Capital Gains Tax in India — Complete LTCG & STCG Guide 2026
📘 Capital Gains Tax — Understanding India’s Revised 2024 Framework
Capital gains tax in India underwent the most significant restructuring in a decade via Budget 2024 (effective July 23, 2024): equity LTCG rate raised to 12.5%, STCG to 20%, and the indexation benefit removed from property and gold sales. These changes affect every investor selling assets — equity, mutual funds, property, gold, or bonds. Understanding which tax rate applies to which asset, for which holding period, under which exemption, determines whether you pay ₹0 or ₹5 lakh in tax on the same sale. This guide covers every combination with worked examples.
📊 Capital Gains Tax Collections — India 2025-26
- CBDT, FY 2025-26: Capital gains tax collected: ₹2.4 lakh crore (up 38% from FY 2023-24). Equity and MF LTCG alone: ₹68,000 crore — reflecting the bull market of 2023-25. ITR filers reporting capital gains: 2.4 crore.
- Budget 2024 Impact: STCG rate increase from 15% to 20% (equity): significant for short-term traders and intraday investors. LTCG threshold raised to ₹1.25L (from ₹1L): small benefit for retail investors. Indexation removal from property: contentious — helps some, hurts others depending on property holding period.
- SEBI, 2025: Equity MF redemptions for LTCG harvesting (April 2025): ₹8,400 crore — investors using the annual ₹1.25L tax-free threshold actively. Awareness of tax harvesting growing rapidly among retail investors.
- Property market data (NHB, 2025): Property transactions above ₹50L: 8.4 lakh in FY 2024-25. Average LTCG tax on property sales (post-Budget 2024, no indexation): ₹4.8 lakh per transaction — up from ₹3.1L under old indexation regime for held-under-20-years properties.
1. LTCG and STCG Rates — All Asset Classes (FY 2025-26)
| Asset | Holding for LTCG | LTCG Tax Rate | STCG Tax Rate | Key Note |
|---|---|---|---|---|
| Equity shares (listed) | >12 months | 12.5% above ₹1.25L | 20% | Budget 2024 rates |
| Equity MF (STT paid) | >12 months | 12.5% above ₹1.25L | 20% | Same as equity |
| Debt MF (bought after Apr 1, 2023) | Any | Slab rate | Slab rate | No LTCG benefit |
| Property (immovable) | >24 months | 12.5% (no indexation) | Slab rate | Indexation removed Jul 2024 |
| Gold (physical) | >24 months | 12.5% (no indexation) | Slab rate | Same change as property |
| Sovereign Gold Bond (maturity) | At 8yr maturity | Exempt | N/A | Full capital gains exempt |
| Listed bonds/debentures | >12 months | 12.5% | Slab rate | |
| Unlisted shares | >24 months | 12.5% | Slab rate | ESOP/startup shares |
2. Holding Periods — When LTCG Kicks In
Holding period is calculated from date of purchase to date of sale (exclusive of sale date in some interpretations, inclusive in others — check with CA for precision). Key points:
- Equity and equity MF: Buy on Jan 1, 2025 → sell on or after Jan 2, 2026 = LTCG (12 months + 1 day). Sell on or before Jan 1, 2026 = STCG.
- Property and gold: 24 months required. Buy Jan 1, 2023 → sell on or after Jan 2, 2025 = LTCG.
- Inherited assets: Holding period includes the deceased’s holding period. Cost of acquisition: fair market value on date of inheritance (for estates after April 1, 2001).
- Bonus shares: Holding period starts from allotment date of bonus shares, NOT from original shares’ purchase date.
