs. 4 Lakh
  • This means, if you do not have any other income and make LTCG profits up to Rs. 4 Lakh from 2025-26 and onwards, your income tax will be zero
  • This is because, the slab rate for income up to 4 lakh is 0% and in this case, you get basic exemption limit with the help of new tax regime
  • Note that the basic exemption limit with old tax regime is Rs. 2.5 Lakh

Some more Reading:

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Income Tax Calculator App – FinCalC

For Income Tax Calculation on your mobile device, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.

What you can do with this mobile App?

  • Calculate Income Tax for new FY 2024-25 and previous FY 2023-24
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