Capital Gains Tax in India (AY 2026-27): Every Asset Class, the Budget 2024 Rewrite, and How to File Without Surprises

Capital gains tax in India looked one way on 22 July 2024 and another way on 23 July 2024. Budget 2024 was the largest single change to capital gains taxation in two decades — new rates, new holding-period buckets, and the disappearance of indexation on almost every asset class outside real estate.

By AY 2026-27 the dust has settled, but the rules are still misremembered in three predictable ways. Most online guides quote the pre-Budget rates (10% LTCG, 15% STCG, ₹1 lakh exemption, 36-month long-term rule on real estate). Most tax blogs that updated to "12.5%" forgot the asset-class-specific carve-outs. And almost no Indian guide deals cleanly with debt mutual funds, foreign shares, and grandfathered real estate together.

This is the comprehensive reference. It covers every asset class taxed under capital gains, the post-23-July-2024 rules in effect for AY 2026-27, the worked examples that show how the numbers actually fall, and the mistakes that show up in 143(1) intimations months after filing.

The two-line summary

For sales in FY 2025-26:

• Listed Indian equity / equity MFs: STCG 20% (under 12 months), LTCG 12.5% above ₹1.25L per FY (over 12 months). No indexation.
• Most other assets (real estate, gold, unlisted equity, foreign shares): STCG at slab rate (under 24 months), LTCG 12.5% (over 24 months), no indexation — except a one-time choice on grandfathered real estate.
• Debt MF post-April-2023: always slab rate. No LTCG bucket exists.
• Surcharge on capital gains: capped at 15% in both regimes.
• Section 87A rebate: does not apply to capital gains.

The rest of this guide is the asset-class-by-asset-class detail — and where the trapdoors sit.

Why holding period matters more than rate

In capital gains, the rate flows from the holding-period bucket. The bucket flows from the asset class. Get the asset class wrong and every downstream computation is wrong.

Three things to absorb from the table:

One, listed-equity holding period is 12 months. Everything else is 24. The pre-Budget 36-month bucket on real estate and unlisted equity is gone.

Two, indexation has been pruned to a single legal carve-out — the property-grandfathering choice. If you bought your apartment in 2018 and you're selling it in FY 2025-26, you can compute LTCG either as (sale − purchase) × 12.5% or as (sale − indexed purchase) × 20% and pick whichever is lower. Property bought after 23 July 2024 has no such choice.

Three, debt mutual funds are now mostly slab-rate property. The April 2023 cutoff is binary — units bought on 31 March 2023 retain the old LTCG-with-indexation treatment forever; units bought on 1 April 2023 are slab-rate forever. If you're SIP-ing into a debt fund that started before April 2023, the AMC tracks each tranche separately, and your calculator must too.

Listed Indian equity and equity mutual funds — the dominant case

For most salaried Indians, "capital gains" effectively means listed-equity gains. The rules:

• Holding period: 12 months from the purchase date of each unit / share.
• STCG rate (under 12 months): 20% on the gain. Surcharge capped at 15%; cess 4%.
• LTCG rate (over 12 months): 12.5% on the gain above ₹1.25 lakh per financial year. The ₹1.25 lakh exemption is per individual, per FY, across all listed-equity LTCG combined — not per scrip, not per fund.
• No indexation.
• Securities Transaction Tax (STT): must have been paid on both the buy and sell legs for the lower 12.5%/20% rates to apply. Off-market transfers (e.g., gifting through a depository slip without an exchange transaction) typically don't qualify.

Worked example — equity MF SIP

A salaried employee runs a ₹10,000/month SIP in a Nifty index fund for 5 years. In FY 2025-26 she redeems units worth ₹8 lakh (NAV growth: 60% on ₹6 lakh contributions over 60 SIP installments).

The SIP installments closest to the redemption date — those held under 12 months — count as STCG. The earlier installments are LTCG. Suppose:

• LTCG portion of redemption: ₹6 lakh of NAV represents ₹4 lakh contribution + ₹2 lakh gain.
• STCG portion of redemption: ₹2 lakh of NAV represents ₹2 lakh contribution + ₹0 gain (recent SIPs at flat NAV).

