{"id":11607,"date":"2022-05-16T15:10:11","date_gmt":"2022-05-16T09:40:11","guid":{"rendered":"https:\/\/kuvera.in\/blog\/?p=11607"},"modified":"2022-07-20T18:23:42","modified_gmt":"2022-07-20T12:53:42","slug":"everything-to-know-about-long-term-capital-gains-tax-on-shares","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/","title":{"rendered":"Everything to Know about Long Term Capital Gains Tax on Shares"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_40 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" area-label=\"ez-toc-toggle-icon-1\"><label for=\"item-69eaf0c37f5b6\" aria-label=\"Table of Content\"><span style=\"display: flex;align-items: center;width: 35px;height: 30px;justify-content: center;direction:ltr;\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/label><input  type=\"checkbox\" id=\"item-69eaf0c37f5b6\"><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Understanding_Capital_Assets_and_Their_Types\" title=\"Understanding Capital Assets and Their Types\">Understanding Capital Assets and Their Types<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Long-term_capital_assets\" title=\"Long-term capital assets:\">Long-term capital assets:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Short-term_capital_assets\" title=\"Short-term capital assets:\">Short-term capital assets:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#What_Are_Long_Term_Capital_Gains\" title=\"What Are Long Term Capital Gains?\">What Are Long Term Capital Gains?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Taxation_of_Capital_Gains_in_India\" title=\"Taxation of Capital Gains in India\">Taxation of Capital Gains in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Capital_Gains_Tax_on_Equity_Shares\" title=\"Capital Gains Tax on Equity Shares\">Capital Gains Tax on Equity Shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Capital_Gains_Taxation_of_Mutual_Funds\" title=\"Capital Gains Taxation of Mutual Funds\">Capital Gains Taxation of Mutual Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Taxation_of_Equity_Linked_Savings_Scheme_ELSS\" title=\"Taxation of Equity Linked Savings Scheme (ELSS)\">Taxation of Equity Linked Savings Scheme (ELSS)<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#How_to_Calculate_Long-Term_Capital_Gains\" title=\"How to Calculate Long-Term Capital Gains?\">How to Calculate Long-Term Capital Gains?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Tax_Exemptions_Available_on_Long_Term_Capital_Gains\" title=\"Tax Exemptions Available on Long Term Capital Gains\">Tax Exemptions Available on Long Term Capital Gains<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Terms_to_Know_when_Calculating_Capital_Gains\" title=\"Terms to Know when Calculating Capital Gains\">Terms to Know when Calculating Capital Gains<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Frequently_Asked_Questions\" title=\"Frequently Asked Questions\">Frequently Asked Questions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#What_is_the_meaning_and_function_of_indexation\" title=\"What is the meaning and function of indexation?\">What is the meaning and function of indexation?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Which_properties_are_not_regarded_as_capital_assets\" title=\"Which properties are not regarded as capital assets?\">Which properties are not regarded as capital assets?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Are_dividends_from_shares_tax-free\" title=\"Are dividends from shares tax-free?\">Are dividends from shares tax-free?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Can_you_adjust_capital_losses_from_your_stock_investments\" title=\"Can you adjust capital losses from your stock investments?\">Can you adjust capital losses from your stock investments?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Is_there_any_TDS_deduction_applicable_on_stock_investments\" title=\"Is there any TDS deduction applicable on stock investments?\">Is there any TDS deduction applicable on stock investments?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/#Interested_in_how_we_think_about_the_markets\" title=\"Interested in how we think about the markets?\">Interested in how we think about the markets?<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p><span style=\"font-weight: 400;\">Equity shares are among the most popular investment methods for those willing to take high risks for high potential returns. When investors choose to invest in the shares of a company, they hope that the shares will increase in price, resulting in capital gains.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>When you stay invested for a long time, capital gains are called long term capital gains. Read the following sections to know more about long-term capital gains tax on shares.