Capital Gains Tax in India 2025: LTCG & STCG Explained
Capital gains tax affects almost every Indian taxpayer who invests in shares, mutual funds, or property. With multiple changes introduced over recent years and clarifications applicable for AY 2025-26 (FY 2024-25), understanding Capital gains LTCG and STCG has become essential for accurate tax planning and ITR filing. This guide explains long-term and short-term capital gains in India, updated tax rates, exemptions, calculations, and practical examples relevant only to Indian taxpayers.
What Are Capital Gains in India?
Capital gains arise when you sell a capital asset at a profit. Under the Income Tax Act, 1961, capital assets include:
- Equity shares and equity mutual funds
- Debt mutual funds
- Immovable property (house, land)
- Gold, bonds, ETFs, REITs, and InvITs
The tax treatment depends on the holding period, which determines whether the gain is short-term or long-term.
Capital Gains LTCG and STCG: Holding Period Rules
Bottom line: The holding period decides the tax rate.
Holding Period for Different Assets (AY 2025-26)
| Asset Type | STCG | LTCG |
|---|---|---|
| Equity shares & equity mutual funds (listed) | Up to 12 months | More than 12 months |
| Debt mutual funds (units purchased before 1 April 2023) | Up to 36 months | More than 36 months |
| Debt mutual funds (units purchased on or after 1 April 2023) | Always STCG | LTCG not available |
| Immovable property | Up to 24 months | More than 24 months |
Source: Income Tax Act, Section 2(42A)
LTCG Tax on Equity Shares India 2025
Key update: The ₹1,00,000 exemption under Section 112A continues for AY 2025-26.
LTCG Tax Rate on Equity
- Tax rate: 10 percent
- Exemption: First ₹1,00,000 of LTCG is tax-free
- Indexation: Not allowed
- Securities Transaction Tax (STT): Mandatory on purchase and sale
Example: LTCG on Equity Shares
- Sale value: ₹5,00,000
- Cost of acquisition: ₹3,50,000
- Long-term capital gain: ₹1,50,000
- Exempt LTCG: ₹1,00,000
- Taxable LTCG: ₹50,000
- Tax payable: ₹5,000 plus cess
Reference: Section 112A – Income Tax Department
STCG Tax Rate on Shares and Mutual Funds India
STCG on Equity-Oriented Assets
- Tax rate: 15 percent
- Applicable when equity shares or equity mutual funds are sold within 12 months
- STT must be paid
STCG on Equity Mutual Funds After Budget 2024 India
Budget 2024 did not change the 15 percent STCG rate for equity mutual funds. The structure remains stable for AY 2025-26, providing certainty to retail investors.
Source: Union Budget 2024 Highlights
LTCG Tax on Debt Mutual Funds Without Indexation India
Important change continuing in AY 2025-26:
- Debt mutual funds purchased on or after 1 April 2023 are taxed as STCG only
- Gains are taxed as per income tax slab rates
- Indexation benefit is not available
Example
- Gain from debt fund: ₹1,20,000
- Taxpayer slab: 30 percent
- Tax payable: ₹36,000 plus cess
Source: CBDT Circular on Debt Mutual Funds
Capital Gains Tax Calculation on Property Sale India
LTCG on Property
- Holding period: More than 24 months
- Tax rate: 20 percent with indexation benefit
STCG on Property
- Holding period: Up to 24 months
- Taxed as per slab rates
Example: LTCG on Property Sale
- Sale price: ₹80,00,000
- Indexed cost: ₹55,00,000
- LTCG: ₹25,00,000
- Tax payable: ₹5,00,000 plus cess
Use the Cost Inflation Index (CII) published by CBDT for accurate calculations.
Source: CII Table – Income Tax Department
LTCG Exemption Under Section 54 and 54F India
Section 54: Sale of Residential House
- Exemption if LTCG is reinvested in one residential house property in India
- Purchase within 1 year before or 2 years after sale
- Construction within 3 years
Section 54F: Sale of Any Capital Asset
- Exemption if net sale consideration is invested in a residential house
- Taxpayer must not own more than one house (other than new one)
Unutilized gains must be deposited in the Capital Gains Account Scheme (CGAS).
Source: Sections 54 & 54F – Income Tax Act
Capital Gains Tax on Inherited Property India
Good news: Inheritance itself is not taxed.
When Tax Applies
- Tax arises only when the inherited property is sold
- Holding period includes the period for which the previous owner held the asset
- Cost of acquisition is the previous owner’s cost, indexed accordingly
This often converts the sale into LTCG, reducing tax liability.
Set Off and Carry Forward of Capital Losses India
Set Off Rules
- STCL: Can be set off against STCG and LTCG
- LTCL: Can be set off only against LTCG
Carry Forward
- Losses can be carried forward for 8 assessment years
- ITR must be filed within the due date
Source: Section 70 to 74 – Income Tax Act
Capital Gains Tax Slab Rates for NRIs in India
Applicable Rates
| Asset | Tax Rate |
|---|---|
| LTCG on equity | 10 percent above ₹1,00,000 |
| STCG on equity | 15 percent |
| LTCG on property | 20 percent with indexation |
| STCG | Slab rates |
TDS applies on sale proceeds for NRIs, even if there is no capital gain.
Source: NRI Taxation – Income Tax Dept
Capital Gains Tax Filing in ITR for Salaried Individuals India
Which ITR to Use?
- ITR-2: Salaried individuals with capital gains
- ITR-3: If you have business income
Key Reporting Points
- Separate disclosure for STCG and LTCG
- Equity gains reported under Schedule CG
- Claim exemptions under Schedule EI
Filing accurately avoids notices and ensures proper loss carry forward.
Key Takeaways on Capital Gains Tax in India
- Understand holding periods to classify Capital gains LTCG and STCG
- Equity LTCG above ₹1,00,000 is taxed at 10 percent
- Debt mutual funds no longer enjoy LTCG benefits
- Property sales offer indexation and Section 54 and 54F relief
- Proper set off and timely ITR filing can significantly reduce tax outgo
If you actively invest or plan to sell assets in FY 2024-25, mastering capital gains tax in India will help you stay compliant and optimize taxes under current laws for AY 2025-26.
This content is AI Generated, use for reference only.
