Monday, June 24, 2024

Explained: How To Avoid Long Term Capital Gain (LTCG) Tax On Shares


With the growing possibilities to excel in the world market, several startups had shown up into the corporate picture to thrive on the selected pathway. If you are the one owning a startup, then this piece will prove to be an instant relief for you!

To alleviate your portfolio in the market as a prospective investor, you must attain long-term gains and maintain a good track record. Thereby your equity ownership will increase tremendously in a company that will be further subjected to residual gains. This article covers the points through which you can dodge paying tax on LTCG shares holdings. Click here to know more.

Way to exempt LTCG tax on shares

If you are bewildered and burdened with the heavy imposition of tax on Long-term Capital gain on shares then read the below-mentioned escape strategies that you can invest upon!

1.   Systematic Withdrawal Plan (SWP)

The SWP is an ascertained withdrawal plan that permits the investors to confer a directive to redeem some amount on a specific time period and transfer the amount from the mutual fund project to the respective bank account. In the LTCG tax cases, the investors can escape from the payment of the taxes and the transfer of their listed holdings by choosing the systematic withdrawal plan. In this way, their net gain for every financial year can be displayed below the fixed limit of INR 1 lakh.

2.   Investment in large-cap fundings and mid-cap fundings

Companies like SBI and Reliance are large-cap companies that have established a good position in the equity marketplace. The investment in such companies will offer you higher returns with an exemption of paying tax on LTCG on shares.

On the other hand, the prospective investors can also gain maximum return on investment with absolute no volatility on caps or index-based returns by choosing for the mid-cap funds. In the order of precedence, after large-cap companies, mid-caps provide similar perks with no discrepancies attached.

3.   Sell your mutual fund holdings at the right time!

As a diligent investor, if you sell your equity holdings on an adequate time before crossing the one lakh mark, then you can escape from the payment of tax on LTCG on shares. For this, you will have to stay updated with the routine market changes, keep a meticulous check on the investment profile and then sell off your equity holdings before you reach the threshold.

There are also cases in which you might be facing some inadvertent losses on a long-term basis, then selling off your mutual fund shares after the maturation date of 21 March (of the current financial year) will relax you from paying tax on LTCG on shares.

4.   Investment in small-caps and multi-cap funds

Small-caps are the smallest companies in the equity stock market. It gives the investors higher reliability and flexibility with a promise of growth and good returns on investment. The major merit of the small-cap funds are:

  • This movement of the small caps is not generally followed in the stock market.
  • Being an investor, you will gain excellent perks to growing eternally and your investment holdings will elevate drastically.

Moreover, as a prospective investor, you can escape from paying tax on LTCG tax on shares by investing in multi-caps firms. The nature of investment is ever-changing in size and proportions. Since these caps vary in size, they are comparatively more dynamic and flexible and suit well for every investor.

5.   Sectoral funds

In the case of the LTCG tax payment, you can explore the sectoral funds’ arena to gain extensive exposure with every investment. The sector funds will help you to override your losses incurred in a specific sector with your prospective holdings in another sector. Thereby an effective way to sail through the loss and avoid the imposition of tax payment on shares.


As an investor, you must look for broader aspects to gain more and pay less! Always expect more returns on investment, despite the possibility of unseen losses. As an investor, you must be inclined to invest in areas with broader aspects and also seek out ways to pay fewer taxes on investment.