Capital Gains Tax FY 2026-27 — Complete Rates for Equity, Debt, Real Estate

Capital gains tax rates for FY 2026-27 vary significantly by asset class — understanding the rules enables tax-efficient investment planning for Indian investors. Equity instruments (stocks, equity MFs, ELSS): LTCG 12.5% above ₹1.25 lakh annual exemption (held >12 months); STCG 20% (held ≤12 months). Debt mutual funds: post-April 2023 changes mean LTCG 12.5% (after 2 years); STCG at slab rate. Real estate: LTCG 20% with indexation benefit (held >2 years); STCG at slab rate. Gold: physical and ETF have LTCG 12.5% (above ₹1.25L exemption) for holdings >24 months; STCG at slab rate. The ₹1.25 lakh annual LTCG exemption (Section 112A) allows tax-free capital gains for small investors — strategically used, it can shield ₹6.25 lakh of gains for couple + senior parents combined. For Indian middle-class investors with mutual fund and stock holdings, understanding capital gains tax structure is critical for redemption planning, tax-loss harvesting, and overall wealth optimization. Freedomwise's Tax on Mutual Funds India covers MF-specific rules.

What are the FY 2026-27 capital gains tax rates?

Comprehensive table:

Asset class	LTCG period	LTCG rate	STCG rate
Equity stocks	>12 months	12.5% above ₹1.25L exemption	20%
Equity mutual funds	>12 months	12.5% above ₹1.25L exemption	20%
ELSS	After 3-year lock-in	12.5% above ₹1.25L exemption	N/A (lock-in covers)
Debt mutual funds	>24 months	12.5% (above ₹1.25L exemption)	Slab rate
Liquid/Money market	>24 months	12.5% (above ₹1.25L exemption)	Slab rate
Real estate	>24 months	20% with indexation	Slab rate
Gold (physical/ETF)	>24 months	12.5% above ₹1.25L exemption	Slab rate
Sovereign Gold Bonds	At maturity	Tax-free	N/A
Bond funds	>24 months	12.5% above ₹1.25L exemption	Slab rate
Listed bonds	>12 months	12.5% above ₹1.25L exemption	Slab rate
International equity funds (FoF)	>24 months	12.5% above ₹1.25L exemption	Slab rate

Key changes from FY 2024-25:

• LTCG on equity raised from 10% to 12.5%
• LTCG exemption raised from ₹1 lakh to ₹1.25 lakh
• Debt MF lost LTCG benefit in April 2023
• Real estate retained indexation benefit (for purchases before 2024)

How does the ₹1.25 lakh LTCG exemption work?

Exemption mechanics:

Section 112A exemption:

• ₹1.25 lakh annual exemption on LTCG
• Applies to: equity stocks, equity mutual funds, ELSS, gold ETF, international equity FoF
• Not cumulative; resets each fiscal year
• Tax computed on LTCG amount EXCEEDING ₹1.25 lakh

Worked example: ₹3 lakh equity LTCG in a year

• Total LTCG: ₹3,00,000
• Exemption: ₹1,25,000
• Taxable LTCG: ₹1,75,000
• Tax at 12.5%: ₹21,875

Strategic use:

• Plan redemptions to use full exemption each year
• For couple: ₹2.50 lakh combined exemption (each spouse uses own)
• For couple + 2 senior parents: ₹5 lakh combined exemption (each individual)

Annual planning:

• Calculate expected LTCG before year-end
• Redeem additional units (₹1.25 lakh gain limit) before March 31
• Tax-free harvesting; reinvest immediately if portfolio rebalance needed

What is indexation and how does it work for real estate?

Real estate indexation (FY 2026-27 rules):

Concept: Indexation adjusts cost basis for inflation, reducing taxable gain.

Worked example: Real estate purchased FY 2010-11 for ₹40 lakh; sold FY 2026-27 for ₹95 lakh

• Original cost: ₹40 lakh (FY 2010-11)
• Indexed cost using Cost Inflation Index (CII):
• CII FY 2010-11: 167
• CII FY 2026-27: ~370 (projected)
• Indexed cost: ₹40 lakh × (370/167) = ₹88.62 lakh
• Capital gain: ₹95 lakh - ₹88.62 lakh = ₹6.38 lakh
• Tax at 20% (with indexation): ₹1.28 lakh

Without indexation (post-April 2024 purchases): higher tax due to no inflation adjustment.

Section 54 reinvestment exemption:

• Sale proceeds reinvested in another residential property: capital gain exempt
• Time limit: 1 year before or 2 years after sale (for purchase); 3 years for construction
• One property at a time exemption

How does capital gains tax apply to mutual funds?

