Capital Gains Tax in India: What I'd Work Out Before Any Sale
I'm a director of a real-estate company, so I'd compute the tax before any sale, sometimes two ways. Rates by asset, Sections 54/54EC, loss harvesting.
Direct answer: Equity (>12 months) is taxed at 12.5% LTCG above ₹1.25 lakh a year, or 20% STCG at 12 months or less. Property, physical gold and other non-financial assets (>24 months) are 12.5% LTCG without indexation; debt mutual funds bought since April 2023 are taxed at slab rate regardless of holding period. This rate card took effect on 23 July 2024 and is still what applies to a sale you make in FY 2026-27, tax year 2026-27, what the old numbering called AY 2027-28. Budget 2026 left it alone.
Alongside our family's rice mill, I am a director of Blue Vistas, a real-estate company registered with my cousin in Gurgaon, and in property the tax on a sale is decided long before anyone files a return: by when you sell, what you can prove you paid, and what you do with the money afterwards. My rule for every money decision is numbers first, then the decision. On a capital gain that means working out the tax before the sale, and for older property working it out two ways.
When you sell a share, redeem a mutual fund, or sell a property for more than you paid for it, the profit is called a capital gain, and it's taxable.
Capital gains tax in India is not a single rate or a single rule. The tax depends on the type of asset, how long you held it, and when you sold it. The rates below were set on 23 July 2024 and have survived two Budgets since, so they are the settled position rather than a fresh announcement. But rates are reset by each year's Finance Act, not fixed permanently, so treat "current" as meaning this filing year specifically.
This is a working guide to how capital gains tax works across the most common asset classes, starting with the listed shares and equity mutual funds most retail investors hold. It then covers selling a property and selling gold or jewellery in detail (how the gain is computed, and the exemptions that can shrink the tax, sometimes to nothing) and how capital losses work, including harvesting them before the financial year ends.
Two Categories: Short-Term vs Long-Term
The most fundamental distinction is between short-term capital gains (STCG) and long-term capital gains (LTCG). This is based purely on the holding period: how long you owned the asset before selling.
Short-term gains are taxed at higher rates. Long-term gains usually have concessional rates or exemptions.
What counts as "long-term" varies by asset class:
| Asset Type | Long-Term if Held For |
|---|---|
| Listed equity shares | More than 12 months |
| Equity-oriented mutual funds | More than 12 months |
| Debt mutual funds (pre-April 2023 purchases) | More than 24 months |
| Debt mutual funds (purchased April 2023 onwards) | No long-term benefit — all taxed at slab rate |
| Unlisted shares | More than 24 months |
| Immovable property (land, building) | More than 24 months |
| Gold ETFs listed on an exchange | More than 12 months |
| Physical gold, digital gold, unlisted gold fund-of-funds and gold savings funds | More than 24 months |
| Sovereign Gold Bonds | See note below |
There used to be a third bucket at 36 months. It was abolished for transfers on or after 23 July 2024: everything now falls into either 12 months (securities listed on an Indian exchange, plus equity-oriented mutual fund units) or 24 months (everything else). If a guide still tells you gold or old debt funds need 36 months, it is describing a rule that no longer exists.
LTCG and STCG on Stocks and Equity Mutual Funds
These rules took effect on 23 July 2024 under Budget 2024 and are unchanged for FY 2026-27:
| Type | Holding period | Tax rate | Exemption |
|---|---|---|---|
| Equity LTCG | More than 12 months | 12.5% | First ₹1,25,000 of gains per year exempt |
| Equity STCG | 12 months or less | 20% | None |
Short-Term Capital Gains (STCG), held 12 months or less: Flat 20% tax. Budget 2024 raised this from 15% and it has stayed there since. It does not depend on your income tax slab, and there is no exemption threshold: the entire short-term gain is taxed at 20% from the first rupee.
Long-Term Capital Gains (LTCG), held more than 12 months: 12.5% tax on gains above ₹1.25 lakh per year. Budget 2024 raised the rate from 10% and lifted the exempt slice from ₹1 lakh to ₹1.25 lakh; both of those numbers still hold. The 12.5% applies without indexation: for listed equity and equity mutual funds you do not get to inflate your purchase cost, so the gain is simply sale price minus actual purchase cost.
The ₹1.25 lakh exemption is annual and aggregated. It applies per financial year to your aggregate LTCG from equity shares and equity mutual funds: across all your long-term equity gains in the year, the first ₹1.25 lakh is tax-free, and only the portion above it is taxed at 12.5%. It is not a fresh allowance for each stock or each redemption.
Cess applies on top. A 4% health and education cess is added to the tax, so effective LTCG is 12.5% × 1.04 = 13% and effective STCG is 20% × 1.04 = 20.8%, before any surcharge for very high incomes.
Example: LTCG. You sold equity shares with a gain of ₹2,00,000 after holding them 2 years.
- Exempt LTCG: ₹1,25,000
- Taxable LTCG: ₹75,000
- Tax at 12.5%: ₹9,375
- Plus cess (4%): ₹375
- Total tax: approximately ₹9,750
How SIP Redemptions Are Taxed
Each monthly SIP instalment starts its own 12-month holding period clock. If you've been investing ₹10,000/month via SIP and start redeeming just over 12 months after the first SIP, only that first instalment is LTCG. The subsequent 11 months of SIPs would be STCG. After 24 months of SIP, the first 12 months of instalments become LTCG.
When you redeem a SIP-built corpus, the oldest units sell first (FIFO), so they may be long-term while recent ones are short-term. The platform's capital gains statement usually does this calculation for you; use it. Each platform's statement covers only the units held there, though. If you would rather not rebuild the lots yourself across several brokers and folios, I made the Capital Gains & XIRR Tracker, my own Google Sheets template that matches each sale to its purchase lots oldest first, sorts the gains by section and works out your true return. It's ₹1,499 on Gumroad.
Your Tax Regime Does Not Change These Rates
A point that confuses many people: capital gains on equity are taxed at these special rates regardless of whether you are on the old or new tax regime. The regime you pick, old with deductions or new with lower slabs, changes how your salary, business income and interest income are taxed, not these equity rates. Equity LTCG stays at 12.5% above ₹1.25 lakh, and equity STCG stays at 20%, in both regimes.
So when you read our old vs new tax regime guide, remember that your stock-market gains are taxed identically either way. They simply sit on top, taxed at their own rates.
A Worked Example: One Year of Equity Trades
Say a marketing manager in Hyderabad makes the following equity transactions in FY 2026-27:
- Shares of a large listed company: bought March 2024 for ₹3,00,000, sold November 2026 for ₹4,40,000. Held over 12 months → LTCG of ₹1,40,000.
- An equity mutual fund: bought January 2026 for ₹2,00,000, redeemed October 2026 for ₹2,55,000. Held 9 months → STCG of ₹55,000.
- A small-cap stock: bought June 2025 for ₹1,00,000, sold September 2026 for ₹85,000. Held over 12 months → long-term capital loss of ₹15,000.
Step 1: Net the long-term items. LTCG ₹1,40,000 minus long-term loss ₹15,000 = net LTCG of ₹1,25,000.
