Question 1

What is the difference between LTCG and STCG?

Accepted Answer

LTCG (Long-Term Capital Gains) applies when you hold asset for longer period. STCG (Short-Term Capital Gains) for shorter period. Holding period: Equity/Equity MF: > 1 year = LTCG, ≤ 1 year = STCG | Property/Gold/Debt MF: > 2 years = LTCG, ≤ 2 years = STCG. Tax rates (2025): Equity LTCG: 10% above ₹1L exemption | Equity STCG: 15% | Property/Gold LTCG: 20% with indexation | Property/Gold STCG: As per income slab. LTCG has lower tax rates and better exemptions.

Question 2

What is indexation benefit in capital gains?

Accepted Answer

Indexation adjusts purchase price for inflation, reducing taxable gains. Formula: Indexed Cost = Purchase Price × (CII of sale year / CII of purchase year). Available for: Property, Gold, Debt MF, Unlisted shares (LTCG only). Not available for: Listed equity, Equity mutual funds. Example: Property bought in 2015 at ₹50L (CII: 254), sold in 2025 at ₹1.2Cr (CII: 363). Indexed cost = ₹50L × (363/254) = ₹71.5L. Taxable gain = ₹1.2Cr - ₹71.5L = ₹48.5L (vs ₹70L without indexation). Tax saved = ₹4.3L.

Question 3

How to save tax on long-term capital gains on property?

Accepted Answer

Ways to save LTCG tax on property: Section 54 - Buy another residential property within 2 years (exemption up to full LTCG) | Section 54EC - Invest in NHAI/REC bonds within 6 months (max ₹50L, lock-in 5 years) | Section 54F - Buy residential property if selling non-residential (full exemption if invest all sale proceeds). Requirements: Must be LTCG (held > 2 years), New property must be in India, Can't sell new property within 3 years. Best strategy: Combine indexation + Section 54 to eliminate most tax.

Question 4

Is there any exemption for equity LTCG?

Accepted Answer

Yes, equity LTCG has ₹1 lakh annual exemption. Tax rates: First ₹1,00,000 LTCG = Tax-free | Above ₹1,00,000 = 10% tax (no indexation). This applies to: Listed equity shares, Equity mutual funds (held > 1 year). STCG on equity: 15% flat (no exemption). Grandfathering: Gains till Jan 31, 2018 are tax-free. Example: Sell equity MF with ₹3L LTCG = First ₹1L tax-free + ₹2L taxed at 10% = Total tax ₹20,000. Plan to realize ₹1L LTCG every year tax-free.

Question 5

How is capital gains tax calculated on mutual funds?

Accepted Answer

Mutual fund capital gains depend on fund type and holding period: Equity Mutual Funds: Held > 1 year = LTCG at 10% above ₹1L exemption | Held ≤ 1 year = STCG at 15%. Debt Mutual Funds: Held > 3 years = LTCG at 20% with indexation | Held ≤ 3 years = STCG as per income slab. Calculation: Sale value - Purchase value - Expenses = Capital gain. For SIP, each installment is separate transaction (FIFO method). Example: Equity MF, ₹5L invested, sold at ₹8L after 2 years = ₹3L LTCG. Tax = (₹3L - ₹1L) × 10% = ₹20,000.

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