The current capital gains regime — STCG on equity at 20%, LTCG on equity to 12.5% with a higher ₹1.25 lakh exemption. Property indexation rules changed. This guide covers every asset class with updated rates for FY 2025-26.
Capital Gains Tax is a tax imposed on the profit realized from the sale of a capital asset. These profits are added to your total income and taxed at specific rates.
Important Points About Capital Gains Tax
It applies when you sell a capital asset and make a profit
The tax is levied in the financial year when the asset is transferred
The tax rate varies based on the holding period of the asset
Different assets have different holding period criteria
Capital gains are categorized based on the holding period. Budget 2024 revised holding periods for some asset classes effective July 23, 2024.
Holding Period Criteria — FY 2025-26
| Asset Class | LTCG if held | STCG if held |
|---|---|---|
| Listed equity shares / equity MF | > 12 months | ≤ 12 months |
| Immovable property (Budget 2024 change) | > 24 months | ≤ 24 months |
| Unlisted shares | > 24 months | ≤ 24 months |
| Debt mutual funds / bonds | > 36 months | ≤ 36 months |
| Gold / jewellery / other assets | > 24 months | ≤ 24 months |
A capital asset is any property owned by an individual, whether or not it is connected to their business or profession.
Types of Capital Assets
1. Movable Property
Jewelry
Shares and securities
Vehicles
Art and antiques
2. Immovable Property
Land
Buildings
House property
Commercial property
Classification of Capital Assets
1. Financial Assets
Stocks and shares
Mutual fund units
Bonds and debentures
Digital assets and cryptocurrencies
2. Real Estate
Residential property
Commercial property
Agricultural land (within municipal limits)
Plot of land
3. Personal Assets
Jewelry and precious stones
Artifacts and paintings
Collectibles and antiques
Vehicles
Understanding how inherited assets are treated for capital gains tax purposes
Key Aspects of Inherited Assets
Cost of Acquisition
The cost to the previous owner is considered as your cost
The holding period includes the previous owner's period
Fair market value as of April 1, 2001 can be considered if inherited before this date
Taxation Rules
No tax at the time of inheritance
Capital gains apply only when you sell the inherited asset
Special provisions for agricultural land inheritance
Basic Formula
Capital Gains = Sale Price - (Cost of Acquisition + Improvement Cost + Transfer Expenses)
Components of Calculation
Sale Price: The amount received from selling the asset
Cost of Acquisition: Original purchase price
Improvement Cost: Any expenses incurred to improve the asset
Transfer Expenses: Expenses related to the transfer of the asset
Indexation Benefit — Budget 2024 Change
Indexation removed for assets acquired after July 23, 2024 — 12.5% flat rate without indexation
For property acquired before July 23, 2024: choose the lower of (a) 20% with indexation or (b) 12.5% without indexation
Equity shares and equity MFs never had indexation — not applicable
Cost Inflation Index (CII) still published annually by CBDT for eligible assets
Section 87A rebate is available under the new regime for individuals with total income up to ₹12 lakhs — but CBDT has clarified critical restrictions for equity investors.
Section 87A Rules for Capital Gains (FY 2025-26)
Rebate IS Available
Available to resident individuals with total income up to ₹12 lakh (new regime)
Applicable on ordinary income tax — salary, interest, rent, other sources
Maximum rebate: ₹60,000 under new regime (FY 2025-26)
⚠ Rebate NOT Available — Critical Exception
NOT available on STCG on equity/equity MF taxed under Section 111A (20%)
NOT available on LTCG under Section 112A (12.5%)
This applies even if your total income is below ₹12 lakh
CBDT clarified this restriction via circular — applicable from FY 2024-25 onwards
Only the ordinary income portion of tax is eligible for the 87A rebate
Deductible Expenses
1. Acquisition Related
Purchase cost of the asset
Registration charges
Stamp duty paid
2. Improvement Expenses
Renovation costs
Extension or modification expenses
Any capital expenditure on the asset
3. Transfer Expenses
Brokerage charges
Legal fees
Advertisement expenses
Commission paid
Practical Examples
1. Property Sale (acquired before July 23, 2024)
Purchase price: ₹50 lakhs (2015) · CII 2015-16: 254
Sale price: ₹90 lakhs (FY 2025-26) · CII 2025-26: 363
Indexed cost = 50L × (363/254) = ₹71.46 lakhs
LTCG with indexation = ₹90L − ₹71.46L = ₹18.54 lakhs @ 20%
OR LTCG without indexation = ₹90L − ₹50L = ₹40L @ 12.5%
Choose the option giving lower tax (20% × 18.54L = ₹3.71L vs 12.5% × 40L = ₹5L → indexation is better here)
2. Equity LTCG Example (held 14 months)
Purchase of listed shares: ₹5 lakhs
Sale: ₹7.5 lakhs (held 14 months — LTCG under Section 112A)
