Tax Loss Harvesting

What is long term capital gain tax? How is it calculated?

Any profit or gain arising from stock investment are considered as long term capital gains, if the holding period is more than 1 year. Until 23^rd July, 2024, Long term capital gains up to Rs. 1 Lakh in a financial year were exempted from tax. As per the new budget announced on 23^rd July 2024, the exemption has been increased from Rs.1,00,000 to Rs. 1,25,000. The tax rates on long-term capital gains have been increased from the earlier rate of 10% to a new rate of 12.5%.

Example:

Mr P bought 200 shares of Titan Ltd. At Rs. 800 per share on 1^st May, 2023.

Case 1: Shares sold before 23^rd July, 2024

Mr. P sold the same 200 shares of Titan at Rs. 1500 per share on 3^rd June, 2024. Holding period of the shares is more than 12 months.

Long Term Capital Gain = 1,40,000 (Up to Rs 1,25,000 is not taxed as per the provision)

Long term capital Gain Tax= (140000-125000)    = 15,000 X 10% = 1,500

Case 2: Shares sold after 23^rd July, 2024

Mr. P sold the same 200 shares of Titan at Rs. 1500 per share on 25^th July, 2024. Holding period of the shares is more than 12 months.

Long Term Capital Gain = 1,40,000 (Up to Rs 1,25,000 is not taxed as per the provision)

Long term capital Gain Tax= (140000-125000)    = 15,000 X 12.5% = 1,875

Case 3: Shares sold before 23^rd July, 2024 and also after 23^rd July, 2024

Mr. P sold the 90 shares of Titan at Rs. 1500 per share on 3^rd June, 2024. He sold the remaining 110 shares of Titan at Rs. 2000 per share on 25^th July, 2024.

Long Term Capital Gain on 90 shares = 63,000 (Up to Rs 1,25,000 is not taxed as per the provision)

Long Term Capital Gain on 110 shares = 1,32,000 (Up to Rs 1,25,000 is not taxed as per the provision)

In this case, Rs. 70,000 will be taxed at the new rate of 12.5%.

(Computation of 70,000 = 1,25,000 – 63,000 – 1,32,000 = 70,000)