Scope and date. Written for FY 2025-26 (AY 2026-27) and FY 2026-27, current as at July 2026. Capital gains is one of the most fact-sensitive areas of Indian tax law — the same sale can be taxed very differently depending on dates, residential status and documentation. Treat this as a thorough map, not as advice on your transaction. For anything material, confirm the position with your CA and against the bare Act.
- 1. Capital Gains Basics — you are here
- 2. Calculating the Gain
- 3. Rates & Special Regimes
- 4. Exemptions 54 to 54GB
- 5. Property Sales
- 6. Losses, Advance Tax & ITR
The One-Screen Snapshot
If you read nothing else in this series, read this table. It is the whole subject in nine rows.
| Asset | Long-term after | Short-term rate | Long-term rate |
|---|---|---|---|
| Listed equity shares, equity mutual funds (STT paid) | 12 months | 20% | 12.5% on gain above ₹1.25 lakh/year |
| Listed bonds, debentures, business trust units | 12 months | Slab | 12.5% |
| Immovable property — land, building | 24 months | Slab | 12.5%, or 20% with indexation if acquired on or before 22-07-2024 |
| Unlisted shares | 24 months | Slab | 12.5% |
| Gold, jewellery, silver, art | 24 months | Slab | 12.5% |
| Gold / silver ETFs and funds | 12 months | Slab | 12.5% |
| Debt mutual funds bought on or after 01-04-2023 | Never long-term | Always slab rate — Section 50AA | |
| Foreign shares | 24 months | Slab | 12.5% |
| Crypto / virtual digital assets | Flat 30% regardless of holding period — Section 115BBH | ||
Add 4% health and education cess to every figure above, plus surcharge if your income crosses the surcharge thresholds. Part 3 unpacks each row.
Two Acts — Which One Applies to You
Get this straight first, because it decides which section numbers go in your working papers.
| Period | Governing Act | Section numbers you'll use |
|---|---|---|
| FY 2025-26 (AY 2026-27) — the return being filed now | Income-tax Act, 1961 | 45, 48, 54, 54F, 111A, 112, 112A — the familiar ones |
| FY 2026-27 onward — transactions from 01-04-2026 | Income-tax Act, 2025 | 67, 72, 82, 86, 196, 197, 198 — see the map below |
Two points that save a lot of confusion:
- The law barely changed; the numbering did. The 2025 Act reorganises and consolidates the capital gains provisions rather than rewriting the policy. A gain computed under old Section 48 is computed the same way under new Section 72.
- Rates never lived in either Act's capital gains chapter anyway. They come from the annual Finance Acts. The current structure was set by the Finance (No. 2) Act 2024 with effect from 23 July 2024 and has continued unchanged since, including through Budget 2026.
Throughout this series the old section is given first and the 2025 Act section in brackets — Section 54 (Section 82).
What Is a Capital Asset
Capital gains tax only bites on the transfer of a capital asset. The definition is deliberately wide: property of any kind, whether or not connected with your business, movable or immovable, tangible or intangible — land, buildings, shares, securities, mutual fund units, gold, jewellery, patents, trademarks, goodwill, and securities held by a foreign institutional investor.
What Is Not a Capital Asset
The exclusions matter more than the inclusions, because this is where most disputes start.
| Not a capital asset | Why it matters |
|---|---|
| Stock-in-trade, raw materials and consumables held for business | Profit on sale is business income at slab rates, not capital gains. A builder selling flats has business income; a family selling its office has capital gains. |
| Personal effects — movable property for personal use: clothes, furniture, car, electronics | Selling your used car at a profit is not taxable. But jewellery, gold, silver, drawings, paintings, sculptures and archaeological collections are carved out of this exclusion and remain capital assets even when held personally. |
| Rural agricultural land meeting the distance and population tests | Genuinely outside capital gains altogether. Urban agricultural land is a capital asset — though see the Section 54B exemption in Part 4. |
| Specified Gold Bonds, Gold Deposit Bonds and certain notified instruments | Statutorily excluded. |
The line between "investment" and "trade" is drawn on facts, not on what you call it. Frequency of transactions, holding period, use of borrowed funds and how the asset sits in your books all count. If you hold shares as investment and consistently show them under Investments in your balance sheet, you are on much stronger ground than if the treatment changes year to year.