<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/kuvera.in\/explore\/fixed-deposit\/c\/all\"><img loading=\"lazy\" class=\"size-large wp-image-13417 aligncenter\" src=\"https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2022\/07\/FD-Banner_14-July-2022-1024x334.jpg\" sizes=\"(max-width: 640px) 100vw, 640px\" srcset=\"https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2022\/07\/FD-Banner_14-July-2022-1024x334.jpg 1024w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2022\/07\/FD-Banner_14-July-2022-300x98.jpg 300w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2022\/07\/FD-Banner_14-July-2022-768x250.jpg 768w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2022\/07\/FD-Banner_14-July-2022.jpg 1080w\" alt=\"Online Fixed Deposits on Kuvera\" width=\"640\" height=\"209\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Understanding_Capital_Assets_and_Their_Types\"><\/span>Understanding Capital Assets and Their Types<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Capital assets are assets that you sell or transfer to get capital gains. Stocks, mutual fund units, buildings, land, house properties, machinery, jewellery, patents, leasehold rights, etc., are all capital assets.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">There are two types of capital assets:\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Long-term_capital_assets\"><\/span>Long-term capital assets:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\"> If you sell assets like debt-oriented mutual fund units, jewellery, etc., after holding them for 36 months, they are long-term capital assets. <a href=\"https:\/\/kuvera.in\/explore\/stocks\/c\/all\">Listed stocks<\/a>, bonds, debentures, equity funds, and zero-coupon bonds are long-term capital assets if held for more than 12 months.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h4><span class=\"ez-toc-section\" id=\"Short-term_capital_assets\"><\/span>Short-term capital assets:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\"> For certain assets, a holding period of 36 months or less makes them short-term capital assets. This also includes immovable assets such as houses, buildings, or land held for 24 months or less. Other assets like shares, UTI units, equity funds, etc., are short-term if held for 12 months or less.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Things like personal goods and items, agricultural land, raw materials for business, special gold bonds, etc., do not come under capital assets. Another critical point is that the holding period of the previous owner counts for assets that you acquire as a gift or inheritance.\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_Are_Long_Term_Capital_Gains\"><\/span>What Are Long Term Capital Gains?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Capital gains refer to profits arising from the sale\/transfer of any capital asset. This can include gains from selling assets such as stocks, real estate, commodities, etc. When the selling price of a capital asset is higher than its purchase price, it results in capital gains. On the other hand, when the purchase price is higher, it results in a capital loss.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">If one sells an asset after a specific holding period, it results in long-term capital gains (LTCG). The holding period refers to the period from the acquisition of the asset to the day preceding the transfer of the asset.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Let us say that you have purchased 500 shares at Rs. 40 per share and sold them at Rs. 60 per share after two years. This would mean that you would get capital gains of Rs. 10,000. However, if you sell them at Rs. 30 per share, you would incur a capital loss of Rs. 5,000.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Taxation_of_Capital_Gains_in_India\"><\/span>Taxation of Capital Gains in India<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Profits arising from the sale of a capital asset are taxable under the head &#8216;Income from Capital Gains&#8217; in India. You need to pay capital gains tax for income earned from selling shares, <a href=\"https:\/\/kuvera.in\/explore\/mf\/c\/all\">mutual funds<\/a>, bonds, house property, etc. The tax rate depends on the type of asset and the holding period of investment.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Capital gains tax is not applicable on a property you have inherited as it does not involve a transfer of ownership. However, if you sell an inherited asset, you would be liable to pay capital gains tax.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>Long-term capital gains tax on shares and equity-oriented funds is applicable if you stay invested for over a year. LTCG applies to <a href=\"https:\/\/kuvera.in\/explore\/mf\/c\/all\/debt\">debt-oriented mutual fund<\/a> units and jewelry if held for over three years.