Home › Capital Gains Tax

Capital Gains Tax in India (FY 2025-26): STCG & LTCG Explained

Capital gains are taxed differently from salary and interest. For transactions on or after 23 July 2024, use the updated STCG and LTCG rates below while preparing AY 2026-27 returns.

STCG vs LTCG

Short-term capital gains arise when an asset is sold before its relevant long-term holding period. Long-term capital gains arise after that period. Holding periods depend on the asset category, so verify the asset classification before filing.

Capital gains tax rates table

Section 111A and Section 112A

Section 111A covers STCG on listed equity and equity mutual funds with STT, taxed at 20%. Section 112A covers LTCG on listed equity and equity mutual funds, taxed at 12.5% after the ₹1,25,000 annual exemption.

Other LTCG and no indexation

Other long-term gains, including property and unlisted shares, are taxed at 12.5% without indexation. Do not mix these rates with normal slab rates or old indexation assumptions.

Foreign shares, debt funds and surcharge cap

STCG on assets not covered by Section 111A, including foreign shares and debt mutual funds held short term, is taxed at slab rates. Debt mutual funds bought after 1 Apr 2023 are always taxed at slab rates. Surcharge on income under Sections 111A, 112A and dividends is capped at 15%.

Capital gains can also influence which return form you need. Check which ITR form to file and the new tax regime slab guide before submission.

Short-term vs long-term: the holding period

Whether a gain is short-term or long-term depends on how long you held the asset before selling, and the threshold varies by asset class:

• Listed equity shares and equity mutual funds: long-term if held for more than 12 months, otherwise short-term.
• Immovable property and unlisted shares: long-term if held for more than 24 months.
• Debt mutual funds bought on or after 1 April 2023: always treated as short-term and taxed at slab rates, whatever the holding period.

The holding period decides both the rate and which section applies, so always note your purchase and sale dates before computing the gain.

How to compute a capital gain

In simple terms, capital gain = sale value − cost of acquisition − allowable expenses (such as brokerage or transfer charges, and cost of improvement for property). For assets bought before 23 July 2024 that previously enjoyed indexation, transitional rules may apply, but for most listed securities the new flat rates (20% STCG under 111A, 12.5% LTCG under 112A) apply without indexation. The ₹1.25 lakh annual exemption for 112A gains is applied across all your listed equity/equity-fund LTCG for the year, not per transaction.

Set-off and carry-forward of capital losses

Capital losses are valuable and should never be ignored. A short-term capital loss can be set off against both short-term and long-term gains, while a long-term capital loss can be set off only against long-term gains. Any unabsorbed capital loss can be carried forward for up to 8 assessment years — but only if you file your return by the due date. This is a common reason to file on time even in a loss-making year: it preserves the loss to offset future gains.

Exemptions that can save LTCG

The law offers reinvestment-based exemptions on long-term gains, mainly on property: Section 54 (reinvest gains from a residential house into another house), Section 54F (reinvest the net sale proceeds of any long-term asset into a residential house) and Section 54EC (invest gains, up to ₹50 lakh, in specified NHAI/REC bonds within six months). Each has strict timelines and conditions, so plan the reinvestment before you sell. Large capital gains can also trigger advance-tax obligations — pay in instalments to avoid interest under Sections 234B/234C.