Capital Gains Inputs

Tax Liability

Tax Payable
₹95,625
Long-Term Capital Gain (LTCG)
Net Capital Gain₹9,95,000
Holding Period6 years
ClassificationLTCG (equity, >12 months)
Tax Rate Applied12.5% (above ₹1.25L exemption)
Exempt Amount₹1,25,000
Tax (incl. 4% cess)₹95,625
Net Take-home After Tax₹14,04,375

Visual Breakdown

Gain Composition
Tax Rates by Asset

Capital Gains Tax in India — Post Budget 2024

Budget 2024 (effective 23 July 2024) overhauled India’s capital gains tax structure. Key changes: LTCG on listed equity raised from 10% to 12.5% with ₹1.25 lakh exemption (was ₹1 lakh), STCG on equity raised from 15% to 20%, indexation benefit removed for property and gold, and most non-equity assets now taxed at uniform 12.5% LTCG after 24-month holding.

Current Tax Rates Summary (FY 2025-26)

AssetShort-Term (period)STCG RateLong-Term (period)LTCG Rate
Listed Equity Shares & Equity MF≤ 12 months20%> 12 months12.5% on gains above ₹1.25L
Debt Mutual Funds (post 1-Apr-2023)Slab rateSlab rate (no LTCG)
Property / Real Estate≤ 24 monthsSlab rate> 24 months12.5% (no indexation)
Gold (Physical/Digital/SGB)≤ 24 monthsSlab rate> 24 months12.5%
Unlisted Shares≤ 24 monthsSlab rate> 24 months12.5%
Foreign Stocks / ETFs≤ 24 monthsSlab rate> 24 months12.5%
Bonds / Debentures≤ 12 monthsSlab rate> 12 months12.5%
SGB (Sovereign Gold Bond) — held till maturityAlwaysFULLY EXEMPT

Note: Add 4% Health & Education Cess + applicable surcharge (10-37% for high incomes) on top of base tax.

Section 87A Rebate on Capital Gains

Important Budget 2025 clarification: Section 87A rebate is NOT available against Special Rate Income (which includes LTCG @ 12.5%, STCG @ 20% on equity, etc). It is only available against normal-rate income. Earlier confusion led ITR Department to issue refunds; revised guidance has tightened this.

Pre-Budget 2024 Indexation Trap (Grandfathered Relief)

For property purchased BEFORE 23 July 2024 and sold AFTER 23 July 2024, taxpayers can choose between:

  • Option A: 12.5% without indexation (new regime)
  • Option B: 20% WITH indexation (old regime)

Choose whichever gives lower tax. For property held 10+ years with low rental yield, Option B (with indexation) often beats Option A. For new property < 5 years, Option A is usually better.

Capital Gains Exemptions (Sections 54, 54B, 54F, 54EC)

SectionApplies ToExemption ConditionLimit
Section 54Residential property saleBuy another residential property (1 yr before or 2 yrs after; construct within 3 yrs)Up to ₹10 cr (Budget 2023)
Section 54BAgricultural land saleBuy new agricultural land within 2 yearsNo upper cap
Section 54FOther LTCG (gold, shares, etc.)Invest entire sale proceeds in 1 residential propertyUp to ₹10 cr
Section 54ECProperty LTCGInvest in REC/NHAI/PFC bonds within 6 months (5-yr lock-in)₹50 lakh per FY
Section 54EELTCG on equity/mutual fundsInvest in notified start-up funds within 6 months₹50 lakh
CGAS (Capital Gains Account Scheme)Pending reinvestmentPark gains in CGAS account till you find propertySame as above

Worked Examples

Example 1: Equity Mutual Fund SIP — Long-Term

Invested ₹5 lakh in 2020Cost: ₹5,00,000
Sold in 2026 for ₹15 lakhSale: ₹15,00,000
Brokerage + STT + GST₹5,000
Net Gain₹9,95,000
Holding (6 years >12 months)LTCG applies
Exempt ₹1.25L per FYTaxable: ₹8,70,000
Tax @ 12.5%₹1,08,750
+ 4% Cess₹4,350
Total Tax₹1,13,100

Example 2: Property Sale — Pre vs Post Budget Comparison

Property bought 2015 for ₹50L, sold 2026 for ₹2 Cr. Holding period > 24 months.

MethodIndexed CostGainTax
Option A: 12.5% (no indexation)₹50,00,000₹1.5 Cr₹19,50,000 (incl cess)
Option B: 20% + indexation (CII 2015: 254 → 2026: ~365)₹71,85,000₹1.28 Cr₹26,62,400 (incl cess)

Option A wins by ₹7L for this case. Always run both calculations before filing.

Set-Off and Carry Forward Rules

Loss TypeCan Be Set-Off AgainstCarry Forward
Short-Term Capital Loss (STCL)STCG and LTCG8 years
Long-Term Capital Loss (LTCL)ONLY LTCG (not STCG)8 years
Speculative Loss (intraday)Only speculative gains4 years
Loss from VDAs (crypto, NFT)NOTHING (Section 115BBH)Cannot carry forward

To carry forward losses, you MUST file ITR before due date (31 July typically for individuals). Belated returns lose carry-forward right.