Step 2: Apply the LTCG exemption. Net LTCG ₹1,25,000 minus the ₹1,25,000 annual exemption = ₹0 taxable LTCG. The whole long-term gain is wiped out by the exemption and the loss. Tax on LTCG: nil.
Step 3: Tax the STCG. STCG ₹55,000 × 20% = ₹11,000, plus 4% cess = ₹11,440.
Total capital gains tax = ₹11,440. Notice how the long-term loss was used against the long-term gain, and the ₹1.25 lakh exemption absorbed the rest. Had the small-cap stock been sold within 12 months instead, the ₹15,000 loss would have been short-term and could have offset the STCG too, a reminder that timing when you book a loss matters.
Grandfathering: The 31 January 2018 Rule
If you have held shares or equity funds since before 1 February 2018, a special "grandfathering" provision protects gains that accrued up to 31 January 2018. When LTCG on equity first became taxable, the law ensured you would not be taxed on appreciation that happened before the tax existed.
The mechanics: for assets bought before 1 February 2018, your cost of acquisition is taken as the higher of (a) the actual cost, and (b) the lower of the fair market value on 31 January 2018 and the actual sale price. In plain terms, gains built up before that date are shielded, and only gains after it are taxed.
This matters for long-term holders sitting on old positions. If you bought a stock in 2012 and it had already multiplied several times by January 2018, much of that gain is grandfathered and effectively tax-free. Your broker's capital gains statement usually applies this automatically, but it is worth understanding why an old holding shows a smaller taxable gain than the raw purchase-to-sale difference suggests.
STT, Brokerage and the Cost of Acquisition
For equity shares and equity mutual funds, LTCG at 12.5% and STCG at 20% apply only when the transaction was subject to STT (Securities Transaction Tax). STT is deducted at source on equity transactions: it is collected automatically when you trade through a registered Indian broker on a stock exchange or redeem equity MF units through a registered AMC. For 99% of retail investors trading through registered brokers and mutual fund platforms, STT is automatically paid and the standard rates apply.
STT is not deductible against your capital gains; it is a separate levy you simply pay. However, the concessional LTCG rate is only available because STT was paid on the transaction, so it is the price of the lower rate.
Brokerage and statutory charges on the buy and sell legs can be added to your cost of acquisition and deducted from sale proceeds respectively, reducing the taxable gain slightly. Keep your contract notes.
Cases where equity LTCG/STCG rates might not apply:
- Unlisted equity shares: Not subject to STT; LTCG (>24 months) at 12.5% without indexation; STCG at slab rate. Startup ESOP shares usually fall here, and their two-stage tax has its own guide.
- Off-market share transfers (private transactions): Not subject to STT; different tax treatment
The Surcharge Cap on Equity Gains
High earners face a surcharge on top of income tax, but capital gains get a measure of protection. The surcharge on LTCG and STCG on equity is capped at 15%, even if your overall income would otherwise attract a higher surcharge rate: 25% under the new regime, or up to 37% under the old one. This cap means very large equity gains are not loaded with the steepest surcharge slabs. For most retail investors below the surcharge thresholds this is irrelevant, but for those with incomes above ₹2 crore it materially limits the tax on equity gains, a deliberate concession to keep India's equity markets attractive to large investors.
Dividends Are Taxed Differently
Capital gains are not the only way equity puts money in your pocket, and dividends are taxed differently. They are no longer tax-free in your hands: they are added to your total income and taxed at your slab rate, not at the capital gains rate. If your dividend income is significant, it is taxed like salary, and TDS may be deducted by the company.
Do not assume everything from your shares is taxed at the gentle 12.5% LTCG rate. Dividends, in particular, can be taxed at up to 30% if you are in the top slab.
Share buybacks are taxed as capital gains. If a company buys back your shares on or after 1 April 2026, your gain is the amount received minus your cost of acquisition, taxed at the short-term or long-term rate for your holding period. A promoter pays an additional tax that takes the effective rate to 22% where the promoter is a domestic company and 30% otherwise. Buybacks from 1 October 2024 to 31 March 2026 were taxed differently: the whole amount was a deemed dividend at your slab rate, and the cost of the shares tendered became a capital loss.
Debt Mutual Funds (Post March 2023)
Budget 2023 made a critical change: for debt mutual funds purchased from April 1, 2023 onwards, there are no long-term capital gains benefits. All gains, regardless of holding period, are taxed at your applicable income tax slab rate.
This effectively killed the tax efficiency advantage that debt mutual funds had over bank FDs for most investors. An FD interest is taxed at slab rate; a debt mutual fund redeemed after 3 years is now also taxed at slab rate.
Debt mutual funds purchased before April 1, 2023: Those older units keep a long-term category, but on today's terms rather than the ones they were bought under. Hold them more than 24 months and the gain is LTCG at 12.5%, without indexation. The 36-month clock and the 20%-with-indexation rate that applied to these units are both gone, withdrawn for every redemption made on or after 23 July 2024.
Selling Property: Computation, Exemptions and TDS
Selling a flat or a plot is usually the largest single transaction most families ever undertake, and it comes with one of the largest potential tax bills. The good news is that India's tax law, while detailed, is generous to property sellers who plan ahead. You can compute the taxable gain carefully, and then legally wipe out most or all of the tax by reinvesting in another home or in specified bonds.
For immovable property (land and buildings) the dividing line is 24 months, and the holding period runs from the date of acquisition to the date of sale (transfer).
Short-Term (held 24 months or less): Taxed at your applicable slab rate: the gain is added to your total income and taxed accordingly, at up to 30%.
Long-Term (held more than 24 months):
Budget 2024 rewrote property LTCG, and the position it created is still the one in force:
- Current rate: 12.5% without indexation benefit
- Old rate (for assets sold before July 23, 2024): 20% with indexation benefit
Because long-term treatment carries a far lower rate, the holding period often decides whether a sale is worth making this month or next. A sale at 23 months is short-term and taxed at slab rates; wait past 24 months and the rate drops to 12.5%, so watch the calendar.
How the Gain Is Computed
The long-term capital gain on property is:
Sale consideration − (cost of acquisition + cost of improvement + cost of transfer)
Each component matters:
- Sale consideration: the actual price received. If the agreement value is below the stamp duty (circle rate) value, the stamp duty value is generally treated as the sale consideration, subject to a tolerance band, which inflates your gain, so price realistically.
- Cost of acquisition: what you originally paid, including stamp duty and registration on purchase. Be clear that indexation is no longer part of the default computation: since 23 July 2024 the long-term gain on property is the plain difference between sale price and actual cost, taxed at 12.5%. There is one exception, and it still applies in FY 2026-27: a resident individual or HUF selling land or a building acquired before 23 July 2024 may instead compute the gain the old way, inflating the cost with the Cost Inflation Index and paying 20%, then pay whichever of the two works out lower.
- Cost of improvement: capital expenditure on additions or alterations, such as an extra floor or a major renovation, but not routine repairs.
- Cost of transfer: brokerage, legal fees, and similar selling expenses.