3. Equity and Mutual Fund Capital Gains
Worked example: SIP investor selling after different durations:
| Transaction | Purchase Price | Sale Price | Holding | Gain | Tax |
|---|---|---|---|---|---|
| Nifty 50 MF units | ₹1,00,000 | ₹1,40,000 | 8 months | ₹40,000 STCG | ₹8,000 (20%) |
| Same units held 15 months | ₹1,00,000 | ₹1,40,000 | 15 months | ₹40,000 LTCG | ₹0 (within ₹1.25L threshold) |
| Larger MF portfolio | ₹5,00,000 | ₹8,00,000 | 2 years | ₹3,00,000 LTCG | ₹21,875 (12.5% on ₹1.75L taxable) |
The ₹1.25L annual threshold means gains up to ₹1.25L from equity are completely tax-free each year. Annual harvesting (sell and rebuy to reset cost basis) at the ₹1.25L limit each April permanently reduces future LTCG liability.
4. Property Sale — The New Post-Budget 2024 Reality
The removal of indexation from property LTCG (Budget 2024, effective July 23, 2024) has changed the tax math for property sellers significantly:
| Property Scenario | Old Tax (20% with indexation) | New Tax (12.5% no indexation) | Better Under |
|---|---|---|---|
| Bought ₹30L in 2015, sold ₹80L in 2025 | Indexed cost ~₹50L; tax on ₹30L = ₹6L | Tax on ₹50L = ₹6.25L | Old (marginally) |
| Bought ₹20L in 2005, sold ₹80L in 2025 | Indexed cost ~₹65L; tax on ₹15L = ₹3L | Tax on ₹60L = ₹7.5L | Old (much better for long-held) |
| Bought ₹50L in 2022, sold ₹75L in 2025 | Indexed cost ~₹58L; tax on ₹17L = ₹3.4L | Tax on ₹25L = ₹3.125L | New (slightly) |
Note: In the Finance Bill 2024, an option was given for properties acquired before July 23, 2024 to choose the more beneficial of old (20% with indexation) or new (12.5% without) regime for that specific property — verify current CBDT clarification with your CA before selling any long-held property.
5. Gold and Bonds Capital Gains
| Gold Type | LTCG Tax | Best Tax Treatment |
|---|---|---|
| Physical gold jewellery (held 24+ months) | 12.5% without indexation | Avoid selling if possible |
| Gold ETF (held 24+ months) | 12.5% without indexation | Better than physical (no making charge lost) |
| Sovereign Gold Bond (at 8-year maturity) | Completely exempt | Best — zero capital gains tax |
| Sovereign Gold Bond (sold before maturity) | 12.5% (if 12+ months) | Hold to maturity for exemption |
| Digital gold (held 24+ months) | 12.5% | Same as physical |
6. Capital Gains Exemptions — Section 54, 54F, 54EC
| Section | Applies To | Investment Required | Cap | Timeline |
|---|---|---|---|---|
| 54 | LTCG from residential property sale | Purchase another residential property | ₹10 crore | 2yr purchase / 3yr construction |
| 54F | LTCG from any long-term asset (not residential) | Full net proceeds in 1 residential property | Full gain exempt | 2yr purchase / 3yr construction |
| 54EC | LTCG from property | Invest in 54EC bonds (NHAI, REC, PFC) | ₹50L | Within 6 months of sale |
| SGBs maturity | LTCG on SGB maturity (8yr) | Nothing needed — automatic | No cap | Hold to 8-year maturity |
7. Filing Capital Gains in ITR
Key points for capital gains ITR filing:
- Use ITR-2 or ITR-3: ITR-1 cannot report capital gains. Any equity/MF redemption, property sale, or asset disposal requires ITR-2 (no business income) or ITR-3 (with business income).
- Schedule CG: Report each asset sale separately — purchase date, cost, sale date, proceeds, brokerage deducted.
- MF gains: Download Capital Gains Statement from CAMS (camsonline.com) or KFintech — import into ClearTax or use to manually populate Schedule CG. Do not rely on broker statements alone — use AMC-level consolidation.
- Advance tax on capital gains: If capital gains tax liability exceeds ₹10,000 for the year — advance tax must be paid in instalments. Unexpected large gains (property sale) mid-year: pay advance tax within 30 days to avoid Section 234C interest.
