Capital Gains Tax in India — Post-July 2024 Regime for FY 2025-26 (AY 2026-27)

What changed on 23 July 2024 (the headline)

The Finance (No. 2) Act 2024 fundamentally rewrote the capital gains taxation landscape in India. Effective for all transfers executed on or after 23 July 2024, the Government unified tax rates across vastly different asset classes while eliminating indexation for new assets.

If you are filing your Income Tax Return for FY 2025-26 (AY 2026-27), the old regime rates (10% for equity LTCG, 20% with indexation for property) only apply historically or via specific grandfathering exceptions. The current regime focuses on a streamlined philosophy: higher burden on short-term speculation (20%), a unified 12.5% rate for long-term investing, and removal of complex inflation-adjustment mechanics.

Capital gains tax rates are strictly determined by the Income Tax Act provisions and remain unaffected by whether you choose the new or old tax regime for your salary (though your regime choice affects surcharge limits). For the broader income tax framework, see the Income Tax overview.

The new capital gains map — by asset class

Asset class	Long-term holding period	STCG rate	LTCG rate	Indexation?
Listed equity shares + equity mutual funds	> 12 months	20% (Sec 111A)	12.5% (Sec 112A) — exempt up to ₹1.25L	No
Real estate (land + building)	> 24 months	Slab rate	12.5%	No (unless grandfathered)
Unlisted equity shares (startups / private)	> 24 months	Slab rate	12.5%	No
Gold, jewellery, + physical assets	> 24 months	Slab rate	12.5%	No
Debt mutual funds (purchased on/after 1 Apr 2023)	Always short-term	Slab rate	N/A	No
Debt mutual funds (purchased before 1 Apr 2023)	> 24 months	Slab rate	12.5%	No
Business trusts (REITs / InvITs)	> 12 months	20%	12.5%	No
Virtual Digital Assets (crypto / NFTs)	N/A	30%	30%	No

Listed equity + equity mutual funds

For retail investors and HNIs trading on Indian stock exchanges, the tax burden has increased on both ends of the holding-period spectrum.

• Short-Term Capital Gains (STCG): under Section 111A, gains on listed equity, equity-oriented mutual funds, and units of business trusts held for 12 months or less are now taxed at 20% (up from 15%).
• Long-Term Capital Gains (LTCG): under Section 112A, gains on the same assets held for more than 12 months are taxed at 12.5% (up from 10%).
• The ₹1.25 lakh exemption: to cushion small retail investors, the annual tax-free threshold was increased. You pay 12.5% tax only on aggregate long-term gains that exceed ₹1,25,000 in the financial year.

Condition: to avail these concessional rates, Securities Transaction Tax (STT) must have been paid on the acquisition and transfer of the equity shares (with limited exceptions like IPO allotments).

Real estate — the grandfathering choice

The most controversial element of the 2024 reform was the abolition of indexation on real estate. Previously, sellers could inflate their original purchase price using the Cost Inflation Index (CII) to account for inflation, drastically reducing their taxable gain, which was then taxed at 20%.

For transactions on or after 23 July 2024, the baseline rule is that real estate LTCG is taxed at a flat 12.5% without indexation.

However, following public pushback, the Government enacted a grandfathering clause to protect older investments.

The grandfathering rule: If you are a resident individual or HUF (NRIs are excluded) and you acquired the property before 23 July 2024, you have the legal right to calculate your tax liability under both the old and new methods and pay whichever results in the lower tax outflow.

Worked example: the grandfathering choice

Imagine you bought an apartment in April 2015 for ₹50,00,000. You sell it in July 2025 for ₹2,00,00,000.

