Long-Term Capital Gain (LTCG) or Long-Term Capital Loss (LTCL) arises when a capital asset — including equity shares, mutual fund units, bonds, real estate, or gold — is sold after being held for a period that qualifies as long-term under the Indian Income Tax Act. For listed equity shares and equity mutual funds, the long-term holding period is more than 12 months. LTCG on equity shares and equity-oriented mutual funds above ₹1.25 lakh per financial year is taxed at 12.5% (without indexation benefit) under the Finance Act 2024 amendments. For debt mutual funds purchased after April 1, 2023, gains are taxed at the investor's applicable income tax slab rate regardless of holding period. LTCL can be set off against LTCG from any capital asset and carried forward for up to eight assessment years to be offset against future LTCG. Understanding the distinction between STCG and LTCG is essential for Indian investors to optimise tax efficiency — particularly through tax-loss harvesting and strategic timing of asset sales to maximise the benefit of the lower LTCG tax rate.
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