Because of these deductions, and, for older property, the indexation option, the taxable gain is often far smaller than the headline difference between purchase and sale price. That makes every cost document worth keeping: the purchase deed, stamp duty and registration receipts, improvement bills, and brokerage invoices are what let the gain be computed correctly. The tax document checklist helps you assemble these.
The Indexation Choice for Property Bought Before 23 July 2024
Indexation adjusts the purchase price for inflation using the Cost Inflation Index (CII), reducing the taxable gain. Historically, long-term property gains were taxed at 20% with indexation, which often shrank the taxable gain dramatically for property held many years. Budget 2024 withdrew indexation as a general rule for assets sold on or after 23 July 2024 and made a flat 12.5% rate without indexation the norm, which it remains in FY 2026-27. Indexation did not disappear entirely, and CBDT still notifies a fresh index every year: 384 for FY 2026-27, up from 376 for FY 2025-26.
The exception sits in the statute rather than in a clarification. If you are a resident individual or HUF selling land or a building acquired before 23 July 2024, the tax is computed both ways, 12.5% without indexation and 20% with indexation, and you pay whichever is lower. This was not a transitional window that has since closed. The test is the date of acquisition, not the date of sale, so the choice still applies to a sale made in FY 2026-27, and it will keep applying for as long as pre-July-2024 property changes hands. A flat bought in 2015 and sold in FY 2026-27 still gets the choice. A flat bought in, say, August 2024 does not: for that one it is 12.5% without indexation, full stop. The relief is limited to land and buildings, and non-residents, companies and firms do not get the choice.
Very little else a retail investor sells keeps indexation. Debt mutual fund units bought before April 2023 lost it on 23 July 2024 along with everything else, even though they kept a long-term category.
How the two computations compare:
Indexed cost = (CII of year of sale ÷ CII of year of purchase) × Original cost
Say you bought property for ₹20 lakh in FY 2005-06 (CII: 117) and sell it for ₹80 lakh in FY 2026-27 (CII: 384).
- With indexation: indexed cost = (384/117) × ₹20L = ₹65.64 lakh. LTCG = ₹80L − ₹65.64L = ₹14.36 lakh. Tax at 20% = ₹2.87 lakh.
- Without indexation: LTCG = ₹80L − ₹20L = ₹60 lakh. Tax at 12.5% = ₹7.5 lakh.
Add 4% cess to whichever figure you end up paying. A resident individual here pays the ₹2.87 lakh, because the pre-July-2024 acquisition date lets them take the lower of the two. Someone who acquired after 23 July 2024 (say in September 2024, selling in March 2027, so the 24-month clock has comfortably cleared) has only the second line available to them.
That gap is the whole story of the change. Which computation wins depends on how much the property appreciated relative to how far the index has moved since you bought. Indexation wins where the price rise is modest next to the index rise: typically an older purchase, where the index has had two decades to compound. On a property held that long, indexation is worth far more than the lower headline rate, which is exactly why the option was written back in for people who had already bought before the rules moved. It loses where the property ran well ahead of inflation, because then the lower 12.5% rate applied to the bigger gain beats 20% applied to the smaller one; the Mumbai flat example is a case in point. On a long-held flat the difference runs to several lakh, so compute both ways before filing rather than assuming 12.5% is the answer, and keep the original cost documents that make both computations possible.
Source: “The Indexation Choice for Property Bought Before 23 July 2024”, above · a worked example, for illustration
The Exemptions That Save the Tax
These are the most valuable exemptions available on property capital gains, and this is where careful planning saves lakhs, but they come with strict conditions. Three sections matter most:
| Section | What you reinvest in | Time limit | Cap |
|---|---|---|---|
| 54 | Another residential house (when selling a residential house) | Buy 1 year before / 2 years after; or construct within 3 years | Exemption limited to the capital gain, and capped at ₹10 crore |
| 54F | Another residential house (when selling any other long-term asset, e.g. land) | Same timelines as 54 | Proportionate if entire net consideration not invested; capped at ₹10 crore; conditions on owning other houses |
| 54EC | Bonds of a CBDT-notified issuer (REC, HUDCO, IREDA among them) | Within 6 months of sale | ₹50 lakh in total across the year of sale and the next — not ₹50 lakh a year |
Keep the two bases apart: Section 54 requires reinvesting the gain, while Section 54F requires reinvesting the net consideration. Mixing these up leads to wrong exemption claims and notices. You can combine 54/54F with 54EC across different parts of the gain if the amounts work out.
Section 54: Sale of Residential Property, Reinvestment in Residential Property
Eligibility: Individual or HUF selling a long-term residential property
Exemption: LTCG is exempt to the extent it is reinvested in:
- Purchase: One residential property in India within 1 year before sale or 2 years after sale
- Construction: One residential property in India within 3 years after sale
Conditions:
- The new property cannot be sold within 3 years of purchase/construction
- If new property sold within 3 years, the exemption is reversed (added back in year of sale)
- Maximum investment for exemption: Up to the amount of LTCG (not total sale proceeds); the exemption is tied to the gain, not the full sale price
- From FY 2023-24 (AY 2024-25), the exemption is capped: capital gain above ₹10 crore is left out of the Section 54 computation, and a new house costing more than ₹10 crore counts only up to ₹10 crore
Example: Sold residential flat for ₹80 lakh; purchased for ₹35 lakh in 2010. LTCG: ₹45 lakh computed without indexation. (Because the flat was acquired before 23 July 2024, a resident seller could also compute it with indexation at 20% and pay the lower of the two, but where Section 54 applies in full, the tax is nil either way.)
If you buy a new flat for ₹50 lakh: Exemption = ₹45 lakh (entire LTCG), since new property cost ≥ LTCG. Tax: ₹0.
If you buy a new flat for ₹30 lakh: Exemption = ₹30 lakh. Taxable LTCG = ₹45L − ₹30L = ₹15 lakh. Tax at 12.5% = ₹1,87,500 + cess.
Section 54F: Sale of Any Long-Term Asset (Other Than Residential Property), Reinvestment in Residential Property
Eligibility: Individual or HUF selling any long-term capital asset that is NOT a residential property (e.g., equity shares, gold, commercial property, agricultural land held long-term)
Exemption: Proportional: (Investment in new property ÷ Net consideration from sale) × LTCG
Conditions:
- Invest net sale proceeds (not just gains) in a new residential property within 1 year before / 2 years after sale
- You must not own more than one residential property at the time of sale (other than the new one being purchased)
- The new property cannot be sold within 3 years
- Maximum exemption cap: ₹10 crore from FY 2023-24. It does not bite in the same way it does under Section 54; on a transaction anywhere near that size, have the mechanics checked rather than assuming the two sections work alike
Example: Sold equity shares (long-term) with LTCG of ₹40 lakh. Sale consideration: ₹70 lakh. Invest ₹70 lakh in new residential property.
Exemption = ₹40 lakh (100%, since entire proceeds reinvested). Zero tax.
If only ₹50 lakh reinvested out of ₹70 lakh: Exemption = (₹50L/₹70L) × ₹40L = ₹28.57 lakh. Taxable = ₹40L − ₹28.57L = ₹11.43 lakh. Tax at 12.5% = ₹1,42,875 + cess.
