How are capital gains taxed in India?

By the India Law Simplified editorial team · Verified against the bare Acts & official portals · Updated 2026-08-18 · ~8 min read

⚡ Quick answer

Capital gains tax depends on the asset and how long you held it. For listed shares and equity mutual funds, gains within 12 months are short-term (STCG), taxed at 20%; beyond 12 months they are long-term (LTCG), taxed at 12.5% on the amount above a ₹1.25 lakh annual exemption. Property and unlisted assets held over 24 months are long-term, taxed at 12.5% (with a grandfathering option for older property). The rules changed for transfers on or after 23 July 2024.

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Capital gains tax is the tax on the profit you make when you sell an asset — shares, mutual funds, property, gold or crypto. India taxes them very differently depending on what you sold and how long you held it, and the rules were overhauled in July 2024. This guide breaks down the rates clearly, with the holding periods that decide short-term vs long-term, the ₹1.25 lakh equity exemption, the rules for property, and worked examples.

1Short-term vs long-term — it's about holding period

Every capital gain is either short-term or long-term, decided by how long you held the asset before selling. The dividing line differs by asset:

Listed shares & equity mutual funds: long-term after 12 months
Immovable property (land/building) & unlisted shares: long-term after 24 months
Other assets (gold, debt funds bought before Apr 2023, etc.): generally long-term after 24 months

⚠️ ImportantThese holding-period and rate rules apply to transfers made on or after 23 July 2024. Earlier transfers followed the old rates and indexation rules.

2Listed shares and equity mutual funds

This is what most retail investors deal with:

Short-term (held under 12 months): taxed at 20% (Section 111A)
Long-term (held over 12 months): taxed at 12.5% on gains above ₹1.25 lakh per financial year (Section 112A)
Securities Transaction Tax (STT) must have been paid for these concessional rates to apply

💡 ExampleYou sell equity mutual funds after 2 years with a ₹3 lakh long-term gain. The first ₹1.25 lakh is exempt, leaving ₹1.75 lakh taxable at 12.5% = ₹21,875 (plus cess). If instead you'd sold within 12 months, the whole ₹3 lakh would be short-term, taxed at 20% = ₹60,000.

3Property and other assets

For immovable property and unlisted assets held over 24 months, the long-term rate is 12.5%. A special rule applies to property bought before 23 July 2024: you can choose whichever is lower — 12.5% without indexation, or 20% with indexation (which adjusts your purchase cost for inflation).

You can also save tax on property gains by reinvesting under Sections 54/54F (in another house) or 54EC (in specified bonds, up to ₹50 lakh).

4Debt funds, gold and crypto

A few asset classes have their own rules:

Debt mutual funds bought on/after 1 April 2023: taxed entirely at your slab rate (no LTCG benefit).
Gold and gold funds: long-term after 24 months, taxed at 12.5%.
Crypto/VDAs: a separate flat 30% under Section 115BBH — not treated as normal capital gains, with no loss set-off.

5The 23 July 2024 change, and the choice you may still have

The Finance (No. 2) Act 2024 removed indexation for almost every asset class with effect from 23 July 2024, and set long-term capital gains at a flat 12.5%.

For land and buildings there is a grandfathering concession. If the property was acquired before 23 July 2024, you may compute the tax both ways — 20% with indexation, or 12.5% without — and pay the lower.

The concession is narrower than it is usually reported. It applies only to resident individuals and Hindu Undivided Families, and only to land and buildings. It is not available to non-residents, companies, LLPs or firms, and not to any other class of asset.

✅ TipWhere a property has been held a long time through a high-inflation period, indexation at 20% frequently still wins. Compute both rather than assuming the lower headline rate is better.

6Setting off and carrying forward capital losses

Capital losses have their own rules, and they are more restrictive than most people expect.

A short-term capital loss may be set off against either short-term or long-term capital gains. A long-term capital loss may be set off only against long-term capital gains. Neither can be set off against salary, business income or interest.

Unabsorbed capital losses carry forward for eight assessment years
Carry-forward is conditional on filing the return by the due date — a belated return forfeits it
Losses cannot be carried forward at all if the return is not filed

⚠️ ImportantThis is why filing on time matters most in a bad year, which is precisely the year people are least inclined to bother.

