How to save tax on Long-Term Capital Gains (LTCG) in India (under current tax laws as of FY 2024–25):
What Are Long-Term Capital Gains (LTCG)?
LTCG refers to the profit made from the sale of assets like:
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Equity shares (held for more than 1 year)
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Property, gold, debt funds, etc. (held for more than 2–3 years, depending on asset type)
LTCG on equity exceeding ₹1 lakh is taxed at 10% (without indexation).
LTCG on real estate/gold/debt is taxed at 20% (with indexation)
✅ Ways to Save Tax on LTCG
1. Invest Under Section 54 (Real Estate)
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Applicable if you sell a residential property
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You must reinvest the capital gain in:
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Another residential house in India within 1 year before or 2 years after the sale (or within 3 years if under construction)
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Exemption = amount invested in new house
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You can now claim this only once in a lifetime if capital gain ≤ ₹2 crore
2. Section 54EC – Invest in Bonds
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Capital gains from property sale can be invested in 54EC bonds (e.g., REC, NHAI)
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Invest within 6 months of sale
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Max investment allowed: ₹50 lakh
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Lock-in period: 5 years
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No interest is taxable, and entire capital gain is exempt
3. Section 54F – For Assets Other Than House
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Sell any capital asset (like land, gold, mutual funds)
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Reinvest the entire sale consideration (not just the gain) in a new house
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Must not own more than one residential house on the date of transfer
4. Use Capital Gains Account Scheme (CGAS)
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If you haven’t bought the new property yet, you can deposit the capital gains in a CGAS account (in a public sector bank)
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Use the funds within the allowed timeframe to avoid taxes
5. Tax Harvesting for Equity LTCG
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Sell equity investments strategically to realize LTCG up to ₹1 lakh annually tax-free
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Reinvest the amount (called buy-back or switching) to reset acquisition price
6. Set Off with Capital Losses
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You can adjust LTCG with long-term capital losses or carry forward losses from the last 8 years
7. Choose Between Old vs. New Tax Regime
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LTCG on equity is taxed in both regimes, but on other assets (like debt funds or real estate), compare effective tax implications under both regimes
