Sold Shares or Mutual Funds in FY 2024-25? Claim ₹1.25 Lakh LTCG Tax Exemption While Filing ITR

If you’ve sold shares or equity mutual funds during the financial year 2024–25, here’s some good news that could save you money. While filing your Income Tax Return (ITR) this year, you can now claim a Long-Term Capital Gains (LTCG) tax exemption of up to ₹1.25 lakh — an increase from the previous limit of ₹1 lakh.

This change applies for the entire financial year, irrespective of whether the sale took place before or after July 23, 2024. However, it's important to note that the tax rate on LTCG has changed based on the sale date, so investors must calculate their taxes carefully.

What Has Changed for FY 2024-25?

In a significant tax update announced in Budget 2024, the LTCG exemption limit for listed shares and equity mutual funds has been increased from ₹1 lakh to ₹1.25 lakh. This benefit applies to all taxpayers under both the old and new tax regimes.

So, if your total LTCG income during the year is up to ₹1.25 lakh, you won’t have to pay any tax on it.

✅ Example:

If you sold stocks in June 2024 and made a long-term gain of ₹1.20 lakh, your entire gain will be tax-free.
If you made a gain of ₹1.40 lakh, only ₹15,000 will be taxed (after claiming the ₹1.25 lakh exemption).

Tax Rates Depend on Date of Sale

While the exemption limit applies across the year, LTCG and Short-Term Capital Gains (STCG) tax rates have changed based on the sale date.

• Sales before July 23, 2024:

  • LTCG taxed at 10%

  • STCG taxed at 15%

• Sales on or after July 23, 2024:

  • LTCG taxed at 12.5%

  • STCG taxed at 20%

This means even though the exemption limit is higher, gains beyond ₹1.25 lakh will attract a higher tax if the sale was made after July 23.

Additional Relief for Low-Income Taxpayers

If your total annual income is below the taxable limit, you may not have to pay capital gains tax at all.

• Old regime exemption limit: ₹2.5 lakh

• New regime exemption limit: ₹3 lakh

In such cases, your capital gains are adjusted against the basic exemption limit. Only gains exceeding this threshold are taxable.

✅ Example:

Suppose your total income is ₹2 lakh (excluding capital gains), and you have LTCG of ₹1 lakh. Since the income is below the old regime's exemption limit (₹2.5 lakh), the capital gain will also be considered tax-free.

Filing ITR? Keep These Points in Mind

When filing your Income Tax Return this year, it’s crucial to:

1. Check the date of sale of your shares or mutual funds.

2. Apply the correct tax rate based on whether the sale was before or after July 23.

3. Claim the ₹1.25 lakh LTCG exemption if eligible.

4. Use Form ITR-2 if you have capital gains from investments.

5. Maintain proper documentation for purchase and sale details, including dates and amounts.

Remember, LTCG exemption is available only on listed shares and equity mutual funds held for more than 12 months.

Final Thoughts

The government's decision to raise the LTCG exemption limit to ₹1.25 lakh is a welcome move for investors, especially those who regularly invest in equity markets. However, with the increase in tax rates post-July 23, taxpayers must be cautious and precise when calculating capital gains during ITR filing.

Make sure to review your transaction dates, apply the correct tax rates, and claim your eligible exemptions to minimize your tax liability this financial year.