Capital Gains Tax Planning

Capital gains taxation was substantially restructured by the Finance (No. 2) Act, 2024, effective for transfers on or after 23 July 2024, and these are the rates currently in force.

For listed equity shares, equity-oriented mutual fund units, and business trust units (where STT is paid): short-term capital gains under Section 111A are taxed at 20% (raised from 15%), and long-term capital gains under Section 112A are taxed at 12.5% (raised from 10%) on gains exceeding an annual exemption of ₹1.25 lakh (raised from ₹1 lakh). The long-term holding threshold for this class remains more than 12 months.

For all other capital assets — unlisted shares, debt instruments, immovable property, gold, and similar — long-term capital gains under Section 112 are now taxed at a uniform 12.5%, replacing the earlier slab of 20% with indexation (for most assets) or 10%/20% variants. The indexation benefit under the second proviso to Section 48 has been withdrawn for transfers on or after 23 July 2024. The long-term holding threshold for unlisted securities and immovable property is now unified at more than 24 months.

A transition safeguard applies specifically to immovable property: resident individuals and HUFs who acquired the property before 23 July 2024 may compute tax under the old 20%-with-indexation formula if it results in a lower liability than the new 12.5% rate, per the CBDT's clarificatory FAQs issued alongside the Finance Bill 2024 changes.

These provisions sit within the Income-tax Act, 1961, which stood repealed effective 31 March 2026 and was replaced by the Income-tax Act, 2025 from 1 April 2026; the 2025 Act renumbers sections but was a consolidation exercise that did not itself alter these rates, thresholds, or holding periods. We verify the applicable-year Finance Act position before finalising any client computation.

Capital gains tax planning is the practice of deciding when to sell an asset — shares, property, mutual funds, gold, a business — so that the tax on the gain is the minimum the law allows. The framework is in the Income Tax Act 1961: gains are charged under Section 45, computed under Section 48, classified as short-term or long-term by the holding period, and taxed at the rates of Sections 111A and 112 for securities and other assets. The exemptions of Sections 54, 54F and 54EC can defer tax on reinvested proceeds, and losses — a capital asset sold at a loss — can be set off against gains under Sections 70 and 74 and carried forward.

Planning operates on the levers the law provides. The holding period decides whether a gain is short-term or long-term — sometimes the difference is a matter of days. A gain crystallised in a year of low income can sit in the nil or lower slab. A loss realised in a portfolio can offset a gain elsewhere in the same year under Section 70, and unabsorbed losses can be carried forward and set off under Section 74. The exemption sections reward reinvestment — a property sale rolled into a new house under Section 54, or into bonds under Section 54EC, pays no tax on the gain if the conditions are met.

The cost of no planning is symmetrical and predictable: gains taxed at full rates that a holding-period adjustment or a reinvestment would have reduced, losses expiring unused because they were never set off within the Section 74 carry-forward window, and property sales paying tax that Section 54 would have deferred. Capital gains are the tax where a few days of planning regularly save lakhs.

This service is for investors and business owners selling shares, property, funds or businesses. We map the assets, model the gains across years and regimes, plan realisation dates around the holding period and income profile, execute tax-loss harvesting under Sections 70 and 74, and deploy the Section 54, 54F and 54EC exemptions with the deadlines tracked.