Capital Gains Tax in India: A Plain-English Guide
Sold shares, mutual funds, property or gold this year? The profit is a capital gain — and how it's taxed depends on what you sold and how long you held it. Here are the current rates, the ₹1.25 lakh equity exemption, and how to save tax legally.
Estimate my tax →Capital gains tax is the tax on the profit when you sell a capital asset. It splits into short-term and long-term based on how long you held the asset — and the rate depends on the asset. Listed shares held over a year are taxed at 12.5% above a ₹1.25 lakh exemption; sold sooner, the gain is taxed at 20%.
Short-term or long-term?
Everything starts with your holding period — how long you owned the asset before selling. The threshold differs by asset type.
Long-term gains are usually taxed more gently than short-term — so the holding period can change your tax bill significantly.
Capital gains tax rates — FY 2025-26
The first ₹1.25 lakh of long-term equity gains each year is exempt. These special rates are the same under both tax regimes, and the ₹1.25 lakh equity exemption applies whichever you choose. Crypto and other virtual digital assets are taxed separately at a flat 30%.
The indexation choice on old property
Budget 2024 removed indexation for most assets — but left one valuable choice for property bought before the change.
If you're a resident individual or HUF, you can pick whichever is lower: 12.5% without indexation, or 20% with indexation (using the cost inflation index to raise your purchase cost).
Only one option: 12.5% without indexation. The same flat rate applies to all other assets too.
Working out which option wins needs the actual numbers — the indexation route can beat the flat rate when you've held a property a long time. It's worth running both before you file.
How to save tax on long-term gains
The law lets you defer or avoid long-term capital gains tax if you reinvest — mostly into a house or specified bonds. Each has its own conditions and time limits.
Section 54
Reinvest the long-term gain from a residential house into another residential house.
Section 54F
Reinvest the full sale proceeds of any other long-term asset into a residential house.
Section 54EC
Invest the long-term gain — up to ₹50 lakh — in specified bonds within 6 months.
These exemptions are powerful but strict — the timelines, the type of reinvestment and the holding rules all matter. Getting them wrong loses the benefit, so they're worth planning with a CA.
Setting off & carrying forward losses
Capital losses aren't wasted — you can set them against gains, and carry the rest forward, as long as you file your return on time.
Set off this year
A long-term loss can offset only long-term gains. A short-term loss can offset either short-term or long-term gains.
Carry forward 8 years
Any unused loss carries forward for up to eight assessment years — but only if you filed the return by the due date.
File late and you lose the right to carry forward capital losses. Crypto and other virtual digital asset losses can't be set off or carried forward at all.
Got capital gains? File with a CA
Capital gains go in ITR-2 (or ITR-3 if you trade as a business) — not the simple ITR-1. Between holding periods, the indexation choice, grandfathering and the reinvestment exemptions, this is the part of a return most likely to be filed wrong. Send your trade and sale details on WhatsApp and a Chartered Accountant computes it correctly and claims every exemption you're due.
File my capital gains returnCapital gains tax — FAQs
What is capital gains tax?
It's the tax on the profit you make when you sell a capital asset — such as shares, mutual funds, property or gold. The gain is the sale price minus your cost, and it's taxed as either short-term or long-term.
What is the difference between STCG and LTCG?
It's the holding period. Listed shares and equity funds become long-term after 12 months; property, gold and most other assets after 24 months. Anything sold sooner is short-term, and is usually taxed at a higher rate.
What is the LTCG tax rate on shares for FY 2025-26?
12.5% on long-term gains from listed shares and equity mutual funds, on the amount above ₹1.25 lakh in a financial year. The first ₹1.25 lakh of such gains each year is exempt.
Is ₹1.25 lakh of capital gains tax-free?
Yes, but only for long-term gains on listed equity shares and equity mutual funds. There's no equivalent annual exemption for property, gold or debt funds.
Which ITR form is used for capital gains?
ITR-2 for most people with capital gains, or ITR-3 if you also have business or professional income, such as active F&O trading. Capital gains cannot be reported in the simple ITR-1.
Can I avoid long-term capital gains tax?
You can defer or save it by reinvesting — into a residential house under Sections 54 or 54F, or into specified bonds (up to ₹50 lakh) under Section 54EC — subject to each section's conditions and timelines.
Sold shares or property? Let's file it right
Send your capital-gains statement or sale details on WhatsApp — a Chartered Accountant computes the gain, picks the best option on old property, claims your reinvestment exemptions, and files an accurate return.
File my capital gainsThis guide to capital gains tax is for AY 2026-27 (FY 2025-26) and is for general information only — not tax, legal or financial advice. Rates, holding periods, indexation and exemptions are governed by the Income-tax Act and may change. Capital gains tax is highly fact-specific; confirm your position with a Chartered Accountant, or on the official portal, before filing.