Capital Gains Tax in India: Rates and Exemptions for AY 2025-26
Budget 2024 revised capital gains tax rates significantly. Long-term capital gains on equity are now taxed at 12.5% (up from 10%) and short-term at 20%. Here is the complete guide.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Capital Gains Tax: Post-Budget 2024 Changes
The Finance (No. 2) Act, 2024 (Budget 2024) made major changes to capital gains taxation effective 23 July 2024. These changes apply to assets transferred on or after that date and are relevant for your AY 2025-26 ITR filing.
New Capital Gains Tax Rates (Effective 23 July 2024)
*Indexation removed for property sales after 23 July 2024. However, a special provision allows sellers of property acquired before 23 July 2024 to choose the pre-amendment rate of 20% with indexation if it results in lower tax.
Section 112A: ₹1.25 Lakh LTCG Exemption
Long-term capital gains on listed equity and equity mutual funds under Section 112A are exempt up to ₹1.25 lakh per year (enhanced from ₹1 lakh in Budget 2024). Only gains above this threshold are taxed at 12.5% — with no indexation benefit.
Grandfathering: Cost of acquisition for equity assets held since before 31 January 2018 is the higher of actual cost or the price as on 31 January 2018 (Section 55(2)(ac)).
Capital Gains Exemptions
Section 54 — Sale of Residential House
Long-term capital gains on sale of a residential property can be reinvested in one new residential house (up to two houses if LTCG ≤ ₹2 crore) within 2 years (purchase) or 3 years (construction). Exemption is limited to cost of new house or amount of capital gains, whichever is lower.Section 54EC — Investment in Bonds
LTCG from any asset can be exempted by investing in Section 54EC bonds (NHAI, REC) within 6 months of transfer. Maximum investment: ₹50 lakh. Lock-in: 5 years.Section 54F — Sale of Non-Residential Asset
LTCG from sale of any long-term capital asset (other than residential house) is exempt if entire net sale consideration is invested in a new residential house. Conditions: no more than one house already owned; new house purchased within 1 year before or 2 years after sale.Reporting Capital Gains in ITR
- Use ITR-2 (for individuals with capital gains) or ITR-3 (if also having business income)
- Schedule CG must be filled for each transaction with asset type, date of purchase, date of sale, cost, and sale consideration
- Import broker statement / AIS capital gains summary to avoid errors
- If STT was paid on sale, tick the STT-paid box — this determines which rate applies
Tax Loss Harvesting
Capital losses can be set off against capital gains:
- Short-term capital loss can be set off against both STCG and LTCG
- Long-term capital loss can only be set off against LTCG
- Unabsorbed losses can be carried forward for 8 years (only if ITR filed on time)
We handle capital gains computation for all asset classes — equity, mutual funds, property, gold. Our CA team ensures correct classification and maximum legal exemptions are claimed.
Frequently Asked Questions
What are the new capital gains tax rates after Budget 2024?
Effective 23 July 2024, long-term capital gains on listed equity and equity mutual funds are taxed at 12.5% under Section 112A (up from 10%), and short-term capital gains at 20% under Section 111A (up from 15%). Property, unlisted shares, and gold LTCG are taxed at 12.5% under Section 112 without indexation.
Is indexation benefit still available for property sales?
Indexation has been removed for property sold after 23 July 2024. However, a special transition provision allows sellers of property acquired before 23 July 2024 to choose the pre-amendment rate of 20% with indexation if it results in lower tax than 12.5% without indexation.
What is the LTCG exemption limit under Section 112A for AY 2025-26?
Long-term capital gains on listed equity shares and equity mutual funds are exempt up to ₹1.25 lakh per financial year under Section 112A (enhanced from ₹1 lakh in Budget 2024). Only gains exceeding this threshold are taxed at 12.5%.
How does the grandfathering provision work for equity held before 31 January 2018?
Under Section 55(2)(ac), the cost of acquisition for equity assets held before 31 January 2018 is deemed to be the higher of the actual purchase cost or the market price as on 31 January 2018. This protects pre-2018 unrealised gains from being taxed.
Are gains on Sovereign Gold Bonds taxable?
Capital gains on Sovereign Gold Bonds (SGBs) held to maturity are fully exempt from tax. However, if SGBs are sold before maturity on a stock exchange, the gains are taxable as capital gains — long-term at 12.5% if held over 12 months, or at slab rates if short-term.
I'm CA Harun Raaj, Visakhapatnam. If any of this affects you or your business, reach out — I'd be glad to help.
---
See Also
Frequently Asked Questions
What is the new long-term capital gains tax rate for listed equity shares after Budget 2024?+
The new LTCG tax rate for listed equity shares and equity mutual funds with a holding period greater than 12 months is 12.5% under Section 112A, effective from 23 July 2024. This rate applies with no indexation benefit. However, gains up to ₹1.25 lakh per year are exempt under Section 112A.
How much capital gains tax exemption is available for equity mutual funds in AY 2025-26?+
Long-term capital gains on listed equity and equity mutual funds are exempt up to ₹1.25 lakh per year under Section 112A (enhanced from ₹1 lakh in Budget 2024). Only gains exceeding this threshold are taxed at 12.5%.
Is indexation benefit available for property sales after Budget 2024?+
No, indexation has been removed for property (land/building) sales after 23 July 2024 under Section 112. However, a special provision allows sellers of property acquired before 23 July 2024 to opt for the pre-amendment rate of 20% with indexation benefit if it results in lower tax.
What is the Section 54EC bond investment limit for exempting capital gains?+
Under Section 54EC, long-term capital gains from any asset can be exempted by investing in NHAI or REC bonds within 6 months of transfer. The maximum investment limit is ₹50 lakh with a lock-in period of 5 years.
How does the grandfathering rule apply to equity shares held before 31 January 2018?+
Under Section 55(2)(ac), the cost of acquisition for equity assets held since before 31 January 2018 is deemed to be the higher of the actual cost or the price as on 31 January 2018. This benefits long-term investors by reducing their capital gains liability.
What is the holding period and reinvestment window for claiming Section 54 exemption on residential property sale?+
Under Section 54, long-term capital gains from sale of a residential property are exempt if reinvested in one new residential house (or up to two houses if LTCG is ≤ ₹2 crore) within 2 years from the date of purchase or 3 years from the date of completion of construction. The exemption is limited to the cost of the new house or amount of capital gains, whichever is lower.
Related Services
Based on this article's category and vertical tag, these services are the most relevant next steps.
Need help with this?
Our team handles the paperwork. You focus on your business.