Section 54EC: Capital Gains Bonds
LTCG from land or a building can also be exempt if you invest it in capital gains bonds issued by a CBDT-notified issuer within 6 months of the sale.
The cap is ₹50 lakh, and it is a single ceiling, not an annual allowance. Section 85(2) of the Income-tax Act, 2025 caps the investment at fifty lakh rupees both "during any tax year" and "in the year of transfer of the original asset or assets and in the subsequent tax year". The second limb is the one that catches sellers out. If you sell in, say, February, your six-month window runs into the next financial year, but the cap does not reset on 1 April, so ₹50 lakh of bonds in March and another ₹50 lakh in April buys exemption on ₹50 lakh, not ₹1 crore. Investing beyond the ceiling gives no extra exemption.
The bonds carry a five-year lock-in and modest interest, but the invested amount is exempt. This suits sellers who do not want to buy another property.
Treat no published list of issuers as final. CBDT notifies them one at a time and has kept adding to the set: HUDCO's bonds were notified with effect from 1 April 2025 and IREDA's from 9 July 2025, alongside long-standing issuers such as REC. It moves the other way too: NHAI, historically the largest issuer, stopped issuing 54EC bonds in 2022, so do not go looking for those. Confirm that your issuer is on the current notified list, and that its series is actually open, before you send money.
Capital Gains Account Scheme: Protecting Exemption While Investing
Property purchases and construction take time. If you've sold an asset and intend to claim Section 54 or 54F exemption but haven't yet purchased or constructed the new property before the due date for filing your return (or the extended deadline, where there is one), you risk losing the exemption. The fix is to deposit the unused proceeds in a Capital Gains Account Scheme (CGAS) account before that date, claim the exemption in that year's return, and then withdraw from the account to buy or construct the house within the statutory window.
How CGAS works:
- Open a Type A (savings) or Type B (FD) account with a designated bank (most nationalised banks)
- Deposit the capital gains amount (for Section 54) or net sale proceeds (for Section 54F)
- Withdraw only for the specific purpose of constructing/purchasing the property
- Must utilise funds within the prescribed time period (2 years for purchase, 3 years for construction)
- Unutilised amount is taxable as capital gains in the year the time period expires, taxed as a long-term gain of that later year
Failing to deposit in CGAS before ITR filing forfeits the exemption: the full LTCG becomes taxable for that year.
In practice, CGAS is a simple safety net that many sellers underuse. Suppose you sell in January but have not finalised a new flat by the July filing due date. Rather than forfeit the Section 54 exemption, you park the gain in a CGAS account before filing, claim the exemption in that year's return, and draw the money out later to complete the purchase within two years (or construction within three). Because any amount you do not ultimately use becomes taxable when the time limit expires, deposit only what you really intend to reinvest.
The 1% TDS Under Section 194-IA
When property (other than agricultural land) is sold and either the consideration or the stamp duty value is ₹50 lakh or more, the buyer must deduct 1% TDS under Section 194-IA, on the consideration or the stamp duty value, whichever is higher, and deposit it using Form 26QB. From the seller's perspective:
- The 1% is deducted from your sale proceeds.
- It is credited against your final capital gains tax and appears in your Form 26AS.
- If your actual tax is lower than the TDS (common when you claim Section 54/54EC exemptions), you claim the excess back as a refund by filing your return. That refund only comes through the return, so do not write it off.
This is the seller-side counterpart to the buyer's obligation, which is covered in detail in TDS on property purchase under Section 194-IA. Sellers should ensure the buyer actually deposits the TDS and issues the certificate, so the credit reflects correctly; after the sale, Form 26QB and your Form 26AS are the records that show whether it was deposited.
A Worked Example: A Mumbai Flat
Suppose a flat in Mumbai is sold in FY 2026-27, having been bought in FY 2016-17.
- Sale consideration: ₹1,40,00,000
- Cost of acquisition: ₹52,00,000 (including stamp duty and registration)
- Cost of improvement: ₹6,00,000 (a renovation done in FY 2016-17, soon after the purchase)
- Brokerage on sale: ₹2,00,000
Step 1: Long-term capital gain, the default way.
₹1,40,00,000 − ₹52,00,000 − ₹6,00,000 − ₹2,00,000 = ₹80,00,000
(The flat was held well over 24 months, so this is a long-term gain. Note that nothing has been indexed; that is the whole point of the flat 12.5% rate.)
Step 2: Tax before exemptions.
12.5% × ₹80,00,000 = ₹10,00,000, plus 4% cess = ₹10,40,000, with surcharge on top if the seller's income reaches those thresholds. A sizeable bill.
Step 3: The alternative computation the seller is entitled to.
Because the seller is a resident individual and bought the flat before 23 July 2024, the gain may instead be computed the old way, 20% with indexation, paying whichever comes out lower. The Cost Inflation Index is 264 for FY 2016-17 and 384 for FY 2026-27, so the costs scale by 384 ÷ 264 = 1.4545. Brokerage is not indexed; selling expenses come off the sale price as they are.
- Indexed cost of acquisition: ₹52,00,000 × 1.4545 = ₹75,63,636
- Indexed cost of improvement: ₹6,00,000 × 1.4545 = ₹8,72,727
- Indexed gain: ₹1,40,00,000 − ₹75,63,636 − ₹8,72,727 − ₹2,00,000 = ₹53,63,637
- Tax at 20%: ₹10,72,727, plus 4% cess = ₹11,15,636
So on these facts indexation loses: ₹10,72,727 against the ₹10,00,000 from Step 2, roughly ₹73,000 more, or ₹75,636 more once cess is added to both. The seller takes the default 12.5% route.
Which is exactly why both have to be computed rather than assumed. Indexation only wins when the property's appreciation was modest next to inflation over the holding period. This flat rose about 170% in ten years while the index rose about 45%, so the lower rate on the bigger gain beats the higher rate on the smaller one. On a flat bought in the 1990s or the early 2000s the answer often flips the other way, which is the whole reason Step 3 exists.
Step 4: Reinvesting to save tax.
Working with the default-method gain of ₹80,00,000:
- A new flat bought for ₹50,00,000 within two years → Section 54 exempts ₹50,00,000 of the gain.
- Remaining gain: ₹80,00,000 − ₹50,00,000 = ₹30,00,000.
- ₹30,00,000 goes into 54EC bonds within six months (well within the ₹50 lakh cap) → that ₹30,00,000 is exempt too.
Step 5: Taxable gain after exemptions.
₹80,00,000 − ₹50,00,000 (Sec 54) − ₹30,00,000 (Sec 54EC) = ₹0
No capital gains tax is owed: the entire ₹80 lakh gain is sheltered by combining a new house purchase with 54EC bonds. Notice what that does to Step 3: once the exemptions swallow the whole gain, the 12.5%-versus-20% choice stops mattering. It matters whenever any gain is left standing.
Step 6: The 1% TDS.
Because the sale was ₹1.4 crore (above ₹50 lakh), the buyer deducted 1% = ₹1,40,000 and deposited it via Form 26QB. Since the final tax is nil, that ₹1,40,000 is fully refundable, but only if the seller files a return and claims it. Many sellers forget this and leave the refund unclaimed.