<\/p>\n<p>&nbsp;<\/p>\n<p>The following table shows the long term capital gains tax rates:<\/p>\n<p>&nbsp;<\/p>\n<table style=\"width: 100%;\" border=\"1.5\">\n<tbody>\n<tr>\n<td><b>Type of Taxes<\/b><\/td>\n<td><b>Rate of Taxes<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">LTCG on the sale of equities\/equity funds<\/span><\/td>\n<td><span style=\"font-weight: 400;\">10% on gains of over Rs. 1 lakh<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">LTCG for sale of any other security except equities<\/span><\/td>\n<td><span style=\"font-weight: 400;\">20%\u00a0<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Capital_Gains_Tax_on_Equity_Shares\"><\/span>Capital Gains Tax on Equity Shares<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">When the purchase price of shares is lower than its selling price, you get capital gains. For listed shares, if the holding period is more than 12 months at the time of sale, it results in the generation of long-term capital gains.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>In the case of unlisted shares, for a holding period of less than a year, STCG is applicable at 15%. LTCG on shares is suitable at 10% for gains over Rs. 1 lakh in a financial year.<\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Besides capital gains, profits from intraday trading are taxed as speculative business income. The gains are added to your taxable income and taxed as per applicable slabs. Dividends from shares are also taxable at the hands of investors from FY 2020-21.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Capital_Gains_Taxation_of_Mutual_Funds\"><\/span>Capital Gains Taxation of Mutual Funds<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p>The taxation of mutual funds depends on the type of funds and holding period of investment. Equity mutual funds are those whose portfolio has an equity exposure of more than 65%. The LTCG tax rate for equity funds is 10%. Keep in mind that capital gains of up to Rs. 1 lakh earned from equity mutual funds are tax-free.<\/p>\n<p>&nbsp;<\/p>\n<p>Debt funds are defined as mutual funds with debt exposure of over 65%. If you sell debt fund units after 36 months from the date of purchase, the LTCG tax rate is 20%. Moreover, in this case, individuals are eligible for indexation benefits.<\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">For hybrid funds, the equity exposure decides the rules of taxation. If a fund&#8217;s equity exposure is over 65%, it is taxed as equity funds. Otherwise, it is taxed like debt mutual funds. Capital gains earned from investments made via a Systematic Investment Plan (SIP) are taxed based on individual installments on a first-in, first-out basis.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Taxation_of_Equity_Linked_Savings_Scheme_ELSS\"><\/span>Taxation of Equity Linked Savings Scheme (ELSS)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">ELSS funds are tax-saving mutual funds that invest at least 80% of their assets in equities and equity-related instruments. These mutual funds have a three-year lock-in period, the shortest among tax-saving investments under Section 80C.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">These mutual funds allow you to claim tax deductions of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act. Besides tax benefits, ELSS funds offer high potential returns as they invest in equity shares of companies belonging to multiple sectors.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Capital gains from ELSS funds are subject to only long-term capital gains (LTCG) due to the 3-year lock-in period.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"How_to_Calculate_Long-Term_Capital_Gains\"><\/span>How to Calculate Long-Term Capital Gains?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The following are the steps to calculate LTCG from selling an asset:<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Step 1:<\/b><span style=\"font-weight: 400;\"> Start with the FMV accrued\/received from selling shares.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Step 2:<\/b><span style=\"font-weight: 400;\"> Deduct the following expenses from the FMV to know the LTCG on shares.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Indexed cost of acquisition\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Indexed cost of improvement<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Expenses exclusively required for the transfer<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><b>Step 3:<\/b><span style=\"font-weight: 400;\"> The profits after these deductions will be your capital gains.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Where, Indexed cost of acquisition = Cost of acquisition x Cost Inflation Index for the year of transfer\/CII for the year of acquisition<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Indexed cost of improvement = Cost of improvement x CII for the year of transfer\/CII for the year of acquisition<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Example:<\/b><span style=\"font-weight: 400;\"> Mrs. Patel bought 450 shares of a listed company in January 2020 at Rs. 90 per share after paying a 1.5% brokerage. In January 2021, she sold all shares at Rs. 130\/share of the company. The CII for 2020 and 2021 is 289 and 301, respectively.