Method A: new regime (12.5% without indexation)

• Sale value: ₹2,00,00,000
• Purchase price: ₹50,00,000
• Actual capital gain: ₹1,50,00,000
• Tax @ 12.5%: ₹18,75,000

Method B: old regime (20% with indexation)

• Sale value: ₹2,00,00,000
• Indexed purchase price (hypothetical CII adjustment): ~₹75,00,000 (inflated over 10 years)
• Taxable capital gain: ₹1,25,00,000
• Tax @ 20%: ₹25,00,000

Conclusion: in this scenario, Method A is cheaper. The taxpayer elects the 12.5% flat rate and pays ₹18.75 lakh — saving over ₹6.25 lakh compared to the indexed method. (Property sales also attract TDS obligations under Section 194-IA — see the TDS rate chart.)

Unlisted equity + startups (24-month threshold)

Startup founders, angel investors, and employees holding ESOPs face a highly specific tax environment.

• Holding period: the Finance Act 2024 reduced the holding period for unlisted equity from 36 months to 24 months.
• STCG (≤ 24 months): taxed at the investor’s applicable income tax slab rate (up to 30%).
• LTCG (> 24 months): taxed at a flat 12.5% without indexation.
• Crucial note: unlike real estate, there is no grandfathering choice for unlisted shares. Even if you bought startup equity in 2018, when you sell it in FY 2025-26 it is strictly taxed at 12.5% without indexation. (For high-growth startup equity that has achieved a 5x or 10x multiple, the 12.5% flat rate is generally far more beneficial than the old 20% indexed rate.)

Gold, jewellery, and other physical assets

Taxation of physical assets like gold bullion, jewellery, archaeological collections, and paintings has been synchronised with the unlisted equity and real estate rules.

• Holding period: reduced from 36 months to 24 months.
• STCG: added to total income and taxed at slab rates.
• LTCG: taxed at a flat 12.5% without indexation.
• Exception: Sovereign Gold Bonds (SGBs) held to maturity (8 years) remain entirely exempt from capital gains tax.

Debt mutual funds (pre + post 1 April 2023 split)

Debt mutual funds have lost much of their historical tax arbitrage. Taxation is now aggressively split based on the date of acquisition.

1. Purchased ON or AFTER 1 April 2023: Following the Finance Act 2023 amendment, any mutual fund where domestic equity exposure is ≤ 35% (classified as a “specified mutual fund”) is stripped of all long-term capital gains benefits. Regardless of whether you hold for 1 year or 10 years, the gains are treated as short-term capital gains and taxed at your applicable slab rate.

2. Purchased BEFORE 1 April 2023: Legacy investments retain their structural benefits. Their holding period has been unified to 24 months. If sold after 24 months, gains qualify as LTCG and are taxed at the new unified rate of 12.5% without indexation.

Note on international equity ETFs and Fund of Funds (FoFs): treatment of international funds relies on whether they meet the “specified mutual fund” definition under Section 50AA. Most international FoFs and debt ETFs fall into the slab-rate category if purchased post-April 2023.

REITs, InvITs, and business trusts

Units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are treated identically to listed equity shares.

• Holding period: > 12 months qualifies as long-term.
• STCG: taxed at 20%.
• LTCG: taxed at 12.5%. (The ₹1.25 lakh annual exemption limit under Section 112A applies cumulatively across listed shares, equity MFs, and business trusts.)

Crypto / VDAs (Section 115BBH unchanged)

Taxation of Virtual Digital Assets (VDAs) — including cryptocurrencies like Bitcoin and NFTs — remains rigidly punitive and was untouched by the 2024 / 2025 rate rationalisations.

• Flat 30% tax: all gains are taxed at a flat 30% under Section 115BBH, irrespective of how long you hold the asset. No short-term vs long-term distinction.
• No deductions: you cannot deduct any expenses (exchange fees, gas fees, mining costs) other than the actual cost of acquisition.
• No loss set-off: losses from one crypto asset cannot be set off against gains from another crypto asset, nor against any other income head. Losses cannot be carried forward.
• TDS: a 1% TDS applies on the transfer of VDAs under Section 194S.

