Income Tax20 January 202512 min read

Capital Gains Tax India 2025: Complete Guide for STCG & LTCG

Comprehensive guide on capital gains tax in India. Learn about STCG, LTCG rates for stocks, property, mutual funds, and gold with indexation benefits.

capital gainsSTCGLTCGstock marketproperty

What is Capital Gains Tax?

Capital gains tax is levied on the profit earned from the sale of capital assets like property, stocks, mutual funds, and gold. The tax rate depends on:

  • Type of asset
  • Holding period
  • Whether indexed cost is applicable

    • Types of Capital Assets

    Listed Securities

  • Equity shares
  • Equity mutual funds
  • ETFs
  • REITs and InvITs

    • Unlisted Securities

  • Private company shares
  • Unlisted debentures

    • Immovable Property

  • Land and buildings
  • Commercial and residential property

    • Other Assets

  • Gold (physical, digital, ETF)
  • Debt mutual funds
  • Bonds and debentures
  • Jewelry and art

    • Holding Period Classification

    Capital Gains Tax Rates 2025-26

    Short-Term Capital Gains (STCG)

    Long-Term Capital Gains (LTCG)

    Important Change (Budget 2024):
  • LTCG on listed equity increased from 10% to 12.5%
  • LTCG exemption increased from Rs 1 lakh to Rs 1.25 lakh
  • Indexation benefit removed for property (option available for pre-July 2024 purchases)

    • Indexation Benefit

    What is Indexation?

    Indexation adjusts the purchase price of an asset for inflation using the Cost Inflation Index (CII). This reduces your capital gains and hence the tax liability.

    CII Values (Recent Years)

    Asset TypeShort TermLong Term
    Listed equity sharesUp to 12 monthsMore than 12 months
    Equity mutual fundsUp to 12 monthsMore than 12 months
    Debt mutual fundsUp to 36 monthsMore than 36 months
    Immovable propertyUp to 24 monthsMore than 24 months
    Gold and jewelryUp to 36 monthsMore than 36 months
    Unlisted sharesUp to 24 monthsMore than 24 months
    Asset TypeTax Rate
    Listed equity/equity MF (STT paid)20%
    Other assets (property, gold, debt MF)As per income tax slab
    Unlisted sharesAs per slab
    Asset TypeTax RateExemption
    Listed equity/equity MF12.5%Rs 1.25 lakh p.a.
    Property (with indexation)12.5% (without indexation)Nil
    Gold (with indexation)12.5% (without indexation)Nil
    Debt mutual funds12.5% (without indexation)Nil
    Unlisted shares12.5%Nil
    Financial YearCII
    2001-02 (Base Year)100
    2021-22317
    2022-23331
    2023-24348
    2024-25363

    Indexation Formula

    Indexed Cost = (Purchase Price × CII of Sale Year) / CII of Purchase Year

    Indexation Example

    Property purchased in 2015-16 for Rs 50 lakh, sold in 2024-25 for Rs 1 crore.
  • CII 2015-16 = 254
  • CII 2024-25 = 363
  • Indexed Cost = (50,00,000 × 363) / 254 = Rs 71,45,669
  • Capital Gain = Rs 1,00,00,000 - Rs 71,45,669 = Rs 28,54,331
  • Tax = Rs 28,54,331 × 12.5% = Rs 3,56,791
    • Note: From July 2024, indexation benefit is removed. However, for assets purchased before July 2024, taxpayers have the option to choose between:
  • Old regime: 20% with indexation
  • New regime: 12.5% without indexation

    • Exemptions from Capital Gains Tax

    Section 54: Sale of Residential Property

  • Applicable to: Long-term gains from residential house
  • Investment: Purchase or construct another residential house
  • Time limit: Purchase within 2 years or construct within 3 years
  • Amount: Lower of capital gains or investment in new house

    • Section 54EC: Investment in Bonds

  • Applicable to: LTCG from land or building
  • Investment: NHAI/REC bonds
  • Maximum: Rs 50 lakh per financial year
  • Lock-in: 5 years

    • Section 54F: Sale of Any Long-Term Asset

  • Applicable to: LTCG from any asset (except residential house)
  • Investment: Purchase residential house
  • Condition: Should not own more than one house
  • Proportionate exemption: Based on investment

    • Section 54GB: Startup Investment

  • Applicable to: LTCG from residential property
  • Investment: Equity of eligible startup
  • Maximum exemption: Rs 50 lakh

    • Set-off and Carry Forward

    Set-off Rules

  • STCL can be set off against both STCG and LTCG
  • LTCL can only be set off against LTCG
  • Capital losses cannot be set off against other income

    • Carry Forward

  • Unabsorbed capital losses can be carried forward for 8 years
  • Must file return within due date to claim carry forward

    • Tax Harvesting Strategy

    Tax harvesting involves strategically selling investments to book losses or gains to optimize tax liability.

    Loss Harvesting

  • Sell loss-making investments before year-end
  • Set off losses against gains
  • Repurchase after 30+ days to avoid wash sale

    • Gain Harvesting

  • Book LTCG up to Rs 1.25 lakh annually (tax-free)
  • Reinvest immediately
  • Increase cost basis for future sales

    • Reporting in ITR

    Schedule CG in ITR

    Report all capital gains/losses in Schedule CG with:
  • Asset details
  • Purchase and sale date
  • Cost and sale consideration
  • Computation of gains/losses

Form 10E for Exemptions

If claiming exemptions under Section 54/54EC/54F, furnish details in Schedule CG.

Conclusion

Understanding capital gains taxation helps in better investment planning and tax optimization. Always consider holding periods and available exemptions before selling assets.

Use our Capital Gains Calculator to calculate your tax liability.

Written by

CA Work Desk

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