ITR Filing 2025: Do I Need to Report Tax-Free LTCG Below ₹1 Lakh in ITR?

When investors earn profits from selling shares or equity mutual funds, those profits are classified as capital gains. Many are aware that long-term capital gains (LTCG) up to ₹1.25 lakh in a financial year are now tax-free. However, the common question remains—should these exempt LTCG amounts still be reported in the Income Tax Return (ITR)? 

This article clears up the confusion with clarity and factual information.

Are Tax-Free LTCG Below ₹1 Lakh Really Exempt?

Yes, any LTCG from the sale of equity shares or equity mutual funds up to ₹1.25 lakh in a financial year is exempt from income tax. This limit is applied on a cumulative basis, meaning it includes the total LTCG from all such transactions combined during the financial year.

Do You Still Need to Report Tax-Free LTCG in ITR?

Even though LTCG up to ₹1.25 lakh is exempt from tax, it is still mandatory to report such gains in your Income Tax Return. The exemption does not mean exclusion from disclosure. The Income Tax Department requires taxpayers to provide details of all capital gains, whether taxable or not, for transparency and accurate income profiling.

Where Should You Report LTCG in the ITR?

For individuals filing ITR-2 or ITR-3, long-term capital gains must be disclosed under the ‘Capital Gains’ schedule. Even if the amount is exempt, the sale and purchase details including ISIN, date of purchase and sale, and fair market value as on January 31, 2018 (if applicable) must be furnished.

Why Is Reporting Exempt LTCG Important?

Failing to report exempt LTCG can lead to discrepancies in your ITR and may attract notices from the Income Tax Department. Since brokers and depositories also report your securities transactions under Annual Information Statement (AIS), omitting these details could raise red flags.

Does It Affect Your Refund or Tax Liability?

Not directly. Reporting tax-free LTCG below ₹1 lakh does not impact your tax liability or refund, but it does ensure consistency with the data available to the tax authorities. It helps avoid future scrutiny and aids in maintaining a clean financial record.

What About LTCG from Other Assets?

The ₹1.25 lakh exemption applies only to listed equity shares and equity mutual funds. LTCG from debt mutual funds, property, or gold are taxed differently and are not eligible for this exemption. These should be reported separately based on their applicable holding period and tax treatment.

What Are Long-Term Capital Gains?

Long-term capital gains (LTCG) refer to profits made from the sale of listed equity shares or equity-oriented mutual funds held for more than 12 months. As per the latest tax provisions under section 112A, LTCG above ₹1.25 lakh in a financial year are taxed at 10%. However, gains up to ₹1.25 lakh remain exempt from tax.

This revised exemption limit of ₹1.25 lakh has come into effect from July 23, 2024 and is applicable for the financial year 2024–25 and subsequent years.

Read More: ITR Filing 2025: Do You Need Rent Receipts To Claim HRA Tax Exemption?

Conclusion

In summary, while LTCG up to ₹1.25 lakh on equity investments may be tax-free, it must still be reported accurately in your ITR. Doing so maintains compliance, avoids potential mismatches with AIS or Form 26AS, and keeps your financial records in good order. Always ensure that your capital gains disclosures are complete, even if no tax is payable.

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in securities are subject to market risks. Read all related documents carefully before investing.