Capital Gains Tax India 2026: Property, Shares, Gold & Exemptions

Capital gains tax is what you pay on the profit when you sell an asset — a flat, a portfolio of shares, gold, a plot of land. It catches people out more often than income tax does, for a simple reason: it arrives in a lump, usually at a moment when the money already feels spent.

This guide covers how it is computed, what the current rates are, and the exemptions that genuinely reduce it. Mutual funds have their own detailed treatment in the mutual fund taxation guide, and virtual digital assets are taxed under an entirely separate regime covered in crypto tax India.

What counts as a capital asset

Broadly, property of any kind held by a taxpayer — shares, mutual fund units, immovable property, gold, bonds. There are notable exclusions, the practical ones being stock-in-trade of a business (that is business income, not capital gains) and personal effects such as a car or furniture, though jewellery is specifically not excluded.

Rural agricultural land meeting the statutory tests is also outside the definition. That test is about location and municipal limits rather than what the land is used for, and it is worth confirming rather than assuming.

Short term versus long term

Everything hinges on the holding period, and it is not the same for every asset:

Asset	Long term after	Typical treatment
Listed equity shares	12 months	LTCG 12.5% above ₹1.25L; STCG 20%
Equity mutual funds	12 months	Same as listed equity
Immovable property	24 months	LTCG 12.5%; STCG at slab rate
Gold, debt funds, unlisted shares	24 months	LTCG 12.5%; STCG at slab rate

Two things to note. First, short-term gains on most assets other than listed equity are simply added to your income and taxed at your slab rate — so for a higher-rate taxpayer a short-term sale can be markedly more expensive than a long-term one. Second, these rules were substantially revised in 2024; confirm current rates before filing, and use the capital gains calculator rather than working from memory.

Computing the gain

The arithmetic is straightforward. Getting the inputs right is where the work is:

The distinction that costs people money is improvement versus repair. Adding a floor is an improvement and reduces your gain. Repainting is a repair and does not. Keep invoices for anything structural — a decade later, a bundle of receipts is worth real tax.

For property there is also a floor: if the sale value is below the stamp duty valuation by more than a permitted margin, the stamp duty value is generally substituted as the sale consideration. Selling below circle rate does not reduce your capital gains tax in the way people expect.

The indexation change, and who still gets it

This is the part most worth understanding if you are selling property.

Indexation adjusted your acquisition cost for inflation before computing the gain, so you were taxed on real profit rather than nominal. In 2024 the default treatment changed: long-term gains are now taxed at a lower headline rate of 12.5% without indexation, replacing the older 20% with indexation.

Whether that helps or hurts depends entirely on how long you held and how much the asset appreciated. A property held twenty years through high inflation was often better off under indexation; one held three years in a flat market is better off at 12.5%.

Because of that, a grandfathering option exists: for property acquired before 23 July 2024, resident individuals and HUFs may compute the tax both ways and pay the lower. If your acquisition predates that date, compute both — do not assume the new rate is better. The property capital gains calculator will run the comparison.

The exemptions that actually reduce it

These are the legitimate routes, all conditional on strict timelines:

Section 54 — house to house

Long-term gain from selling a residential house, reinvested in another residential house. The new property must generally be purchased within one year before or two years after the sale, or constructed within three years. Exemption is limited to the amount reinvested.

Section 54F — other asset to house

Long-term gain from any asset other than a residential house, reinvested in a residential house. Broader in what you can sell, stricter in what you can own — there are conditions on holding other residential property at the time.

Section 54EC — specified bonds

Gain from land or building invested in specified bonds within six months of transfer, subject to an annual cap and a lock-in. Useful when you want the exemption without buying more property, but the cap means it rarely covers a large gain on its own.

Capital Gains Account Scheme

The mechanism nobody mentions until it is too late. If you intend to reinvest but the deadline for filing your return arrives first, deposit the gain in a Capital Gains Account with a bank before the filing due date. Miss this and the exemption is lost even though you fully intended to reinvest — this is the most common way a valid exemption is thrown away.

Setting off and carrying forward losses

Losses are an asset if you handle them properly:

• Short-term capital loss can be set off against both short-term and long-term gains.
• Long-term capital loss can only be set off against long-term gains.
• Unabsorbed losses can generally be carried forward for eight assessment years.
• The condition everyone misses: you must file your return by the due date to carry a loss forward. A late return forfeits it permanently.

That last rule is why filing on time matters even in a year you owe nothing. A loss you cannot carry forward is money given away.

Advance tax on a large gain

A gain that arrives mid-year usually creates an advance tax obligation, and this is where an otherwise clean transaction turns into an interest charge.

Advance tax is payable in instalments through the year, and capital gains are no exception once the gain has arisen. The concession is that you are not expected to have predicted it: the instalment obligation on a capital gain generally starts from the instalment falling due after the gain arises, rather than being spread retrospectively across earlier instalments you have already paid.

What that means in practice is simple. Sell in June and you have time to plan the payment. Sell in late March and the tax is due almost immediately, with little room to arrange funds. If you have discretion over timing and the gain is large, the difference between a March sale and an April sale is a full year of breathing space on the tax — worth considering alongside the holding-period question.

Joint ownership and inherited assets

Two situations that come up constantly and are handled wrongly about as often.

Jointly held property. The gain is apportioned according to each owner's share, and each co-owner reports their portion and claims exemptions independently. Where a spouse's name was added purely for convenience without any contribution to the purchase, the position is less comfortable than people assume — the income may still be attributed to the person who actually funded it.

Inherited assets. Inheritance itself is not a transfer and triggers no capital gains tax. The charge arises only when you eventually sell. At that point you step into the previous owner's shoes: their cost becomes your cost, and — critically — their holding period counts towards yours. A flat inherited last year but bought by your parent twenty years ago is a long-term asset in your hands from day one.

This is why records matter across generations. If nobody can produce what the original owner paid, establishing the cost of acquisition becomes an exercise in valuation rather than arithmetic.

Five expensive mistakes

1. Selling just before the long-term threshold. Check the acquisition date before you sell. Waiting a few weeks can change the rate materially.
2. Not keeping improvement records. Every undocumented improvement is gain you pay tax on unnecessarily.
3. Spending the gain before the deadline. Reinvestment exemptions require the money to actually be reinvested or parked in a Capital Gains Account.
4. Assuming the new rate is always better. For older property, run both computations.
5. Filing late in a loss year. Forfeits eight years of set-off for nothing.

Capital gains tax rewards planning before the sale far more than clever filing afterwards. Once the transfer is done, most of your options have closed — which is a good argument for running the numbers while you are still deciding whether to sell.