This example shows the central lesson: the headline gain looks alarming, but Section 54 and Section 54EC together can reduce the actual tax to zero for a seller who reinvests.
- Section 54: a new flat within two years₹50,00,000
- Section 54EC bonds within six months₹30,00,000
Source: “A Worked Example: A Mumbai Flat”, above · a worked example, for illustration
Joint Ownership and Splitting the Gain
When a property is owned jointly, say by spouses, the capital gain is split between the co-owners in proportion to their actual share in the property (typically traced to who contributed to the purchase). Each co-owner then reports their share of the gain, applies their own exemptions, and is taxed at their own rate.
This can be advantageous. The ₹50 lakh 54EC ceiling in Section 85 attaches to the assessee, not to the property or to the sale, so each co-owner assessed separately on their own share brings their own ceiling, and each can claim a Section 54 house reinvestment in their own right. Two co-owners can therefore put up to ₹1 crore between them into bonds where a sole owner could put ₹50 lakh. Read that carefully before planning around it: it is one ₹50 lakh ceiling each, and each person's ceiling still spans the year of sale and the next; per person does not become per year. Each co-owner's exemption is still capped by their own share of the gain (a co-owner whose share is below ₹50 lakh simply shelters all of it), so what decides whether the second ceiling is worth anything is the total gain, not either individual share: on a ₹60 lakh gain split evenly, two co-owners shelter the whole ₹60 lakh where a sole owner would have been stopped at ₹50 lakh. The advantage tops out at one extra ₹50 lakh, reached only once both shares are themselves ₹50 lakh or more. The bonds must be bought in that co-owner's own name out of their own share. And the split must reflect genuine ownership and funding; you cannot allocate the gain to a spouse purely to use their lower slab if they did not actually own or pay for their share. Clubbing provisions can pull such an artificial split back to the real owner.
What I Would Work Out Before Selling a Property
Most of the tax on a property sale is settled before the sale deed is signed. The return only records what the calendar, the paperwork and the reinvestment decision have already fixed. So if I were preparing a sale, this is the sheet I would build first, in this order:
- The holding period, to the day. Acquisition date to sale date. At 24 months or less the gain sits at slab rate; past 24 months it drops to 12.5%. A sale a few weeks early can cost more than any negotiation gains.
- The cost, with proof. Purchase price with stamp duty and registration, every improvement bill, and the brokerage on the sale. What cannot be proved tends to be treated as gain.
- Both computations, if the property was acquired before 23 July 2024. 12.5% without indexation and 20% with indexation, side by side, for a resident individual or HUF. The Mumbai example shows the answer can go either way, so I would not assume.
- The reinvestment route and its deadlines. A house under Section 54 or 54F (bought one year before or two years after the sale, or built within three), 54EC bonds within six months and within the ₹50 lakh ceiling, and a CGAS deposit before the return is due if the house is not bought in time.
- The cash timeline. The buyer's 1% TDS comes back only through a return; the tax on any gain left standing needs advance tax in the instalments after the sale, not a surprise at filing.
The same sheet answers the question people ask before the tax one: whether to sell at all. How property compares with other ways of holding wealth, beyond the tax, is covered in real estate vs mutual funds. And none of it replaces a CA's sign-off on a large or unusual sale.
Selling Gold and Jewellery
Gold is woven into Indian households: bought at weddings, gifted at festivals, inherited across generations, and quietly relied on as a store of value. So when families sell it, whether old jewellery or investment coins, they are often surprised to learn that the profit is taxable. Gold is a capital asset like any other: whether you hold it as jewellery, coins, bars, digital gold, gold ETFs, or gold savings funds, selling it for more than it cost triggers capital gains tax, split into short-term and long-term by how long you held it. The ways of holding gold themselves are compared in gold investment in India.
The rules are not onerous, but they have a few wrinkles specific to gold: which holding-period clock applies, how making charges affect the gain, how inherited gold is treated, and the cash-transaction limits that matter at the jeweller's counter.
Which Clock Applies: Physical Gold, Digital Gold, ETFs and Gold Funds
The wrapper sets the clock, not the metal:
- Physical gold (jewellery, coins, bars): long-term after 24 months, taxed at 12.5% without indexation; held 24 months or less, the gain is short-term, added to your total income and taxed at your slab rate (up to 30%). Making charges count towards cost. Until 23 July 2024 this was a 36-month clock and 20% with indexation; both are gone.
- Digital gold (bought through apps/platforms): treated as a capital asset much like physical gold for capital gains purposes; the 24-month long-term line applies.
- Gold ETFs (units listed and traded on NSE/BSE): a gold ETF is listed, so it runs on the 12-month clock that applies to listed securities. More than 12 months is LTCG at 12.5% without indexation, 12 months or less is STCG at your slab rate. You also avoid making charges and storage concerns, so the shorter clock is a real edge over physical gold.
- Gold fund-of-funds and gold savings funds (unlisted units of a fund that itself holds a gold ETF): not listed, so the 24-month line applies, then 12.5%.
The 24-month line is the same one that applies to property, and it makes a large difference: the long-term rate of 12.5% is usually far below the slab rate a short-term gain would attract. A sale of physical gold at 23 months is short-term; crossing 24 months drops you to 12.5%. But check which clock you are on first. A listed gold ETF is already long-term at 12 months and a day, so sitting on it for another year to "reach 24 months" costs you time and buys you no tax relief.
Gold ETFs were briefly caught by the Section 50AA "specified mutual fund" net, which deems every gain short-term and taxes it at slab rate whatever the holding period. That definition was narrowed to funds putting more than 65% of their money into debt and money-market instruments, which pulled gold ETFs back out of it from FY 2025-26.
Sovereign Gold Bonds
The 2.5% interest paid semi-annually on Sovereign Gold Bonds is taxable at slab rates throughout. The capital gain on maturity (after 8 years) is exempt from capital gains tax, but only on one path: the Finance Act, 2026 substituted Section 70(1)(x) of the Income-tax Act, 2025 so that from tax year 2026-27 the exemption applies only where the bond is "held by an individual from the date of original issue till maturity". A bond bought on the exchange, a bond sold and re-bought, an early redemption with the RBI from year 5, and a secondary-market sale before maturity are all taxable capital gains; because SGBs are listed, a secondary-market sale is long-term after 12 months. Where the exemption does apply, it is still a significant advantage over physical gold or gold ETFs.
How the Gain on Gold Is Computed
The capital gain on gold is:
Sale value − (cost of acquisition + making charges + cost of improvement + selling expenses)
The components:
- Sale value: the price you actually receive from the jeweller, dealer, or on redemption of an ETF.
- Cost of acquisition: what you originally paid for the gold. For gold sold before 23 July 2024, indexation applied: the cost was inflated using the Cost Inflation Index so that inflation was not taxed as profit. The 2024 Budget removed indexation on gold for sales on or after that date, so the gain is now computed on your actual cost.
- Making charges: for jewellery, the making charges you paid at purchase form part of the cost.
- Cost of improvement: any later capital additions.