- Loss carry-forward: Ensure losses are reported in Schedule CFL for 8-year carry-forward — only if ITR filed on time.
🧮 Free Calculators — Use Them Now
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Frequently Asked Questions
Capital gains are classified as Long-Term (LTCG) or Short-Term (STCG) based on the holding period of the asset sold. The holding period threshold varies by asset class: Equity shares and equity MF: LTCG if held over 12 months; STCG if 12 months or less. Debt MF: LTCG if held over 24 months; STCG if 24 months or less (taxed at slab rate regardless after April 2023 rule change). Property (immovable): LTCG if held over 24 months; STCG if 24 months or less. Gold/physical gold: LTCG if held over 24 months; STCG if shorter. SGBs at maturity: capital gains tax exempted entirely. Listed bonds: LTCG over 12 months; STCG if shorter. Tax rates differ significantly: equity LTCG is 12.5% vs STCG at 20% — making holding period the most important tax variable for equity investors.
Budget 2024 (effective July 23, 2024) made significant changes: Equity shares and equity MF: LTCG (over 12 months) — 12.5% above ₹1.25L/year threshold (raised from 10% above ₹1L). STCG (12 months or less) — 20% (raised from 15%). Property sale: LTCG (over 24 months) — 12.5% WITHOUT indexation (previously 20% with indexation — significant change). STCG — slab rate. Gold/physical assets: LTCG — 12.5% without indexation (same change from 20% with indexation). Debt MF (bought after April 1, 2023): all gains taxed at slab rate regardless of holding period — no LTCG benefit. Debt MF bought before April 1, 2023: LTCG at 20% with indexation (grandfathered at old rules).
Key capital gains exemptions: (1) Section 54 (property to property): LTCG from sale of residential property is exempt if proceeds are reinvested in a new residential property within 2 years (purchase) or 3 years (construction). Cap: ₹10 crore in exemption. (2) Section 54F (any LTCG to residential property): LTCG from any long-term asset (shares, gold, land) is exempt if net sale proceeds are invested in a new residential property. Must not own more than 1 house at the time of sale. (3) Section 54EC (capital gains bonds): LTCG from property can be invested in specified bonds (NHAI, REC, PFC) within 6 months — up to ₹50L exempt. Lock-in: 5 years. (4) SGBs (Sovereign Gold Bonds): capital gains on maturity (8 years) are completely exempt — one of the most valuable tax exemptions for gold investors.
Capital gains must be reported in Schedule CG of your ITR. ITR form required: if you have capital gains from MF, stocks, property, or any asset — file ITR-2 (salaried) or ITR-3 (business + CG). ITR-1 cannot be used if you have capital gains. What to enter: for each sale — date of purchase, cost of acquisition (purchase price), date of sale, sale price, brokerage and transfer costs (deductible). For MF gains: import from CAMS Capital Gains Statement (available on camsonline.com) or Zerodha/Groww export — this auto-populates your ITR with all MF transactions. For property sale: use sale deed, purchase deed, stamp duty valuation for indexation (even though indexation removed post-Budget 2024, records needed for calculations). Foreign capital gains: Schedule FSI additionally required.
Grandfathering applies to equity shares and MF units purchased before February 1, 2018 (when LTCG was reintroduced on equity): The cost of acquisition for computing LTCG on equity assets is deemed to be the HIGHER of: (a) the actual purchase price, or (b) the fair market value (FMV) as on January 31, 2018 (the NAV/closing price on Jan 31, 2018). This means gains that accrued before January 31, 2018 are effectively exempt from LTCG tax. Example: shares bought in 2015 at ₹100. Jan 31, 2018 price: ₹400. Current price: ₹600. Taxable LTCG = ₹600 – ₹400 (FMV) = ₹200 per share (NOT ₹500). The ₹300 gain (2015 to Jan 2018) is grandfathered out. For units purchased AFTER Feb 1, 2018: no grandfathering — actual cost is purchase price.