India Capital Gains Tax Guide

Capital gains in India are classified as short-term or long-term depending on the holding period and the type of asset. For listed equity shares and equity-oriented mutual funds held for more than 12 months, gains are long-term (LTCG): 10% on gains exceeding INR 1 lakh (without indexation) or 20% with indexation. Gains on assets held for less than 12 months are short-term (STCG): 15% for equity-oriented assets. For property and debt assets held for more than 24 months, LTCG is 20% with indexation.

Holding Period Classification

Listed equity shares and equity-oriented mutual funds: Short-term if held up to 12 months; long-term if held for more than 12 months.
Immovable property (land, building): Short-term if held up to 24 months; long-term if held for more than 24 months (reduced from 36 months from FY 2017-18).
Debt mutual funds, unlisted shares, gold, and other assets: Short-term if held up to 36 months; long-term if held for more than 36 months.

Tax Rates

STCG — Equity (listed shares, equity MFs): 15% plus surcharge and 4% cess. STCG on other assets is taxed at the slab rate.
LTCG — Equity (listed shares, equity MFs): 10% on gains exceeding INR 1 lakh (without indexation) or 20% with indexation — whichever is lower. No indexation benefit for equity LTCG.
LTCG — Property (land, building): 20% with indexation benefit. The cost of acquisition and improvement is indexed using the Cost Inflation Index (CII).
LTCG — Debt assets: 20% with indexation (for residents) or 10% without indexation (for non-residents, in some cases).

Indexation Benefit

Indexation adjusts the cost of acquisition for inflation using the Cost Inflation Index (CII) published by the Income Tax Department. The formula: Indexed Cost of Acquisition = Actual Cost × (CII of Year of Sale ÷ CII of Year of Purchase). For example, if a property was bought in FY 2010-11 (CII: 167) for INR 50L and sold in FY 2025-26 (CII: 363), the indexed cost is INR 50L × (363/167) = INR 1.087 Cr. If sold for INR 1.5 Cr, the indexed gain is INR 41.3L — taxed at 20%.

Exemptions (Sections 54, 54F, 54EC)

Section 54: LTCG on the sale of a residential house property is exempt if the gain is reinvested in another residential house within 1 year before or 2 years after the sale (or 3 years for construction).
Section 54F: LTCG on the sale of any long-term capital asset (other than a residential house) is exempt if the net consideration is reinvested in a residential house.
Section 54EC: LTCG is exempt if the gain is invested in specified bonds (NHAI, REC) up to INR 50 lakh within 6 months, with a lock-in period of 5 years.

FAQs

How is LTCG on shares calculated?

LTCG on listed equity shares is calculated as: Sale Price minus Cost of Acquisition. The first INR 1 lakh of LTCG in a financial year is exempt. The excess is taxed at 10% (without indexation). Securities Transaction Tax (STT) paid on the sale is not deductible but is factored into the cost.

What happens if I sell property within 24 months?

Gains on the sale of property held for less than 24 months are treated as short-term capital gains and taxed at the applicable slab rate (not 20%). You cannot claim indexation benefits or exemptions under sections 54, 54F, or 54EC for short-term gains.

Can I set off capital losses?

Yes. Short-term capital losses can be set off against both short-term and long-term capital gains. Long-term capital losses can be set off only against long-term capital gains. Unabsorbed losses can be carried forward for 8 assessment years. Capital losses cannot be set off against other heads of income (salary, business, etc.).