Gross LTCG: ₹2.5 lakhs
Exempt: ₹1.25 lakhs
Taxable LTCG: ₹1.25 lakhs @ 12.5% = ₹15,625 tax
3. Equity STCG Example (held 8 months)
Purchase of equity MF units: ₹3 lakhs
Sale: ₹3.8 lakhs (held 8 months — STCG under Section 111A)
STCG: ₹80,000 @ 20% = ₹16,000 tax
Note: Section 87A rebate NOT available on this STCG
Tax Rates Structure
| Type of Capital Gain | Tax Rate |
|---|---|
| STCG on equity/equity MF (Sec 111A) | 20% |
| LTCG on equity/equity MF (Sec 112A) | 12.5% (above ₹1.25 lakh exempt) |
| LTCG on property/other assets | 12.5% without indexation |
| STCG on other assets (property, debt MF) | As per income tax slab |
Available Exemptions
1. Section 54 Exemptions
Sale of residential house and investment in new house
Maximum exemption limit: ₹10 crore
Investment timeline requirements
Conditions for claiming exemption
2. Section 54EC
Investment in specified bonds
Maximum investment limit: ₹50 lakhs
Lock-in period of 5 years
Timeline for investment: 6 months
3. Other Exemptions
Section 54B: Agricultural land
Section 54F: Any long-term asset
Section 54GB: Investment in eligible startups
Guidelines for filing your income tax return with capital gains
Filing Requirements
Important Points for ITR Filing
Use ITR-2 for reporting capital gains
Report each transaction separately
Include complete details of the asset sold
Maintain proper documentation
File within due dates to avoid penalties
What are the new capital gains tax rates after Budget 2024?
Budget 2024 revised capital gains rates effective FY 2024-25 onwards: STCG on equity/equity MF increased to 20% (from 15%), LTCG on equity/equity MF increased to 12.5% (from 10%) with the exemption limit raised to ₹1.25 lakh (from ₹1 lakh). LTCG on other assets like property, debt MF is now 12.5% without indexation. These rates continue for FY 2025-26.
What is the LTCG tax rate on property for FY 2025-26?
For property sold in FY 2025-26: 12.5% without indexation applies for property acquired after July 23, 2024. For property acquired before July 23, 2024, you may choose the more beneficial option — either 20% with indexation or 12.5% without indexation. File ITR-2 and select the option that gives a lower tax liability.
Is Section 87A rebate available on STCG from equity for FY 2025-26?
No. As clarified by CBDT, Section 87A rebate is not available on STCG taxed under Section 111A (equity, equity MF) and LTCG under Section 112A — even if your total income is below ₹12 lakh. The rebate is available on other ordinary income portions. This is a critical planning point for investors.
What is the LTCG exemption limit on equity for FY 2025-26?
Under Section 112A, LTCG from equity shares and equity mutual funds exceeding ₹1.25 lakh per financial year is taxed at 12.5% (no indexation). Gains up to ₹1.25 lakh remain exempt. This limit was raised from ₹1 lakh in Budget 2024.
Do I need to pay advance tax on capital gains?
Yes. Advance tax is payable on capital gains income. However, for capital gains arising from the sale of assets (other than speculative income), you can pay the entire advance tax by March 15 of the financial year without penalty, provided no advance tax was due in earlier installments on account of capital gains.
Are cryptocurrency gains taxable in FY 2025-26?
Yes. Cryptocurrency and other Virtual Digital Assets (VDAs) are taxed at a flat 30% + 4% cess on net gains under Section 115BBH — regardless of the holding period. No deduction is allowed except the cost of acquisition. Losses from VDAs cannot be set off against any other income. TDS at 1% applies on transfers above ₹10,000 (₹50,000 for specified persons).
How are ESOP capital gains taxed in FY 2025-26?
ESOPs are taxed at two stages: (1) On exercise: the difference between Fair Market Value and exercise price is taxed as perquisite income at slab rate. (2) On sale: if held 12+ months after exercise — LTCG at 12.5% above ₹1.25 lakh; if held less than 12 months — STCG at 20% (for listed shares with STT paid).
Can I save tax on LTCG from property by investing in another house?
Yes. Under Section 54, LTCG from sale of a residential property is exempt if the proceeds are reinvested in a new residential house within 2 years (purchase) or 3 years (construction). Maximum exemption: ₹10 crore. Other options: Section 54EC bonds (max ₹50 lakh, within 6 months), or Capital Gains Account Scheme (CGAS) to park funds temporarily.
Is LTCG on debt mutual funds with indexation still available?
No. From April 1, 2023 (Finance Act 2023), gains from debt mutual funds purchased after April 1, 2023 are taxed at slab rates (treated as short-term regardless of holding period). For debt MFs purchased before April 1, 2023 — the Budget 2024 revision applies 12.5% without indexation for LTCG.
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