- Selling expenses: brokerage or commission on the sale.
Because the gain is now computed on your actual cost, keeping the original purchase invoice (showing the gold value and making charges separately) matters even more: it is what lets you prove the cost and claim it. Without proof of cost and making charges, the entire sale value risks being treated as gain.
Inherited and Gifted Gold
This is where families most often go wrong. Two principles:
- Receiving inherited gold is not taxable; inheritance is exempt. A gift of gold from a relative is also exempt; a gift from a non-relative above ₹50,000 in value can be taxable in the recipient's hands (see tax on gifts in India).
- Selling that gold later is taxable as capital gains. For the computation you step into the original owner's shoes:
- The cost of acquisition is what the original owner paid (or the fair market value as on 1 April 2001 if the gold was acquired before that date).
- The holding period includes the time the original owner held it.
People often treat inherited gold as if their cost were zero and the holding started on the inheritance date. Stepping into the original owner's shoes is helpful instead: gold inherited from a grandmother and sold months later is still a long-term asset, because the grandmother's long holding period counts. So inherited gold rarely attracts the higher short-term rate, provided the original holding was long, and the inherited cost usually makes the gain smaller too.
Keeping Proof of Cost When You Have None
A practical problem with family gold is that the original invoice is often long lost: jewellery bought decades ago, or inherited without paperwork. Without proof of cost, you risk the entire sale value being treated as gain. If I were helping a family sell old gold, the first thing I would look for is that paperwork, before anyone discusses the price.
A few ways families handle this:
- For gold acquired before 1 April 2001, you can use the fair market value as on 1 April 2001 as the cost of acquisition. A registered valuer's report establishing that 2001 value is the usual evidence.
- For inherited gold, trace the original owner's purchase records where they exist; even old receipts, wedding purchase records, or bank lockers' valuation slips can help.
- Going forward, retain every purchase invoice showing the gold value and making charges separately, so future sales are easy to compute.
The absence of a cost record does not make gold un-saleable, but it does make a defensible valuation important, especially for high-value sales that may be examined. For inherited gold with no paper trail, or a high-value sale, a CA can help establish the cost basis correctly before you file.
Saving Tax on Gold: Section 54F, Not 54EC
Long-term capital gains on gold are sheltered mainly through Section 54F, which applies because gold is a long-term asset other than a residential house. If you invest the net sale consideration (not just the gain) from the gold sale into a residential house within the time limits, the long-term gain is exempt, proportionately if you reinvest only part, and subject to conditions on how many other houses you own. The Section 54F conditions are the same as for any other asset.
What about 54EC bonds? They are commonly mentioned for capital gains, but since 1 April 2018 Section 54EC is restricted to gains from land or building only. Gold does not qualify, so 54EC is not a route for gold sellers.
There is also no Section 54 route for gold, because Section 54 requires the sold asset to be a residential house. For gold, the practical exemption is Section 54F, and many sellers pay the 12.5% without realising that reinvesting the net proceeds in a residential house could have legally reduced or eliminated it.
The Cash-Transaction Limits at the Counter
While a normal sale of personal gold does not attract routine TDS the way salary or interest does, gold transactions carry their own cash rules:
- Under Section 269ST, a person cannot accept ₹2 lakh or more in cash, whether as a single transaction, from one person in a day, or across multiple payments tied to one event. A jeweller paying you ₹2 lakh or more should do so by banking channel, not cash. The penalty for breaching this, under Section 271DA, is 100% of the cash amount received, and it falls on you as the receiver of the cash, not the payer, so this is squarely your risk when selling gold for a large sum.
- High-value purchases of jewellery may require you to furnish your PAN.
- Routing large gold sales through proper banking channels also creates the paper trail you need to prove the transaction and the sale value at filing time.
So the practical guidance is to insist on payment by cheque or bank transfer for any significant sale, keep the invoice, and avoid large cash dealings that fall foul of the cash-receipt rules.
A Worked Example: Two Lots of Gold
Say a seller in FY 2026-27 sells two lots of gold:
Lot 1: Investment coins bought by the seller.
- Purchased 5 years ago for ₹3,00,000 (long-term, held over 24 months)
- Sold for ₹6,50,000; selling commission ₹10,000
Long-term gain = ₹6,50,000 − ₹3,00,000 − ₹10,000 = ₹3,40,000
Lot 2: Jewellery inherited from the seller's mother, sold soon after.
- The mother had bought it 15 years ago for ₹50,000 (the seller steps into her shoes)
- Sold for ₹2,00,000
Holding period includes the mother's 15 years → long-term. Long-term gain = ₹2,00,000 − ₹50,000 = ₹1,50,000
Total long-term capital gain = ₹3,40,000 + ₹1,50,000 = ₹4,90,000
Tax before exemption (at 12.5% without indexation):
12.5% × ₹4,90,000 = ₹61,250, plus 4% cess ≈ ₹63,700
How the gain could be sheltered:
The route available is Section 54F: if the seller invests the net sale proceeds in one residential house within the prescribed window, and does not own more than one other house, the long-term gain is exempt in proportion to the amount reinvested, and fully exempt if the entire net consideration is reinvested. If buying a house is not the plan, the tax is simply ₹63,700; the 12.5% long-term rate on gold is not punitive.
Two lessons stand out. First, the inherited jewellery was taxed at the long-term rate, not the punitive short-term rate, because the mother's long holding counted toward the 24-month test. Second, where a seller is anyway planning to buy a house, Section 54F can shelter the gain entirely. Had the coins been sold within 24 months of buying them, that lot would have been short-term, taxed at the seller's slab rate with no 12.5% concession.
How Capital Losses Work
Losses are not just disappointing: they are a tax asset if you handle them correctly.
| Loss type | Can be set off against | Carry forward |
|---|---|---|
| Short-term capital loss (STCL) | Both STCG and LTCG | Up to 8 subsequent years |
| Long-term capital loss (LTCL) | Only LTCG | Up to 8 subsequent years |
The asymmetry is important: a short-term loss is more flexible because it can offset both short-term and long-term gains, while a long-term loss can only shelter long-term gains, never short-term ones. Neither can be set off against salary, business, rental or interest income: capital losses live in their own silo and can only meet capital gains.
Unabsorbed losses carry forward and are set off against capital gains in those future years under the same rules. The non-negotiable condition: to carry a loss forward, you must file your ITR on or before the due date for the year in which the loss arose. Miss the deadline and file a belated return, and you forfeit the right to carry that capital loss forward, though you can still set it off within the same year. It is one of the most expensive consequences of late or belated filing.
Tax-Loss Harvesting
Most investors think of capital losses as pure bad news. They are, but the tax code offers a consolation prize. If you have unrealised losses on some investments and realised gains on others, you can deliberately sell the loss-making holdings before the financial year ends to book those losses and cancel out the gains, shrinking your capital gains tax bill. This practice is called tax-loss harvesting, and in India it is entirely legal, openly permitted by the Income Tax Act: a legitimate tax planning strategy.
