What is capital gains tax?
Reviewed by Ranga & Company
Capital gains tax: Capital gains tax is income tax on the profit from selling a capital asset such as property, shares, mutual funds or gold. The rate depends on the asset and on whether the gain is short-term or long-term.
At a glance
- Long-term after
- 12 months (listed shares, equity funds); 24 months (property, most other assets)
- Listed equity, short-term
- 20%
- Listed equity, long-term
- 12.5% on gains above ₹1.25 lakh a year
- Property, long-term
- 12.5% without indexation (20% with indexation option for pre-23 July 2024 purchases)
- Reported in
- Schedule CG of ITR-2 or ITR-3
Rates for transfers from 23 July 2024
| Asset | Short-term | Long-term |
|---|---|---|
| Listed shares, equity mutual funds | 20% (held ≤ 12 months) | 12.5% above ₹1.25 lakh |
| Land and buildings | Slab rate (held ≤ 24 months) | 12.5%, or 20% with indexation for resident individuals/HUFs who bought before 23 July 2024 |
| Unlisted shares, gold, others | Slab rate (held ≤ 24 months) | 12.5% |
| Debt mutual funds (bought from April 2023) | Slab rate | Slab rate |
Working out the gain
- Sale price (or stamp duty value for property, if more than 110% of the price)
- Minus transfer costs such as brokerage
- Minus the cost of acquisition and improvement (indexed, if you use the indexation option)
- Minus exemptions such as sections 54, 54F or 54EC
Saving capital gains tax
- Section 54: reinvest gains from a house in another house
- Section 54F: reinvest proceeds from other assets, such as a plot, in a house
- Section 54EC: invest up to ₹50 lakh in specified bonds within 6 months
- Harvest equity gains up to ₹1.25 lakh a year, which are tax-free
Common mistakes
- Not paying advance tax in the quarter after a large sale
- Ignoring the stamp duty value when the agreed price is lower
- Claiming indexation on property bought after 23 July 2024
Frequently asked questions
What is the tax on long-term capital gains from shares?
12.5% on long-term gains from listed shares and equity mutual funds above ₹1.25 lakh in a financial year, for transfers from 23 July 2024.
Is indexation still available?
Only for resident individuals and HUFs selling land or buildings acquired before 23 July 2024, who can pay 20% with indexation instead of 12.5% without.
How long must I hold property for long-term capital gains?
More than 24 months.
Related terms
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