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Here, Indexed cost of acquisition = Rs. 42,181.66 (Rs. 40,500 x 301\/289) and cost of transfer = Rs. 607.5<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>LTCG on share transfer = Rs. 58,500 \u2013 (Rs. 42,181.66 + 607.5) = Rs. 15,710.84<\/p>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Tax_Exemptions_Available_on_Long_Term_Capital_Gains\"><\/span>Tax Exemptions Available on Long Term Capital Gains<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The following tax exemptions are applicable on LTCG:<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Section 54:<\/b><span style=\"font-weight: 400;\"> This allows you to claim tax exemption on the LTCG earned from selling a house if you invest in another residential property. You can claim exemption on capital gains of up to Rs. 2 crore by investing in up to 2 houses. The exemption will be applicable on capital gains only and not the entire sales proceeds.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Section 54B:<\/b><span style=\"font-weight: 400;\"> Section 54B allows you to claim exemption on LTCG earned from transferring agricultural land, provided that you reinvest in a new agricultural land. The capital gains will be taxable if you do not use them to buy new land within two years.\u00a0<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Section 54EC:<\/b><span style=\"font-weight: 400;\"> You can claim tax exemption on capital gains from selling your house by investing in certain bonds within six months of the sale. You can reinvest capital gains of up to Rs. 50 lakh in bonds of the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC).\u00a0<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Section 54F:<\/b><span style=\"font-weight: 400;\"> This Section allows tax exemption on capital gains earned from selling a property other than a house. You need to reinvest the entire sales consideration in a new residential property and not just the capital gains to claim this exemption.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Through Capital Gains Account Scheme: <\/b><span style=\"font-weight: 400;\">You do not have to pay capital gains taxes if you invest in the Capital Gains Account Scheme (CGAS). If you have not invested the capital gains before filing Income Tax Returns (ITR) within the due date, you can open a CGAS account at any bank.\u00a0\u00a0<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Terms_to_Know_when_Calculating_Capital_Gains\"><\/span>Terms to Know when Calculating Capital Gains<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Here are some of the important terms you need to know when calculating capital gains on shares:<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>The total value of consideration:<\/b><span style=\"font-weight: 400;\"> This is the amount you receive instead of transferring your capital assets. Capital gains will still be subject to taxation if you have not received any compensation.\u00a0<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Cost of improvement:<\/b><span style=\"font-weight: 400;\"> These include any expenses incurred while making alterations or additions to the asset before selling.\u00a0<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Cost of acquisition:<\/b><span style=\"font-weight: 400;\"> This refers to the value you purchased the asset. If a capital asset is acquired without making a purchase, the previous owner&#8217;s fee of improvement and addition will apply.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Cost inflation Index:<\/b><span style=\"font-weight: 400;\"> This index is used to adjust the cost of acquisition and improvement against the effects of inflation over the years. The Indian government publishes the CII every year.\u00a0<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><b>Final Word<\/b><\/p>\n<p>&nbsp;<\/p>\n<p>Capital gains in India are subject to taxes depending on the nature of assets and holding period of investments. Long-term capital gains tax on shares is 10% on realized returns above Rs. 1,00,000 in a financial year if you have them for over a year.<\/p>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span>Frequently Asked Questions<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h4><span class=\"ez-toc-section\" id=\"What_is_the_meaning_and_function_of_indexation\"><\/span>What is the meaning and function of indexation?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Indexation is a method of reducing your capital gains for taxation purposes by calculating the effects of inflation. Inflation gradually reduces your purchasing power as prices of products and services increase.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Thus, the government allows you to claim indexation benefits on long-term investments in debt funds and some other assets. With this benefit, you can adjust the purchasing price of your investments to lower your tax liability.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Which_properties_are_not_regarded_as_capital_assets\"><\/span>Which properties are not regarded as capital assets?