When you sell an investment for less than you paid, you realise a capital loss, and the tax law lets you use that loss to reduce capital gains you have made elsewhere. The key word is realised. A loss on paper does nothing for your taxes. You must actually sell the holding to convert a notional loss into a capital loss that can offset gains. The same is true of gains: only realised gains are taxed, and only realised losses can offset them. Harvesting does not make the underlying loss disappear from your portfolio's economics; you still lost money on that investment. What it does is recover some of the sting by reducing the tax on your winning positions.
What makes harvesting especially attractive here is the absence of a "wash-sale" rule. In the United States you cannot claim a loss if you buy the same security back within 30 days. India has no such restriction: after the loss is realised and reported, you can buy back the same investment, which gives investors meaningful flexibility.
Harvesting Gains Each Year
The ₹1.25 lakh annual exemption on equity LTCG interacts with harvesting in a useful way. If your equity LTCG for the year is below ₹1.25 lakh, you owe no tax on it anyway, so harvesting losses against that gain would waste the loss. Save losses for the years your gains actually exceed the exemption.
In low-gain years the smarter move is to harvest gains, not losses. Because the exemption resets every financial year, long-term investors often harvest gains deliberately. The idea: each year, before 31 March, sell enough long-term holdings to realise gains up to ₹1.25 lakh, pay zero tax on them, and immediately reinvest. Over time this resets your purchase cost upward, so a smaller taxable gain remains when you eventually sell for real.
This is entirely legal. It does involve transaction costs and a day or two out of the market, so it suits patient investors rather than active traders, and whether it fits depends on your own situation and costs. For a deeper look at how this plays across fund types, see our guide on tax on mutual funds.
A Worked Example: A March Portfolio Review
Consider an equity investor reviewing a portfolio in March 2027, near the end of FY 2026-27. The realised gains so far:
- Short-term capital gain on a stock sold within months: ₹1,50,000 (taxed at 20%)
- Long-term capital gain on equity mutual funds held over a year: ₹2,00,000 (first ₹1.25 lakh exempt, rest at 12.5%)
The portfolio also holds two beaten-down positions sitting at a loss:
- Stock A, held 5 months, currently ₹80,000 below cost (a short-term loss if sold)
- Stock B, held 3 years, currently ₹70,000 below cost (a long-term loss if sold)
Before harvesting, the tax:
- STCG: 20% × ₹1,50,000 = ₹30,000
- LTCG: ₹2,00,000 − ₹1,25,000 exemption = ₹75,000 taxable; 12.5% × ₹75,000 = ₹9,375
- Total ≈ ₹39,375 plus 4% cess (≈ ₹40,950)
Both losses are harvested by selling A and B:
- Short-term loss ₹80,000 (from Stock A): flexible, can offset either gain. Set it against the STCG first: ₹1,50,000 − ₹80,000 = ₹70,000 STCG remaining.
- Long-term loss ₹70,000 (from Stock B): can only offset LTCG. Set it against the LTCG: ₹2,00,000 − ₹70,000 = ₹1,30,000 LTCG remaining.
After harvesting, the tax:
- STCG: 20% × ₹70,000 = ₹14,000
- LTCG: ₹1,30,000 − ₹1,25,000 exemption = ₹5,000 taxable; 12.5% × ₹5,000 = ₹625
- Total ≈ ₹14,625 plus cess (≈ ₹15,210)
Tax saved by harvesting: roughly ₹40,950 − ₹15,210 = ₹25,740.
Because India has no wash-sale rule, Stock A and Stock B can be bought back if the investor still believes in them, ideally a day later or via a similar fund, keeping market exposure broadly intact while banking the tax benefit. The losing positions have effectively been used to cut the tax on the winners by over half.
Note how the asymmetry mattered: the short-term loss could have offset the LTCG too, but it was more efficient to use the flexible short-term loss against the short-term gain (taxed at the higher 20%) and the restricted long-term loss against the LTCG. Tracking each lot's date and cost in a sheet, as in an investment portfolio tracker, is what makes this review a ten-minute job in March.
Source: “A Worked Example: A March Portfolio Review”, above · a worked example, for illustration
Doing It Cleanly: The No-Wash-Sale Advantage and Its Limits
India's lack of a wash-sale rule is a real edge: you can realise a loss and rebuild the position. But treat it sensibly:
- Selling and rebuying the exact same quantity of the same scrip on the same day, with no real change in your position, looks like a pure tax device and can be questioned.
- Cleaner approaches: wait a day or two before repurchasing; buy a similar but not identical fund or stock; or simply accept a brief gap in exposure.
- Mind transaction costs: brokerage, STT, exchange charges and the bid-ask spread. If the tax saved is smaller than the round-trip cost, harvesting is not worth it.
- Watch FIFO for mutual funds: redemptions match the oldest units first, which affects whether the realised loss is short- or long-term (see how SIP redemptions are taxed).
Timing: Why Harvesting Is a Year-End Discipline
Tax-loss harvesting is most effective when done deliberately in the final weeks of the financial year, once you can see the full picture of your realised gains. By February or March you know:
- How much STCG and LTCG you have actually booked.
- How much of your equity LTCG falls within the ₹1.25 lakh exemption.
- Which holdings are sitting at a loss and could be harvested.
This lets you harvest precisely the amount of loss needed to offset the taxable portion of your gains, rather than over-selling. Over-harvesting has a hidden cost: if you book more losses than you have gains, the surplus only carries forward. That is useful, but it means you sold a holding (and possibly disrupted a long-term position) for a benefit you cannot use this year.
A second timing nuance concerns mutual fund holding periods. Because equity funds turn long-term after 12 months and most other assets after 24 months, a holding that is just short of the long-term threshold may be worth keeping a few more weeks if you intend to harvest a gain, or selling now if you want a flexible short-term loss. The interplay between the holding-period clock and the type of loss you want to generate rewards a careful look at each lot's purchase date.
Harvesting Beyond Equities
The set-off rules apply across all capital assets, not just shares. You can harvest losses on:
- Debt mutual funds, gold ETFs, and other securities.
- Property, though it is large, lumpy, and rarely sold purely for harvesting.
- Unlisted shares and other capital assets.
A short-term loss on a debt fund, for instance, can offset a short-term gain on a stock, because both are short-term capital items. This cross-asset flexibility is why a year-end review should cover your entire portfolio of capital assets, not just your equity holdings. Just remember the one hard rule that never bends: long-term losses can only meet long-term gains, whatever the asset.
Advance Tax on Capital Gains
If you have capital gains during the year (from equity redemptions, property sales), you may need to pay advance tax. Capital gains that arise after March 15 can be paid by March 31 without any interest penalty. For gains arising before March 15, they should have been included in the advance tax calculation.
This matters particularly when selling property: a large one-time gain can result in a significant tax outflow that you need to plan for, not discover when filing the ITR.
Where to Report Capital Gains in ITR
Capital gains are reported in Schedule CG of ITR-2 (for individuals with capital gains who are not running a business) or ITR-3 (for business/profession income). Harvested losses are reported in the same capital gains schedule, with the set-off worked out there, and any loss you carry forward is captured in the return's carry-forward schedule.
