In short: Capital gains tax India is levied on profits you make when you transfer a capital asset — a property, shares, or mutual fund units. The rules were significantly overhauled from 23 July 2024, simplifying holding periods and revising rates across almost every asset class.
Key points
- Capital gains arise on the transfer of a capital asset and are charged to tax in the year of transfer. The governing provision under the Income Tax Act, 1961 is Section 45, and under the newer Income-tax Act, 2025 the equivalent charging section is Section 67.
- From 23 July 2024, holding periods are simplified to just two: one year for listed securities, and two years for all other assets including property and unlisted shares.
- The long-term capital gains (LTCG) rate on most assets is now 12.5% without indexation, down from 20% with indexation.
- LTCG on listed equity shares and equity mutual funds (where STT is paid) is also 12.5%, with a tax-free exemption threshold of ₹1.25 lakh per financial year.
- Short-term capital gains (STCG) on listed equity (STT-paid) are now taxed at 20%, up from 15% before 23 July 2024. All other short-term gains are taxed at your applicable income tax slab rate.
- Resident individuals and HUFs who sell land or a building acquired before 23 July 2024 can choose between the new 12.5% (no indexation) rate and the old 20% (with indexation) rate — whichever works out lower for them.
What is capital gains tax India and when does it apply?
Whenever you sell — or otherwise transfer — a capital asset and make a profit, that profit is a “capital gain” and is taxable. A capital asset broadly includes land, buildings, shares, securities, mutual fund units, gold, and similar property.
The law does not tax you when the asset merely rises in value. The tax event is triggered only on transfer, which includes a sale, exchange, relinquishment, or extinguishment of rights.
Under the Income Tax Act, 1961 the charging provision is Section 45. India has also enacted a new Income-tax Act, 2025; once fully in force, the equivalent provision will be Section 67, which similarly charges profits from transfer of a capital asset for the relevant tax year.
Short-term vs long-term: what is the holding period?
Whether your gain is “short-term” or “long-term” depends entirely on how long you held the asset before transferring it. The 23 July 2024 changes simplified what was previously a three-tier system into just two categories.
| Asset type | Holding period for LTCG | Effective from |
|---|---|---|
| Listed securities (shares, equity MFs, business trust units) | More than 12 months | 23 July 2024 |
| Immovable property (land / building) | More than 24 months | Unchanged |
| Unlisted shares | More than 24 months | Unchanged |
| All other assets (gold, jewellery, etc.) | More than 24 months | 23 July 2024 (simplified from earlier three-tier rule) |
Hold an asset for longer than the applicable period above and your gain is long-term. Sell before that and it is short-term — generally taxed at a higher effective rate or at your slab rate.
What are the current capital gains tax rates?
Long-term capital gains (LTCG)
For transfers on or after 23 July 2024, the LTCG rate on most assets has been rationalised to 12.5% without indexation. Previously this was 20% with the benefit of indexation (which adjusts your cost for inflation).
For listed equity shares and equity-oriented mutual funds where securities transaction tax (STT) has been paid, LTCG is also taxed at 12.5% — increased from the earlier 10%. However, the first ₹1.25 lakh of such gains in a financial year is exempt from tax. This enhanced exemption applies from FY 2024-25 onwards.
Short-term capital gains (STCG)
If STT has been paid on the transfer of listed equity shares, equity mutual fund units, or business trust units, the STCG rate is now 20%. Before 23 July 2024 this rate was 15%.
For all other capital assets — property, gold, unlisted shares — short-term gains are added to your total income and taxed at whatever income tax slab rate applies to you. There is no flat rate for these.
At a glance: old rates vs new rates (post-23 July 2024)
| Asset / gain type | Rate before 23 July 2024 | Rate from 23 July 2024 |
|---|---|---|
| LTCG — listed equity / equity MFs (Section 112A) | 10% (above ₹1 lakh exemption) | 12.5% (above ₹1.25 lakh exemption) |
| STCG — listed equity / equity MFs, STT-paid (Section 111A) | 15% | 20% |
| LTCG — all other assets (Section 112) | 20% with indexation | 12.5% without indexation |
| STCG — property, gold, unlisted shares | Slab rates | Slab rates (unchanged) |
What if I sell property I bought before July 2024?
If you are a resident individual or a Hindu Undivided Family (HUF) and you sell land, a building, or both that you acquired before 23 July 2024, you have a choice.
You may opt for the new regime — 12.5% tax without indexation — or you may stick with the old regime — 20% tax with indexation. You can pick whichever results in a lower tax liability. This grandfathering option does not apply to companies or other entities.
For property or unlisted shares acquired on or after 23 July 2024 and transferred later, only the new 12.5% without indexation rate applies.
What about debt mutual funds?
If you purchased units of a debt mutual fund on or after 1 April 2023, the gains are always treated as short-term capital gains regardless of how long you hold them. They are taxed at your slab rate.
If you bought debt mutual fund units before 1 April 2023, the normal holding-period rules apply — gains held for the qualifying period can still be long-term.
What happened to share buybacks?
From 1 October 2024, proceeds received from a buyback of shares by a domestic listed company were reclassified as deemed dividends and had to be reported under “Income from Other Sources” in your ITR. The fact sheet notes that a further change under the Finance Act 2026 has reversed this treatment again. Because the precise details of that reversal are still being verified, check the current position with a tax adviser or refer directly to the Finance Act 2026 text.
Are reinvestment exemptions still available?
Yes. The 23 July 2024 changes did not remove existing rollover or reinvestment exemptions. If you qualify for an exemption by reinvesting your capital gains (for example, in a residential property or in specified bonds within the prescribed time limits), those benefits continue to be available under the Income Tax Act, 1961.
For a broader introduction to your rights and obligations as a taxpayer, see the Law for You guides on thecourtroom.in, which cover income tax fundamentals and property law in accessible plain language.
Frequently asked questions
Is capital gains tax India different for NRIs and residents?
The grandfathering option for property sold after 23 July 2024 — the choice between 12.5% without indexation and 20% with indexation — is available only to resident individuals and HUFs. Non-resident taxpayers do not get this option. The general rates for LTCG and STCG otherwise apply across both categories, but NRIs may also be subject to TDS rules on property transactions. Consult a qualified advocate or chartered accountant for your specific situation.
What is the tax-free limit on long-term gains from shares and equity mutual funds?
From FY 2024-25 onwards, the first ₹1.25 lakh of long-term capital gains on listed equity shares and equity-oriented mutual funds (where STT has been paid) is exempt from tax each financial year. Gains above that threshold are taxed at 12.5%. Before this change the exempt threshold was ₹1 lakh.
Do the new capital gains rules apply to transfers made before 23 July 2024?
No. The revised rates and holding-period rules apply only to transfers made on or after 23 July 2024. If you transferred a capital asset before that date, the rules and rates that were in force at the time of transfer continue to govern the taxation of those gains. The old STCG rate of 15% for listed equity, for instance, still applies to transfers completed before 23 July 2024.
Primary sources
- Income Tax Act, 1961 and Income-tax Act, 2025 — full text on India Code (indiacode.nic.in)
- Income Tax Department — official guidance, FAQs and ITR forms (incometax.gov.in)
- Press Information Bureau — CBDT official FAQs and press releases on capital gains changes (pib.gov.in)
- Supreme Court of India — judgments on capital gains disputes (sci.gov.in)
Written by Editorial Team, The Courtroom · Published 2026-07-09 · Last verified 2026-07-09
This article is for general information only and is not legal advice. Laws change; verify against the primary sources cited and consult a qualified advocate for your situation.
