Capital Gains Tax India 2026: Equity, Mutual Funds, Property, Gold

Budget 2024 rewrote the capital gains tax rules. The old system of 10% LTCG on equity, 20% with indexation on property, and different rates for different assets has been simplified. And for most investors, the tax went up.

Here is the complete picture for FY 2025-26.

The New Capital Gains Tax Structure (Post-Budget 2024)

Asset Type	Holding Period for LTCG	STCG Rate	LTCG Rate	Exemption
Listed equity shares	12 months	20%	12.5%	1.25L/year
Equity mutual funds	12 months	20%	12.5%	1.25L/year
Debt mutual funds	No LTCG benefit	Slab rate	Slab rate	None
Residential property	24 months	Slab rate	12.5% (no indexation)	54/54EC exemptions
Gold (physical/ETF)	24 months	Slab rate	12.5%	None
Sovereign Gold Bonds	NA (hold to maturity)	Slab rate	Tax-free at maturity	Full if held to maturity
Unlisted shares	24 months	Slab rate	12.5%	None

Plus 4% cess on all capital gains tax. Surcharge applies at higher income levels.

Equity Shares and Mutual Funds: The 12.5% LTCG

If you hold listed equity shares or equity mutual funds for more than 12 months, gains are classified as long-term. The tax rate is 12.5% with a 1.25 lakh annual exemption.

Example: Neha bought Nifty 50 index fund units worth 5 lakh in January 2024. She sells in March 2026 for 7.5 lakh. Gain = 2.5 lakh. After 1.25 lakh exemption, taxable LTCG = 1.25 lakh. Tax = 1.25 lakh x 12.5% = 15,625. Plus cess: 625. Total: 16,250.

Before Budget 2024, this would have been: 2.5 lakh - 1 lakh exemption = 1.5 lakh x 10% = 15,000. So the new rate is slightly higher, but the higher exemption (1.25L vs 1L) partially offsets it for smaller gains.

For STCG (held 12 months or less), the rate jumped from 15% to 20%. This is significant for active traders. A 1 lakh short-term gain now costs 20,000 instead of 15,000.

The Debt Mutual Fund Problem

Since April 2023, debt mutual funds, gold funds, and international equity funds no longer get any LTCG benefit. Gains are taxed at your income tax slab rate regardless of holding period.

For someone in the 30% bracket, this means a debt fund returning 8% effectively gives 5.6% post-tax. An FD at 7% gives 4.9% post-tax. The gap between debt funds and FDs has narrowed significantly.

The remaining advantage of debt funds over FDs: no TDS on gains until redemption (FDs have 10% TDS on interest above 40,000/year), and you can choose when to book gains (tax timing flexibility). But the tax rate itself is identical.

Property: The Indexation Drama

This was the most controversial change in Budget 2024. Previously, property held for 2+ years was taxed at 20% with indexation. Indexation adjusted your purchase price for inflation, significantly reducing the taxable gain on properties held for decades.

Now, for properties sold after July 23, 2024, the rate is 12.5% without indexation. But there is a grandfathering clause: for properties purchased before July 23, 2024, you can choose the option that gives lower tax - either 20% with indexation or 12.5% without indexation.

Example: Sharma bought a flat in 2010 for 30 lakh. Sells in 2026 for 90 lakh.

Option A (12.5% without indexation): Gain = 60 lakh. Tax = 7.5 lakh.

Option B (20% with indexation): Cost Inflation Index 2010-11 = 167, CII 2025-26 = 363 (estimated). Indexed cost = 30 x (363/167) = 65.2 lakh. Gain = 90 - 65.2 = 24.8 lakh. Tax = 4.96 lakh.

Old method saves 2.54 lakh. For long-held properties, the grandfathered indexation option often wins. For properties held 3-5 years with moderate appreciation, the 12.5% flat rate might be better.

Calculate your exact liability with our capital gains calculator.

Section 54: Reinvest in Property, Save Tax

If you sell a residential property and buy or construct another within the specified time, the capital gain is exempt under Section 54. Conditions:

Buy new property within 1 year before or 2 years after the sale. Or construct within 3 years. The new property must be residential. You cannot sell the new property within 3 years (lock-in).