You need:
- Annual Capital Gains Statement from your broker or mutual fund platform
- Transaction history with purchase date, purchase price, sale date, and sale price for each transaction
Most brokers (Zerodha, Groww, etc.) and mutual fund platforms generate this statement automatically, usually labeled "Capital Gains Report" or "Tax P&L Statement."
Your broker also reports your transactions, losses as well as gains, to the tax department, and they appear in your Annual Information Statement. Reconcile your broker's capital gains statement with the Form 26AS and AIS before filing to avoid mismatches and notices.
Record-keeping. The single most useful habit for any equity investor is to keep every contract note, capital gains statement, and broker report in one place, year after year. When you eventually sell a long-held position, you will need the original purchase date and cost, and for pre-2018 holdings, the fair market value for grandfathering. Brokers usually retain a few years of statements, but holdings can span decades. A simple annual download saved to a folder, cross-checked against your Form 26AS and AIS, means you can compute and defend any gain without scrambling. The tax itself is rarely the hard part; reconstructing a missing cost basis years later is. Keep these with your other filing paperwork; the tax document checklist covers what to retain.
Before You File: A Checklist for Equity Gains
- Download your capital gains statement from each broker and mutual fund platform for FY 2026-27.
- Separate gains into long-term (held over 12 months) and short-term (12 months or less).
- Net any capital losses correctly: short-term losses against both, long-term losses only against LTCG.
- Apply the ₹1.25 lakh LTCG exemption to your aggregate long-term equity gain.
- Calculate tax: 12.5% on LTCG above the exemption, 20% on all STCG, plus 4% cess.
- Reconcile every transaction against your AIS and Form 26AS.
- Work out how the gains sit on top of your salary income at your marginal rate.
- Filing the ITR by the due date is the condition under which losses carry forward for up to 8 years, so the current deadline is worth confirming.
Limitations and What Can Change
Everything above describes the mechanics of the tax, not advice for your specific transaction. Large or unusual disposals (inherited assets, ESOP shares, off-market transfers, NRI sales) have edge cases that deserve a CA's sign-off before you file, and given the sums involved, property capital gains are high-value and frequently scrutinised. Two structural things are also worth tracking, separate from any rate change: first, capital gains rates are reset by the Finance Act each year, so the figures here are current for FY 2026-27 gains specifically (tax year 2026-27, AY 2027-28 in the old numbering), confirmed unchanged by Budget 2026, not a permanent fixture.
Second, the Income-tax Act, 2025 has been in force since 1 April 2026, replacing the Income-tax Act, 1961 under which Section 112A, Section 54 and Section 54F sat. It is a 536-section consolidation rather than a rewrite of the rates: 12.5% and 20% are unchanged, and so are the ₹1.25 lakh exemption, the set-off logic and the reinvestment reliefs, but the sections are renumbered (Section 111A becomes Section 196 and Section 112A becomes Section 198) and the new Act uses a single "tax year" in place of the old previous-year-and-assessment-year pair. Two practical consequences. A sale you made before 1 April 2026 is still governed by the 1961 Act, so an earlier year you are still cleaning up keeps the old section numbers. And returns under the new Act, for tax year 2026-27, the gains this article is about, are not due until mid-2027, so the forms and utilities are still settling.
That does not mean "assessment year" has disappeared from your paperwork. AY 2026-27 and everything before it stays under the 1961 Act, which is why the e-Pay Tax portal still makes you choose between "Income Tax Act 1961" (assessment years up to 2026-27) and "Income Tax Act 2025" (tax year 2026-27 onwards) before it will take a payment. Expect older guides, and your CA's shorthand, to keep saying "112A" for a while yet; this guide also uses the numbers everyone still quotes, such as 54, 54F, 54EC and 194-IA. A section number you do not recognise on a form or a notice is the renumbering, not a new rule. The substance is what matters, and so does the order: the sums before the sale, the return after it.
Frequently Asked Questions
Section numbers under the Income-tax Act, 2025
Sections of the Income-tax Act, 1961 cited in this article govern income earned up to 31 March 2026 (returns for AY 2026-27). From tax year 2026-27 the matching provisions are in the Income-tax Act, 2025. TDS and TCS switch by the date of payment or credit.
| Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|
| Section 50AA | Section 76 |
| Section 54 | Section 82 |
| Section 54EC | Section 85 |
| Section 54F | Section 86 |
| Section 111A | Section 196 |
| Section 112A | Section 198 |
| Section 194-IA | Section 393(1), Table Sl. No. 3(i) |
| Section 269ST | Section 186(1) |
| Section 271DA | Section 451 |
Mapped with the Income Tax Department’s comparison of the 1961 and 2025 Acts, checked 15 September 2026.
Sources and references
- Income Tax Department — Section 112A (LTCG on Listed Equity/Equity Funds)
- AMFI — Tax Regime for Mutual Funds
- SEBI — Securities Transaction Tax Rules, 2004
- Income Tax Department — Objective and Scope of the New Income-tax Act, 2025 (the tax year concept)
- Income Tax Department — Cost Inflation Index (264 for FY 2016-17, 384 notified for FY 2026-27)
- Income Tax Department — Memorandum Explaining the Provisions in the Finance (No. 2) Bill, 2024
- Press Information Bureau — Union Budget 2024-25 summary (capital gains exemption limit raised to ₹1.25 lakh)
- Press Information Bureau — Centre grants Section 54EC tax benefit status to IREDA bonds (effective 9 July 2025)
- HUDCO — 54EC Capital Gain Tax Exemption Bonds (Department of Revenue notification of 7 April 2025)
- Income-tax Act, 2025 (Act 30 of 2025) — Gazette of India (s.2(101) holding periods; s.76 specified mutual fund; s.85(2), the ₹50 lakh capital-gains-bond cap across the year of transfer and the next, p. 129; s.197 long-term rate)
- Finance Act, 2026 (Act 4 of 2026) — Gazette of India, section 43 (Sovereign Gold Bond exemption narrowed to original subscribers held to maturity)
- Income Tax Department — capital gains (sections 111A and 112A)
- Income Tax Department — set off and carry forward of losses
- Income Tax Department — tax treatment of dividend received
- Income Tax Department — Income-tax Act, 2025 in force from 1 April 2026
- Income Tax Department — Tax Payments (selecting AY 2026-27 vs Tax Year 2026-27)
- Income Tax Department — Income-tax Act, 2025, section 69 as substituted by the Finance Act, 2026 (buybacks taxed as capital gains from 1 April 2026)
- Press Information Bureau — Summary of Union Budget 2026-27, 1 February 2026
- Income Tax Department, Government of India
- Income Tax India — capital gains, Section 54 exemptions, and set-off and carry-forward of losses
- CBDT FAQs — new capital gains taxation regime (12.5% without indexation vs 20% with)
- Income Tax Department — Section 54 exemption on transfer of residential house property
- Income Tax Department — Section 54EC
- Income Tax Department — TDS on purchase of immovable property (Section 194-IA)
- Tax2win — Section 269ST: penalty on cash receipt above ₹2 lakh
- Income Tax Department — Income-tax Act, 2025 hub page (section renumbering)
Rules, rates, and thresholds in India change over time. Always confirm the current position with the official source above before acting on it.