sharma23yash-oss Capital Gains Tax (India)
This skill produces information, not tax advice. Tax outcomes depend on residential status, the taxpayer's other income, the specific facts of acquisition, and provisions that change with every Finance Act. Always tell the user to confirm with a qualified chartered accountant or tax adviser before acting, and never file, compute a final liability, or advise on a structure.
What changed on 1 April 2026
The Income-tax Act 2025 replaced the Income-tax Act 1961 with effect from 1 April 2026. It has 536 sections and 16 schedules, against 819 sections and 14 schedules in the 1961 Act, and the rules were reduced from 511 to 333 with forms cut from 399 to 190.
Two consequences for practical work:
- "Tax year" replaces "previous year". A tax year is the twelve-month period of the financial year, 1 April to 31 March. The separate "assessment year" language of the old Act falls away in the new drafting.
- Almost every section is renumbered. Capital gains now sit principally at Section 67 of the 2025 Act. Old habits — "Section 112A", "Section 111A", "Section 54" — refer to the repealed Act. When citing, give the new section and, where useful, note the 1961 Act equivalent so older material can be reconciled.
The government has described the exercise as consolidation rather than a change in tax burden: the substantive rates below were set by the Finance (No. 2) Act 2024 and carried into the new Act.
Holding periods
Only two now apply to capital assets:
| Asset | Long-term if held for |
|---|---|
| Listed equity shares (STT paid) | more than 12 months |
| Equity-oriented mutual funds and units of business trusts | more than 12 months |
| Listed securities generally, and zero-coupon bonds | more than 12 months |
| Unlisted shares | more than 24 months |
| Immovable property (land, building) | more than 24 months |
| Gold, jewellery, physical and paper gold, other capital assets | more than 24 months |
The old 36-month bucket is gone.
Rates
| Asset | Short term | Long term |
|---|---|---|
| Listed equity / equity MF (STT paid) | 20% | 12.5% on gains above ₹1,25,000 per tax year, aggregated across all such assets |
| Unlisted shares | Slab rate | 12.5% (no indexation) |
| Immovable property acquired on or after 23 July 2024 | Slab rate | 12.5% (no indexation) |
| Immovable property acquired before 23 July 2024, resident individual/HUF | Slab rate | Higher-of-benefit: choose 20% with indexation or 12.5% without, whichever is lower |
| Gold, jewellery, SGB sold in the secondary market | Slab rate | 12.5% (no indexation) |
| Debt mutual funds bought on or after 1 April 2023 | Always treated as short-term — taxed at slab rates regardless of holding period | n/a |
| Debt MF bought before 1 April 2023 | per the transitional rules — verify | verify |
| Foreign shares, foreign ETFs | Slab | 12.5% |
All rates are before surcharge and the 4% health and education cess. Surcharge on capital gains covered by the special rates is capped at 15%.
Indexation is gone for almost everything. The single surviving case is the grandfathered immovable property option above.
The ₹1.25 lakh exemption
- Applies only to long-term gains on listed equity and equity-oriented funds where STT has been paid.
- It is a per-taxpayer, per-tax-year threshold, aggregated across all such gains — not per scheme, per demat account, or per transaction.
- Below the threshold the gain is not taxed; above it, only the excess is taxed at 12.5%.
Grandfathering for pre-2018 equity
For listed equity and equity-oriented units acquired before 1 February 2018, the cost of acquisition is the higher of:
- actual cost, and
- the lower of (the highest quoted price on 31 January 2018) and (the full value of consideration on sale)
This preserves gains accrued up to 31 January 2018 from tax. It still applies under the new Act. Anyone holding pre-2018 equity must use it — computing from actual cost overstates the gain, sometimes by a large amount.
Set-off and carry-forward of losses
The rules are strict and asymmetric:
| Loss type | Can be set off against |
|---|---|
| Short-term capital loss | Both short-term and long-term capital gains |
| Long-term capital loss | Long-term capital gains only |
- Capital losses cannot be set off against salary, business income, house property or other income.
- Unabsorbed capital losses carry forward for 8 tax years, retaining their short/long character.
- Carry-forward requires the return to be filed by the due date. A late return forfeits the carry-forward. This is the most commonly missed rule.