Surcharge mechanics (15% cap for listed equity)

For HNIs earning above ₹50 lakh annually, capital gains tax is accompanied by a surcharge:

• Listed equity cap: for both STCG (Sec 111A) and LTCG (Sec 112A) generated from listed equity and equity mutual funds, the maximum surcharge is strictly capped at 15%, across all tax regimes. Even if your total income exceeds ₹5 crore, the surcharge on the equity-gain component will not exceed 15%.
• Other long-term assets: for LTCG on real estate, unlisted shares, and gold, the regular surcharge rates apply based on your total income (10% / 15% / 25% / 37%).
• Regime interaction: under the new tax regime (default), the maximum surcharge on any income head — including property capital gains or unlisted shares — is capped at 25%. (See New vs Old Tax Regime Comparison.)

Exemptions — Section 54, 54F, 54EC mechanics

You can legally shield your long-term capital gains from the 12.5% tax by reinvesting the proceeds into specific avenues:

1. Section 54 (residential to residential): If you sell a residential property, you can exempt the LTCG by reinvesting the capital gain amount into purchasing another residential property in India (within 1 year before or 2 years after the sale) or constructing one (within 3 years).

• The cap: from FY 2023-24, the maximum exemption claimable under Section 54 is capped at ₹10 crore.

2. Section 54F (any asset to residential): If you sell a non-residential asset (commercial property, unlisted shares, gold) and reinvest the entire net sale consideration into a residential property, you can claim an exemption. If you invest partially, the exemption is proportionate.

• Condition: you cannot own more than one existing residential house property on the date of transfer. This exemption is also capped at ₹10 crore.

3. Section 54EC (capital gains bonds): If you sell land or a building (residential or commercial), you can invest the capital gains in specified bonds (NHAI, REC, IRFC, PFC) to claim an exemption.

• Conditions: investment must be made within 6 months from the date of transfer. Maximum investment capped at ₹50 lakh per financial year. Bonds have a 5-year lock-in.

4. Capital Gains Account Scheme (CGAS): If you plan to utilise Section 54 or 54F but haven’t purchased the new house before the ITR filing due date (usually 31 July), you must deposit the unutilised funds into a CGAS account at an authorised bank.

Loss set-off + carry-forward rules

Understanding how to legally offset capital losses against gains is a vital tax-planning strategy.

Set-off rules (in the current year):

• Short-Term Capital Loss (STCL): highly versatile. Can be set off against both STCG AND LTCG.
• Long-Term Capital Loss (LTCL): highly restricted. Can only be set off against LTCG. Cannot offset STCG, salary, or business income.

Carry-forward rules: If capital losses exceed capital gains in a given year, you can carry forward the unabsorbed loss for up to 8 consecutive Assessment Years to offset against future gains.

• The absolute rule: to earn the right to carry forward a loss, you must file your ITR on or before the due date prescribed under Section 139(1) (usually 31 July for non-audit cases). If you file a belated return, you permanently forfeit the ability to carry forward that year’s capital loss.

Reporting in ITR — which schedule, which form

Capital gains reporting requires meticulous accuracy. Mismatches with the Annual Information Statement (AIS) trigger automated scrutiny notices.

• Schedule CG: every capital gain transaction must be reported in Schedule CG of your ITR. The portal requires detailed breakdowns including purchase dates, sale dates, ISINs for listed shares, and property buyer details.
• ITR-2 / ITR-3: the standard requirement is that the presence of any capital gain forces you to file at least ITR-2 (or ITR-3 if you have business income).
• The AY 2026-27 exception for ITR-1 / ITR-4: from AY 2025-26 onwards, CBDT allows taxpayers to report small LTCG under Section 112A directly in the simplified ITR-1 or ITR-4 forms, provided the total LTCG does not exceed the exempt threshold of ₹1.25 lakh, and there are no brought-forward or carry-forward losses. This rule is annually re-notified — verify against the latest CBDT ITR notification before relying.

If you have short-term gains, real-estate gains, or LTCG exceeding ₹1.25 lakh, you are immediately disqualified from ITR-1. For the step-by-step diagnostic, use the ITR Form Selector Guide. For execution support, see the ITR Filing service.