STT, Securities Transaction Tax Impact

STT (Securities Transaction Tax) is paid on every equity/derivative transaction on Indian exchanges. STT is NOT added to cost or deducted from sale value for capital gains — it’s a separate tax. For LTCG benefit eligibility, STT must have been paid at the time of acquisition AND sale.

TransactionSTT RateCharged On
Equity Delivery0.1%Both buyer and seller (each pays)
Equity Intraday0.025%Seller only
Equity F&O Futures Sale0.02%Seller
Equity Options Sale0.1% on premiumSeller
Options Exercise0.125% on intrinsic valueBuyer
Mutual Fund Redemption (equity)0.001%Seller

How to Report Capital Gains in ITR

  • ITR-1 (Sahaj): Not for capital gains (use ITR-2 onwards)
  • ITR-2: Salaried/pensioners with capital gains (no business income)
  • ITR-3: If you have business/professional income alongside capital gains
  • ITR-4 (Sugam): Not for capital gains
  • Schedule CG: Detailed capital gains entries — STCG and LTCG separately
  • Schedule 112A: Grandfathering details for equity acquired before 31-Jan-2018
  • Schedule VDA: Crypto/NFT (separate from CG)
  • Schedule FSI / FA: Foreign source income / foreign assets (mandatory disclosure for residents)

Frequently Asked Questions

What’s the difference between STCG and LTCG?

STCG (Short-Term Capital Gain) applies when an asset is sold within the short-term holding period (12 months for listed equity, 24 months for property/gold/unlisted). LTCG applies for longer holdings. STCG is generally taxed higher (slab rate or 20% for equity); LTCG enjoys concessional rates with exemptions.

How much LTCG on equity is tax-free per year?

Up to ₹1.25 lakh per financial year is exempt (raised from ₹1 lakh in Budget 2024). Gains above this threshold are taxed at 12.5%. So if your LTCG for the year is ₹2 lakh, only ₹75,000 is taxable — tax = ₹9,375 + 4% cess.

Does indexation still apply to property?

Generally NO after 23 July 2024. Old regime (20% with indexation) is available ONLY as a grandfathered choice for property purchased BEFORE 23 July 2024. New regime: 12.5% without indexation. Choose lower tax option for grandfathered properties.

Are debt mutual funds still tax-efficient?

Largely NO post-April 2023. Debt MFs purchased after 1-Apr-2023 are taxed at SLAB rate regardless of holding period — no LTCG benefit, no indexation. Effectively makes debt MFs less attractive than direct bonds or FDs for high-tax-bracket investors.

How is Sovereign Gold Bond (SGB) taxed?

If held till maturity (8 years): Capital gain is FULLY EXEMPT (best tax treatment of any gold investment). If sold on exchange before maturity: regular LTCG/STCG rules apply. Interest (2.5% p.a.) is always taxable at slab rate.

Can I claim Section 54 exemption on multiple properties?

Generally one residential property. Budget 2019 introduced a once-in-lifetime option to invest in 2 residential properties if total LTCG ≤ ₹2 crore. Budget 2023 capped Section 54/54F exemption at ₹10 crore — excess gains taxed at LTCG rate.

Is gift tax payable on inherited assets?

No tax on inheritance itself. But when you eventually sell the inherited asset, capital gain is calculated using ORIGINAL OWNER’s cost (cost basis carries forward). Holding period also includes original owner’s period.

Are NRIs taxed differently on capital gains?

Largely same rates. Key differences: (a) TDS @ 12.5% (LTCG) or 20% (STCG equity) deducted at source from NRI sale proceeds, (b) DTAA benefits may apply for foreign assets, (c) Section 195 TDS applies to property sale by NRI. NRIs cannot claim Section 87A rebate.

What records should I maintain for capital gains?

Contract notes, demat statements, mutual fund statements, sale deeds, purchase deeds, brokerage receipts, stamp duty receipts, valuation reports for inherited/gifted property. Retain for at least 7 years post-filing as IT Department can re-open assessments.

How is capital loss treated if I don’t have gains in same year?

Carry forward up to 8 assessment years (provided you file ITR before due date). STCL set-off against STCG or LTCG; LTCL ONLY against LTCG. Plan harvests strategically — book losses in years with gains to offset tax.

Does TDS apply on capital gains?

Yes for select cases: (a) Property sale > ₹50 lakh — buyer deducts 1% TDS (Sec 194-IA); (b) NRI sales — buyer deducts at applicable rate; (c) Mutual fund equity redemption by NRI — AMC deducts at LTCG/STCG rate. Resident investors usually pay tax via advance tax/self-assessment.

Can I claim cost of improvement on property?

Yes — cost of improvement (renovation, additions) is added to cost basis. Maintain receipts. For pre-2001 properties, fair market value as of 1-Apr-2001 can be used as cost basis (one-time benefit). Improvements between cost-base date and sale are also indexable in old regime.