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The following is a list of exclusions under capital assets as per the Income Tax Act:<\/span><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li><span style=\"font-weight: 400;\">Any personal goods like clothes and furniture<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Consumables, raw materials, or stocks held for business purposes<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Special bearer bonds from 1991<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Gold deposit bonds under the Gold Deposit Scheme (1999) or Gold Monetization Scheme (2015)<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Central Government-issued gold bonuses<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Agricultural land in rural India<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Are_dividends_from_shares_tax-free\"><\/span>Are dividends from shares tax-free?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">No, since FY2020-21, all dividends have been taxable in the hands of investors. In other words, dividend income is added to your taxable income and taxed as per your applicable income tax rates.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Before 2020, companies paid Dividend Distribution Tax (DDT) before sharing dividends with their shareholders. Thus, investors did not have to pay taxes on dividend income of up to Rs. 10 lakh in a financial year.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Can_you_adjust_capital_losses_from_your_stock_investments\"><\/span>Can you adjust capital losses from your stock investments?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p>You can set off any losses under the head&#8217; capital gains&#8217; against other capital gains but not against other income like salary or business income. While you can set off short-term capital losses against both STCG and LTCG on shares, you can only set off long-term capital losses against LTCG.<\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">If you cannot set off total losses in a financial year, you also have the option to carry it forward to the following year. You can carry forward and set off both STCG and LTCG for up to 8 assessment years.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li>\n<h4><span class=\"ez-toc-section\" id=\"Is_there_any_TDS_deduction_applicable_on_stock_investments\"><\/span>Is there any TDS deduction applicable on stock investments?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">No TDS (Tax Deducted at Source) is applicable on capital gains from stock investments for resident investors. If a resident shareholder gets dividend income above Rs. 5,000 in a financial year, the entire dividend will be subject to a 10% TDS deduction.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">However, if a resident does not submit the PAN or provides an invalid PAN, a 20% TDS deduction will apply. If a resident shareholder submits a declaration through Form 15G or Form 15H, no TDS will be deducted. <\/span><\/p>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Interested_in_how_we_think_about_the_markets\"><\/span>Interested in how we think about the markets?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>Read more: <a href=\"https:\/\/kuvera.in\/blog\/category\/zen-and-the-art-of-investing\/\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>Zen And The Art Of Investing<\/strong><\/a><\/p>\n<p>Watch\/hear on YouTube:<\/p>\n<p><iframe loading=\"lazy\" title=\"Kuvera Insights\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/videoseries?list=PLDSzQdT9nLmCysU31bg4Ngh7WY2p3UiiI\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen><\/iframe><\/p>\n<p>Start investing through a platform that brings goal planning and investing to your fingertips. Visit <a href=\"https:\/\/www.kuvera.in\/\"><strong>kuvera.in<\/strong><\/a> to discover <a href=\"https:\/\/kuvera.in\/blog\/direct-plans-better\/\"><strong>Direct Plans<\/strong><\/a> and <strong><a href=\"https:\/\/kuvera.in\/explore\/fixed-deposit\/c\/all\">Fixed Deposits<\/a><\/strong> and <a href=\"https:\/\/kuvera.in\/user\/login\"><strong>start investing today.<\/strong><\/a><\/p>\n<p>#MutualFundSahiHai #KuveraSabseSahiHai!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Equity shares are among the most popular investment methods for those willing to take high risks for high potential returns. When investors choose to invest in the shares of a company, they hope that the shares will increase in price, resulting in capital gains. &nbsp; When you stay invested for a long time, capital gains [&#8230;]<\/p>\n<p><a class=\"btn btn-secondary understrap-read-more-link\" href=\"https:\/\/kuvera.in\/blog\/everything-to-know-about-long-term-capital-gains-tax-on-shares\/\">Read More&#8230;<\/a><\/p>\n","protected":false},"author":11,"featured_media":11608,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[99,822,679],"tags":[764,763,238,135,766,765],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Everything to Know about Long Term Capital Gains Tax on Shares - Kuvera<\/title>\n<meta name=\"description\" content=\"All about Long Term Capital Gains In India. 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