MF-specific application:

Equity mutual fund redemption:

• Held >12 months: LTCG at 12.5% above ₹1.25L exemption
• Held ≤12 months: STCG at 20%
• Per-tranche calculation (each SIP installment separately)
• Cost basis: NAV at purchase × units purchased
• Sale price: NAV at redemption × units redeemed

Worked example: SIP redemption

• ₹10K monthly SIP for 5 years; full redemption
• Total invested: ₹6 lakh
• Total redemption value: ₹10 lakh
• Total gain: ₹4 lakh
• But: each tranche held different periods
• 4 years of tranches: LTCG (>12 months) - apply ₹1.25L exemption
• 1 year (last 12 months) of tranches: STCG - 20% on those gains

Tax computation:

• LTCG portion (₹3.2L gains from older tranches): ₹3.2L - ₹1.25L = ₹1.95L; tax at 12.5% = ₹24,375
• STCG portion (₹0.8L gains from recent tranches): tax at 20% = ₹16,000
• Total tax: ₹40,375

Optimization: Hold equity SIPs > 12 months before redemption to ensure all LTCG treatment.

What is the debt mutual fund taxation post-April 2023?

Significant change:

Before April 2023:

• Debt MF held >3 years: LTCG at 20% with indexation
• Strong tax efficiency vs FDs (which charge slab rate)
• Used by HNIs for tax-arbitrage

Post April 2023:

• Debt MF gains taxed entirely at slab rate (regardless of holding period)
• LTCG indexation benefit removed
• Tax efficiency equivalent to FDs

Current rule (FY 2026-27):

• Debt MF held >24 months: LTCG 12.5% (without indexation, above ₹1.25L exemption)
• Held ≤24 months: STCG at slab rate
• This is reversed/revised from April 2023 rules in subsequent Budget

Implication for investors:

• Debt MFs lose previous tax advantage
• For high-tax-bracket investors: similar to FDs now
• Equity MFs remain more tax-efficient than debt MFs

What is tax-loss harvesting?

Strategy to offset gains with losses:

Concept: Realize portfolio losses to offset realized gains, reducing tax liability.

Worked example:

• Stock A: gained ₹3 lakh, sold
• Stock B: lost ₹1.5 lakh, considering whether to sell
• Net taxable gain without sale of B: ₹3 lakh (taxable above ₹1.25L = ₹1.75L × 12.5% = ₹21.875K tax)
• Net taxable gain with sale of B: ₹3 lakh - ₹1.5 lakh = ₹1.5 lakh; taxable ₹0.25 lakh × 12.5% = ₹3,125 tax
• Tax saved by harvesting loss: ₹18,750

Rules:

• LTCG losses offset against LTCG (within and across assets)
• STCG losses offset against STCG and LTCG
• Carry forward of unabsorbed losses: 8 years

Considerations:

• Don't sell quality assets purely for tax saving
• Reinvest in similar asset after 30 days (avoid wash sale concerns)
• Document carefully in ITR

Strategic application:

• Year-end review of all positions
• Identify losses to harvest
• Match against gains
• Optimal tax outcome

How does NRI capital gains tax work?

NRI-specific considerations:

Stocks/Equity MF:

• Same rates as residents: LTCG 12.5% above ₹1.25L; STCG 20%
• TDS deducted at source by broker/AMC

Real estate:

• LTCG 12.5% (post 2024 purchases without indexation) or 20% (with indexation for pre-2024)
• TDS: 20% on sale value (mandatory)
• Refund through ITR filing for excess TDS

Special provisions:

• DTAA benefits (Double Taxation Avoidance Agreement)
• Some countries have special tax treaties with India
• TRC (Tax Residency Certificate) required

Reporting:

• ITR-2 mandatory
• Foreign assets disclosure (Schedule FA)
• Income from India taxable; foreign income may not be

What are common capital gains tax mistakes?

Five errors:

1. Not utilizing ₹1.25L annual exemption.

• Many investors leave exemption unused
• Strategic redemption + reinvestment captures it
• Tax-free wealth optimization

2. Selling equity MF before 12 months unnecessarily.

• STCG 20% vs LTCG 12.5%
• Waiting could save significant tax
• Plan redemption timing

3. Forgetting tax-loss harvesting.

• Underperforming positions can offset gains
• Annual review recommended
• Don't miss this opportunity

4. Wrong cost basis calculation.

• Bonus shares, splits affect cost basis
• ELSS units in fractional amounts
• Maintain meticulous records

5. Not declaring capital gains in ITR.

• Often discovered during scrutiny
• Penalty + interest
• Form 26AS shows broker/AMC reported transactions

Use this on Freedomwise

• Tax on Mutual Funds India — MF tax
• Tax on Stocks India — stock tax
• ITR Filing FY 2026-27 Guide — filing process
• Old vs New Tax Regime FY 2026-27 — regime choice
• Tax pillar — complete tax education