What Counts as a Transfer
Under Section 45 (Section 67) the gain is charged in the year the transfer takes place. Transfer includes:
- Sale — the ordinary case
- Exchange — swapping one asset for another
- Relinquishment of the asset, or extinguishment of any rights in it
- Compulsory acquisition under any law
- Conversion of a capital asset into stock-in-trade
- Allowing possession of immovable property in part performance of a contract, and certain joint development arrangements
- Maturity or redemption of zero coupon bonds
What Is Not a Transfer — Section 47 (Section 70)
A long list of transactions is specifically kept outside the charge. The ones that come up in practice:
- Gift, will or inheritance. No capital gains arises on the person giving or bequeathing.
- Partition of a Hindu Undivided Family.
- Transfer between a holding company and its wholly-owned Indian subsidiary, and vice versa, subject to conditions.
- Amalgamation and demerger of companies, where the prescribed conditions are met.
- Conversion of bonds or debentures into shares.
Careful: "no transfer" is not the same as "no tax ever". In every case above the tax follows the asset. Sell an inherited flat and the gain is computed from your father's cost, not from the value on the day you inherited it. The tax is deferred, not forgiven.
Short-Term vs Long-Term
Before 23 July 2024 there were three holding periods — 12, 24 and 36 months — and a set of exceptions nobody could hold in their head. There are now two.
| Category | Long-term if held for more than |
|---|---|
| Listed securities — listed equity shares, equity-oriented mutual funds, listed bonds and debentures, units of listed business trusts (REITs / InvITs), UTI units | 12 months |
| Everything else — immovable property, unlisted shares, gold and jewellery, foreign shares, other capital assets | 24 months |
Why it matters so much: a long-term gain is taxed at a flat 12.5%, while a short-term gain on most assets is added to your income at slab rates — up to 30% plus surcharge and cess. On a ₹20 lakh gain, crossing the line can be worth several lakh rupees. Where a sale is close to the boundary, waiting a few weeks is often the single most profitable decision available.
Counting the Holding Period
- Count from the date of acquisition to the date immediately preceding the date of transfer.
- For an inherited or gifted asset, the previous owner's holding period is included. A flat your father bought in 2009 and you inherited last year is long-term the day you inherit it.
- For property booked under construction, the period is generally counted from the date of allotment rather than possession — a distinction worth documenting at the time, not arguing later.
- Bonus shares take their own date of allotment, not the date of the original shares.
- Rights shares run from the date of allotment of the rights shares.
- Debt mutual funds bought on or after 1 April 2023 have no long-term category at all — see Part 3.
Old vs New — Section Map
Keep this beside you during the transition year.
| Provision | Act 1961 | Act 2025 |
|---|---|---|
| Capital gains — charging section | 45 | 67 |
| Distribution on liquidation | 46 | 68 |
| Buyback of shares | 46A | 69 |
| Transactions not regarded as transfer | 47 | 70 |
| Mode of computation | 48 | 72 |
| Cost with reference to previous owner | 49 | 73 |
| Depreciable assets | 50 | 74 |
| Specified mutual funds / market-linked debentures | 50AA | 76 |
| Slump sale | 50B | 77 |
| Stamp duty value as consideration | 50C | 78 |
| Unquoted shares — FMV as consideration | 50CA | 79 |
| Consideration not ascertainable | 50D | 80 |
| Advance money received | 51 | 81 |
| Residential house reinvestment | 54 | 82 |
| Agricultural land | 54B | 83 |
| Compulsory acquisition | 54D | 84 |
| Notified bonds | 54EC | 85 |
| Any asset → residential house | 54F | 86 |
| Shifting out of urban area | 54G | 87 |
| Shifting to an SEZ | 54GA | 88 |
| Cost of acquisition / FMV | 55 | 90 |
| Reference to Valuation Officer | 55A | 91 |
| Carry forward of capital losses | 74 | 111 |
| STCG on listed equity | 111A | 196 |
| LTCG — general | 112 | 197 |
| LTCG on listed equity | 112A | 198 |
What's Next?
- Part 2 — Calculating the Gain: the formula, cost of acquisition rules, indexation and deemed sale value
- Part 3 — Rates & Special Regimes: every rate by asset class, plus debt funds, depreciable assets and crypto
- Part 4 — Exemptions: Sections 54 to 54GB and the Capital Gains Account Scheme
- Advance Tax — Who Pays and When