If the gain is higher than the cost of the new property, only the portion reinvested is exempt. The balance is taxable.

Section 54EC is the alternative: invest up to 50 lakh in specified bonds (NHAI, REC) with 5-year lock-in. The invested amount is exempt from tax. Interest on these bonds (around 5%) is taxable.

Gold Investments: Different Tax for Different Forms

Physical gold and gold ETFs: held for 24+ months = 12.5% LTCG. Under 24 months = slab rate.

Sovereign Gold Bonds (SGB): if held to maturity (8 years), ALL capital gains are tax-free. This makes SGB the most tax-efficient way to invest in gold. You also earn 2.5% annual interest (taxable at slab rate). The only catch is the 8-year lock-in (early exit possible after 5 years on RBI's redemption window, but then capital gains are taxed at 12.5%).

Digital gold (Paytm, Google Pay): treated as physical gold. 12.5% LTCG after 24 months. Plus you paid 3% GST at purchase, which is not recoverable. SGB is strictly superior for any holding period above 5 years.

Crypto and Virtual Digital Assets

A flat 30% tax on all crypto gains, regardless of holding period. No indexation. No basic exemption. No set-off against losses from any other source. 1% TDS on transactions above 10,000.

If you bought Bitcoin at 10 lakh and sold at 15 lakh, gain = 5 lakh, tax = 1.5 lakh (30%). If you also lost 3 lakh on another crypto, you cannot set off that loss. You still pay 1.5 lakh on the profitable trade. The loss can only be carried forward and set off against future VDA gains. Harsh, but those are the rules.

Tax Loss Harvesting: A Legal Way to Reduce Tax

At the end of each financial year, review your equity portfolio for positions showing losses. Sell them, book the loss, and buy them back after a day or two. The booked STCL can offset STCG, and LTCL can offset LTCG on equity.

Example: Your portfolio has 2 lakh LTCG on Nifty 50 fund and 80,000 LTCL on a pharma fund. By selling the pharma fund before March 31, you reduce net LTCG to 1.2 lakh (below the 1.25 lakh exemption). Zero tax on equity gains that year.

Important: India does not have a "wash sale" rule like the US. You can buy back the same stock immediately. There is no mandatory waiting period.

Use our capital gains calculator to plan your tax harvesting before March 31.

Set-Off and Carry Forward Rules

STCL on equity can be set off against both STCG and LTCG (any asset). LTCL on equity can only be set off against LTCG (any asset). Capital losses can be carried forward for 8 assessment years. But you must file your ITR by the due date to claim carry forward. Miss the deadline, lose the carry forward.

Losses on crypto (VDA) can only be set off against VDA gains. No cross-asset offset. Crypto losses carry forward for 8 years but only against VDA gains.

Impact on Long-Term SIP Investors

If you run a SIP in an equity fund, each monthly installment has its own 12-month holding period. When you redeem, the first-in-first-out (FIFO) method applies. Units held over 12 months get LTCG treatment (12.5% above 1.25L). Units held under 12 months get STCG treatment (20%).

For a SIP investor redeeming after several years, most units will be LTCG. But the last 12 months of SIP installments will be STCG. Plan redemptions to minimize STCG: stop your SIP 12 months before you plan to redeem, then all units will qualify as LTCG.

Track your SIP returns with our SIP calculator.

My Recommendation

For equity investors: the 12.5% LTCG with 1.25L exemption is still very reasonable compared to most countries. Do not let tax tail wag the investment dog. Hold good stocks for the long term, harvest losses annually before March 31, and use the 1.25L exemption strategically.

For property sellers: if you bought before July 2024 and held for a long time, calculate both options (20% with indexation vs 12.5% without). The indexed option usually wins for properties held 10+ years. Consider Section 54 reinvestment to defer or eliminate tax entirely.

For gold investors: buy Sovereign Gold Bonds, not physical gold or digital gold. Tax-free capital gains at maturity plus 2.5% annual interest makes it the clear winner.