Capital Gains Tax in India — Complete Guide for Equity, MF, Real Estate, Gold

Capital gains tax in India is paid on the profit from selling investments. The rate and rules depend on asset type (equity, debt, real estate, gold) and holding period (short-term vs long-term). The current FY 2026-27 framework (post recent budget changes): listed equity LTCG (>12 months) taxed at 12.5% above ₹1.25 lakh annual exemption; equity STCG (≤12 months) at 20%; real estate LTCG (>24 months) at 20% with indexation (subject to some recent changes); gold and debt MF generally taxed at slab rate since April 2023 changes; non-equity foreign mutual funds at slab rate. Indian investors should structure transactions to optimize: hold equity >12 months for LTCG rate, harvest losses to offset gains, use the ₹1.25 lakh equity LTCG exemption annually, time large sales to avoid surcharge thresholds, and use Section 54/54EC for real estate gains. Freedomwise's Tax on Stocks India covers equity-specific details; this article provides the complete cross-asset framework.

What is the difference between STCG and LTCG?

Short-term vs long-term classification depends on asset type:

Asset	Short-term threshold	Long-term threshold
Listed equity / equity MF	≤12 months	>12 months
Unlisted shares	≤24 months	>24 months
Real estate (immovable property)	≤24 months	>24 months
Gold (physical, ETF)	Varies by recent rules	Varies
Debt mutual funds (post April 2023)	All periods at slab rate	Same — no LTCG benefit
Sovereign Gold Bonds (at maturity)	Tax-free	Tax-free

What are the current capital gains tax rates?

For FY 2026-27 (post recent budget changes):

Asset	Short-term	Long-term
Listed equity / equity MF	20% STCG	12.5% above ₹1.25 lakh exemption (LTCG)
Unlisted equity	Slab rate	20% with indexation
Real estate	Slab rate	20% with indexation
Debt MF	Slab rate	Slab rate (since April 2023)
Gold (physical, ETF)	Slab rate	Verify current rules - has changed
SGB maturity	Tax-free	Tax-free
FD interest	Slab rate (added to income)	Slab rate

Note: Recent budgets have made changes to several categories. Verify current rules at the time of any major transaction.

How does the ₹1.25 lakh equity LTCG exemption work?

For listed equity and equity mutual funds, the first ₹1.25 lakh of long-term capital gains per financial year is tax-free. Only the amount above ₹1.25 lakh is taxed at 12.5%.

Worked example:

• LTCG from equity sales in FY: ₹3 lakh
• Exemption: ₹1.25 lakh
• Taxable LTCG: ₹3 lakh − ₹1.25 lakh = ₹1.75 lakh
• Tax at 12.5%: ₹21,875

This exemption is per individual per financial year — couples can effectively double it by harvesting gains in both spouses' names.

Tax-efficient strategy: Every financial year, harvest equity gains up to ₹1.25 lakh by selling and immediately rebuying. This "reset cost basis" makes future gains start from current price, with no tax cost. Over decades, this technique can save substantial tax.

How does indexation work for real estate?

For real estate held over 24 months, indexation adjusts the purchase price upward for inflation:

Indexed cost formula: Indexed cost = Original purchase price × (CII of sale year / CII of purchase year)

Cost Inflation Index (CII):

• 2010-11: 167
• 2015-16: 254
• 2020-21: 301
• 2024-25: 363

Worked example:

• Property bought 2010 for ₹40 lakh
• Sold 2025 for ₹1.2 crore
• Indexed cost: ₹40 lakh × (363/167) = ₹86.9 lakh
• LTCG: ₹1.2 crore − ₹86.9 lakh = ₹33.1 lakh
• Tax at 20%: ₹6.62 lakh (with indexation)
• Without indexation: ₹80 lakh × 20% = ₹16 lakh

Indexation can reduce tax dramatically on long-held property. Recent budget changes have selectively removed indexation for some asset classes — verify current applicability.

What are Section 54 and 54EC exemptions?

For real estate LTCG, two major exemption routes:

Section 54:

• Invest LTCG (or gross sale value) in another residential property
• Within 1 year before or 2 years after sale (purchase) or 3 years (construction)
• Maximum capping (recent budget: ₹10 crore property value)
• Full LTCG exemption if invested

Section 54EC:

• Invest up to ₹50 lakh of LTCG in specified bonds (NHAI, REC)
• Within 6 months of sale
• 5-year lock-in
• Tax-free; bonds yield ~5.25%

Both can be combined: use Section 54 for residential reinvestment, Section 54EC for amounts beyond what new property absorbs.

What is tax loss harvesting?

Strategy: deliberately sell loss-making investments before year-end to realize losses, which offset realized gains.

Worked example:

• LTCG from equity sale: ₹2 lakh
• Unrealized loss in another stock: ₹50,000

By selling the loss-making stock before March 31:

• Realized LTCG: ₹2 lakh
• Realized LTCL: ₹50,000
• Net LTCG: ₹1.5 lakh
• Above exemption (₹1.25 lakh): ₹25,000
• Tax at 12.5%: ₹3,125 (vs ₹9,375 without harvesting)

Tax savings: ₹6,250 from one transaction. You can repurchase the loss-making asset after 30 days if you still believe in it (or alternative).

Key rules:

• Long-term losses can only offset long-term gains
• Short-term losses can offset both short-term and long-term gains
• Unutilized losses can be carried forward 8 years
• Speculative losses can only offset speculative gains

How are NRIs taxed on Indian capital gains?

NRIs face additional considerations:

Aspect	Resident	NRI
LTCG equity rate	12.5% above ₹1.25 lakh	12.5% above ₹1.25 lakh (no different rate)
STCG equity rate	20%	20% (same)
TDS on equity LTCG	None at sale	Yes — 12.5% deducted by broker
TDS on debt	None	Yes — at applicable rate
Real estate LTCG TDS	1% (buyer deducts)	20% (buyer deducts)

NRIs can claim DTAA benefits to potentially reduce TDS, but additional documentation required (TRC, Form 10F).

What records should I maintain for capital gains?

For tax compliance:

• Purchase confirmations (date, price, quantity for each transaction)
• Sale confirmations (date, price, quantity)
• Demat statements for stocks
• Mutual fund consolidated statements
• Property registration documents + improvement cost receipts
• TDS certificates received from buyers/brokers
• Section 54/54EC investment proofs if applicable

Maintain for 8 years minimum (carry-forward period for losses). For real estate, maintain forever — old purchases may be needed for indexation calculation decades later.

Use this on Freedomwise

• Tax on Stocks India — equity-specific details
• Tax on Real Estate India — real estate detail
• Tax on Mutual Funds India — MF detail
• Old vs New Tax Regime — tax regime decision
• Tax pillar — complete tax education