- Losses can only be carried forward by the person who incurred them.
Tax-loss harvesting
The mechanic: sell a loss-making holding before the tax year ends to realise the loss, set it against realised gains, and re-establish the position.
What to check before recommending it:
- Realised gains and losses so far this tax year, split short and long term
- Whether the LTCG exemption of ₹1.25 lakh is already used
- Transaction costs and STT on the round trip, plus the bid-ask spread
- The general anti-avoidance provisions: India has no bright-line "wash sale" rule of the US kind, but a same-day sell-and-buy-back with no change in economic position is exactly the sort of arrangement that invites scrutiny. Flag this rather than presenting it as a free lunch, and tell the user to take advice.
- Whether selling breaks the 12-month clock on a position that is close to qualifying as long-term
Other receipts
Dividends — taxable in the shareholder's hands at slab rates. TDS applies above the prescribed annual threshold per company. There is no dividend distribution tax; the company does not pay it for you.
Buyback (on or after 1 October 2024) — the entire buyback consideration is taxed in the shareholder's hands as a deemed dividend at slab rates, and the cost of acquisition of the tendered shares is allowed as a capital loss available for set-off against capital gains under the normal rules. This reversed the earlier regime in which the company paid buyback tax and the receipt was exempt. Tendering into a buyback is therefore materially worse for a high-slab taxpayer than it was, and better for someone with capital gains to shelter.
Bonus shares — cost of acquisition is nil, and the holding period runs from the date of allotment of the bonus shares, not the original purchase. Selling bonus shares within twelve months of allotment creates short-term gain on the full sale value.
Stock split — cost is apportioned across the larger number of shares; the original holding period is preserved.
Rights entitlements — sale of an RE is a capital gain with nil cost of acquisition; the holding period runs from the date the RE was credited.
Demerger — cost is apportioned between the demerged and resulting company using the ratio the company discloses; the holding period of the resulting company's shares includes the period the original shares were held.
Sovereign Gold Bonds — redemption with the RBI at maturity is exempt from capital gains for individuals; a sale in the secondary market before maturity is taxed as above. SGB interest is taxable at slab rates.
F&O and intraday — not capital gains. F&O is non-speculative business income; intraday equity is speculative business income. Both go under business income with their own set-off rules and audit thresholds. Say so and stop — do not compute them under this skill.
The computation
Full value of consideration
− Expenditure wholly and exclusively in connection with the transfer (brokerage, STT is NOT deductible)
− Cost of acquisition (indexed only in the one grandfathered property case)
− Cost of improvement
= Capital gain
Then:
− Losses set off in the correct order
− ₹1.25 lakh exemption, for eligible LTCG only
× applicable rate
+ surcharge (capped at 15% on special-rate capital gains)
+ 4% cess
STT is not an allowable deduction against capital gains. Brokerage, exchange charges, GST on brokerage and stamp duty on the transaction generally are.
Output format
# Capital Gains — Tax Year 2026-27
## Transactions
| Asset | Bought | Sold | Qty | Buy ₹ | Sell ₹ | Holding | Type | Gain ₹ |
## Aggregation
- Short-term capital gains: ₹
- Long-term capital gains (equity, STT paid): ₹
- Less exemption: ₹1,25,000
- Taxable LTCG: ₹
## Loss set-off applied
| Loss | Against | Amount | Carried forward |
## Indicative tax
| Head | Base | Rate | Tax |
| STCG | | 20% | |
| LTCG | | 12.5% | |
| Surcharge / cess | | | |
| **Total (indicative)** | | | |
> Indicative only. Confirm with a qualified tax adviser before filing.
Hard rules
- Always state the tax year and the Act under which you computed.
- Never present a final tax liability. Present an indicative computation and route the user to a professional.
- Do not advise on structuring, gifting, HUF transfers, or offshore arrangements. Explain the rules if asked; decline to design a scheme.
- Residential status changes everything (NRIs face TDS on capital gains at source, and treaty relief may apply). If residential status is not stated, ask before computing.
- Verify current rates against the CBDT/Income Tax Department site before relying on any figure here. Tax provisions in this file reflect the position as at the Income-tax Act 2025 coming into force on 1 April 2026 and may have been amended since.