7Advance tax when the gain is unpredictable

Advance tax is payable in four instalments across the year, but a capital gain is rarely foreseeable at the first instalment.

The law accommodates this: where the shortfall in an instalment is attributable to capital gains, no interest under section 234C is charged for that instalment provided the tax is paid in the remaining instalments, or by 31 March if the gain arises in the final quarter.

✅ TipThe relief is instalment-specific. It does not excuse paying the tax altogether — leave it to the return and section 234B interest still runs.

8Exemptions that can remove the tax entirely

Long-term capital gains can often be eliminated rather than merely reduced, by reinvesting them. Three provisions do most of the work.

Section 54 exempts gains on a residential house reinvested in another residential house. Section 54F does the same where the asset sold was something other than a house — shares, gold, land — provided the entire net consideration, not just the gain, is reinvested. Section 54EC allows investment of the gain in specified bonds, capped at ₹50 lakh in a financial year, with a five-year lock-in.

The purchase must be within one year before or two years after the transfer, or construction within three years
Where the money will not be reinvested before the filing due date, it must be parked in a Capital Gains Account Scheme deposit to preserve the exemption
Section 54 and 54F exemptions can be withdrawn if the new property is sold within three years

✅ TipThe Capital Gains Account Scheme step is the one most often missed. Miss the deadline and the exemption is lost even if you buy the new property later.

Capital gains tax rates (transfers on/after 23 July 2024)
Asset	Short-term	Long-term
Listed shares / equity MF	20% (<12 months)	12.5% above ₹1.25L (>12 months)
Immovable property	Slab rate (<24 months)	12.5% (>24 months); grandfathering for old property
Unlisted shares	Slab rate (<24 months)	12.5% (>24 months)
Debt MF (bought after Apr 2023)	Slab rate	Slab rate (no LTCG benefit)
Crypto / VDA	30% flat	30% flat (Section 115BBH)

Key takeaways

Holding period decides short-term versus long-term, and it differs by asset class.
Indexation was removed from 23 July 2024, with LTCG at a flat 12.5%.
Land and buildings acquired before that date may still choose 20% with indexation — but only for resident individuals and HUFs.
Long-term losses set off only against long-term gains; both carry forward eight years, and only if you file on time.
Sections 54, 54F and 54EC can remove the tax entirely if you reinvest correctly and on time.

Frequently asked questions

What is the LTCG exemption on shares?

Long-term capital gains on listed equity and equity mutual funds are exempt up to ₹1.25 lakh per financial year under Section 112A. Gains above that are taxed at 12.5% (plus cess).

What is the difference between STCG and LTCG?

STCG (short-term capital gain) is profit on an asset held for a short period — taxed higher (20% for listed equity, or slab rate for others). LTCG (long-term) is profit on an asset held longer — taxed at the concessional 12.5% with exemptions. The holding period that divides them depends on the asset.

How can I save tax on capital gains from selling property?

Reinvest the gain in another residential house under Section 54/54F, or invest up to ₹50 lakh in specified NHAI/REC bonds under Section 54EC within 6 months. If you can't reinvest before filing, park the gain in a Capital Gains Account Scheme.

Is there any tax-free limit on short-term gains?

No special exemption like the ₹1.25 lakh LTCG one — but short-term gains are part of your total income, so the basic exemption limit still applies. For listed equity, STCG is taxed at the flat 20% rate under Section 111A.

What changed on 23 July 2024?

Indexation was removed for almost all asset classes and long-term capital gains were set at a flat 12.5%. For land and buildings acquired before that date, resident individuals and HUFs may still compute both ways — 20% with indexation or 12.5% without — and pay the lower. The choice is not available to non-residents, companies, LLPs or firms.

Can I set off a capital loss against my salary?

No. Capital losses set off only against capital gains. A short-term loss can go against short-term or long-term gains; a long-term loss only against long-term gains. Both carry forward eight years, but only if you file the return by the due date.

What is the Capital Gains Account Scheme and when do I need it?

If you intend to claim exemption under section 54 or 54F but will not complete the reinvestment before the filing due date, the unutilised gain must be deposited in a Capital Gains Account Scheme account by that date. Missing this step forfeits the exemption even if you buy the property later.