Sold shares, mutual funds, property or gold this year? Then capital gains tax is the one chapter of the Income-tax law you cannot skip. This guide explains — in plain English — what counts as a capital asset, when a gain is short-term (STCG) vs long-term (LTCG), the exact tax rates for FY 2025-26 (AY 2026-27) after the big Budget 2024 changes, the exemptions that can bring your tax to zero, and how to report everything correctly in your ITR.
What is a capital gain?
A capital gain is the profit you make when you transfer a capital asset — shares, equity or debt mutual funds, land, buildings, gold, bonds, even crypto is taxed under its own special regime. The gain is broadly:
Capital Gain = Sale Consideration − (Cost of Acquisition + Cost of Improvement + Transfer Expenses)
Personal-use items like your car, furniture or clothes are not capital assets — but jewellery, paintings and property always are.
Short-term vs long-term: the holding-period test
Since 23 July 2024, holding periods have been simplified to just two:
| Asset | Long-term if held for more than |
|---|---|
| Listed shares, equity mutual funds, listed bonds, REITs/InvITs | 12 months |
| All other assets — property, gold, unlisted shares, debt funds, foreign shares | 24 months |
Hold for less than that, and the gain is short-term.
Capital gains tax rates for FY 2025-26 (AY 2026-27)
| Asset / Section | Short-term (STCG) | Long-term (LTCG) |
|---|---|---|
| Listed equity shares & equity MFs (STT paid) — Sec 111A / 112A | 20% (transfers on/after 23-Jul-2024; 15% before) | 12.5% on gains above ₹1.25 lakh/year; no indexation |
| Land / building | Slab rate | 12.5% without indexation; if acquired before 23-Jul-2024, resident individuals/HUF may opt for 20% with indexation if lower |
| Gold, unlisted shares, other assets | Slab rate | 12.5% without indexation |
| Debt mutual funds (bought on/after 1-Apr-2023) | Always taxed at slab rate — deemed short-term regardless of holding period | |
How STCG on shares is taxed — Section 111A
Sell listed equity or an equity mutual fund within 12 months and pay STT, and the gain is taxed at a flat 20% (plus cess). No slab benefit applies to the gain itself, but a resident individual can adjust the gain against any unused basic exemption limit. Deductions under 80C–80U cannot be claimed against STCG u/s 111A.
How LTCG on shares is taxed — Section 112A
Hold listed equity/equity MF for more than 12 months and the gain is long-term: the first ₹1.25 lakh of such gains in a year is exempt, the balance taxed at 12.5% without indexation. Grandfathering — for shares bought before 1 February 2018, cost is stepped up to the FMV on 31 January 2018, so older gains stay untaxed.
Exemptions that can make your tax zero
| Section | You sold | You invest in | Key limits |
|---|---|---|---|
| 54 | Residential house (LT) | Another residential house in India | Buy within 1 yr before / 2 yrs after, or build in 3 yrs; exemption capped at ₹10 crore |
| 54F | Any LT asset other than a house | A residential house | Invest full net sale consideration; must not own more than one other house |
| 54EC | Land/building (LT) | NHAI/REC/notified bonds | Within 6 months; max ₹50 lakh; 5-year lock-in |
Can’t invest before your ITR due date? Park the amount in the Capital Gains Account Scheme (CGAS) to keep the exemption alive.
Set-off and carry-forward of capital losses
Short-term loss → set off against STCG and LTCG. Long-term loss → only against LTCG. Capital losses can never be set off against salary or other income. Unadjusted losses carry forward for 8 assessment years — but only if you file your return by the due date.
Intraday and F&O are NOT capital gains
Intraday equity trading is speculative business income and F&O is non-speculative business income — both taxed at slab rates and reported in ITR-3, not Schedule CG. Your broker’s Tax P&L splits these buckets for you; the TaxFetch Stock Trading Profit Classifier does it automatically from your statement.
How to report capital gains in your ITR — 4 steps
Download your capital gain statements
Get the Tax P&L / capital gain statement from every broker you traded with, and CAMS/KFintech statements for mutual funds. Step-by-step guides for all major brokers are linked below.
Classify the gains
Split into intraday, STCG (111A), LTCG (112A) and other assets. Upload your statement to the Stock Trading Profit Classifier to get this in seconds.
Compute the tax
Apply the correct rates, the ₹1.25 lakh 112A exemption, set-offs and any Section 54/54F/54EC exemptions. Use the free TaxFetch Capital Gain Calculator.
File the right form & reconcile with AIS
ITR-2 for capital gains, ITR-3 if you also have intraday/F&O. Match your totals against AIS/TIS on the income-tax portal to avoid mismatch notices, and pay advance tax where due.
📊 Turn your broker statement into an ITR-ready summary — free to try
Upload your Tax P&L / capital gain statement to the TaxFetch Stock Trading Profit Classifier and it instantly classifies every trade into Intraday (speculative), Short-Term and Long-Term buckets, totals your STCG & LTCG, and gives you a clean PDF/Excel summary for your ITR.
Try the Stock Trading Profit Classifier → Capital Gain Calculator →Download your capital gain statement — broker-wise guides
Every broker hides the Tax P&L in a slightly different place. Pick yours for an illustrated, step-by-step download guide:
- Zerodha →
- Groww →
- Upstox →
- Angel One →
- ICICI Direct →
- HDFC Securities →
- Kotak Securities →
- Motilal Oswal →
- Paytm Money →
- 5Paisa →
- Alice Blue →
- Axis Direct →
- Choice →
- Dhan →
- Fisdom →
- Fyers →
- Geojit →
- IIFL →
- SBI Securities →
- Sharekhan →
- SMC Global →
Frequently asked questions
How much LTCG is tax-free in a year?
For listed equity shares and equity mutual funds (Section 112A), long-term capital gains up to ₹1.25 lakh per financial year are exempt. Gains above ₹1.25 lakh are taxed at 12.5% (without indexation).
What is the STCG tax rate on shares?
Short-term capital gains on listed equity shares and equity mutual funds (where STT is paid) are taxed at 20% under Section 111A for transfers made on or after 23 July 2024 (15% for transfers before that date).
Is indexation still available after Budget 2024?
For most assets sold on or after 23 July 2024, indexation has been removed and LTCG is taxed at a flat 12.5%. For land or buildings acquired before 23 July 2024, resident individuals and HUFs can choose the lower of 12.5% without indexation or 20% with indexation.
Can I set off short-term capital loss against long-term gains?
Yes. Short-term capital loss can be set off against both STCG and LTCG. Long-term capital loss can only be set off against LTCG. Unadjusted losses carry forward for 8 assessment years if you file your ITR on time.
Which ITR form should I use for capital gains?
ITR-2 if you have capital gains but no business income. ITR-3 if you also have intraday or F&O trading (treated as business income). ITR-1 cannot be used if you have taxable capital gains, except that small 112A LTCG up to ₹1.25 lakh can now be reported in ITR-1.
Do I have to pay advance tax on capital gains?
Yes, if your total tax liability exceeds ₹10,000 in a year. Since gains are hard to predict, you can pay advance tax in the instalment following the quarter in which the gain arises to avoid Section 234C interest.
What is grandfathering under Section 112A?
For equity shares/equity MFs bought before 1 February 2018, the cost is stepped up to the fair market value as on 31 January 2018 (capped at sale price), so gains accrued before that date are not taxed.
Disclaimer: Rates and rules stated for FY 2025-26 (AY 2026-27) as amended by the Finance (No. 2) Act, 2024. Tax law changes frequently — verify current provisions or talk to a TaxFetch tax expert before acting.