Tax computation:

• LTCG: ₹2 lakh − ₹1.25 lakh exemption = ₹75,000 taxable @ 12.5% = ₹9,375 + 4% cess = ₹9,750.
• STCG: zero (no gain on the recent installments).
• Total CG tax: ₹9,750.

The same redemption pre-Budget 2024 would have been: (₹2L − ₹1L) × 10% = ₹10,000 + cess = ₹10,400. Slightly less. The widened ₹1.25L threshold partly offsets the rate hike for small-ticket investors.

A nuance on the threshold

The ₹1.25 lakh exemption is consumed in the order LTCG events occur, not allocated optimally. If you sold ₹1 lakh of LTCG in May 2025 and ₹3 lakh of LTCG in March 2026, the May sale fully consumes the threshold (₹1L of ₹1.25L), the March sale gets the remaining ₹25K, and ₹2.75 lakh of the March sale is taxable. There is no carry-forward of unused threshold into the next FY.

Real estate — the grandfathering choice

Real estate is the only asset class where Budget 2024 left a planning lever. The taxpayer's choice (per property, made at filing time):

• Option A (new): 12.5% on nominal gain, no indexation.
• Option B (legacy): 20% on indexed gain, using the Cost Inflation Index from the year of purchase.

The choice is available only for properties acquired before 23 July 2024. Properties acquired on or after that date are mandatorily on Option A — flat 12.5%, no indexation.

When Option B (with indexation) wins

The crossover depends on how much the property appreciated relative to inflation. As a rough rule:

• If your property doubled in value over 5-7 years, Option A (12.5%) is usually cheaper.
• If your property's nominal gain barely outpaced inflation (e.g., inherited family flat sold after 20 years at modest appreciation), Option B (20% with indexation) often wins because the indexed cost wipes out most of the gain.

Worked example — apartment purchased 2014, sold 2026

• Purchase price: ₹50 lakh in FY 2014-15 (CII = 240).
• Sale price: ₹1.5 crore in FY 2025-26 (CII for FY 2025-26 ≈ 363, illustrative).
• Stamp duty / registration / improvement costs: ₹6 lakh, indexed where applicable.

Option A — 12.5% no-indexation:

• Nominal gain: 1.5 cr − (50L + 6L) = ₹94 lakh.
• Tax: 94L × 12.5% = ₹11,75,000 + 4% cess = ₹12,22,000.

Option B — 20% with indexation:

• Indexed cost: ₹50L × (363/240) ≈ ₹75,62,500.
• Indexed improvement cost: ₹6L × (363/240) ≈ ₹9,07,500.
• Indexed total cost: ~₹84,70,000.
• Indexed gain: 1.5 cr − 84.7L = ₹65,30,000.
• Tax: 65.3L × 20% = ₹13,06,000 + 4% cess = ₹13,58,240.

In this scenario Option A saves ₹1,36,240 — the asset appreciated ~3x in 11 years, well above the indexation factor (~1.5x), so the new flat rate captures more savings.

For a property held 25+ years where the indexation factor is much higher, Option B can save lakhs. The article's calculator embed below is the cleanest way to test both options against your specific numbers.

Section 54 / 54F / 54EC reinvestment exemptions

The capital gains tax on a real-estate sale can be deferred or eliminated by reinvesting:

• Section 54 — exemption available if you reinvest the LTCG amount into another residential property within 2 years of sale (or 3 years if under construction). Available only on sale of a residential property. From AY 2024-25, the maximum exempt investment under Section 54 is capped at ₹10 crore.
• Section 54F — exemption available on sale of any long-term capital asset other than a residential property (e.g., shares, gold, second house) if the entire net consideration is reinvested in one residential property. Same ₹10 crore cap.
• Section 54EC — exemption up to ₹50 lakh per financial year if invested in NHAI / REC capital-gains bonds within 6 months of sale. 5-year lock-in.

The reinvestment exemptions interact with the regime choice and with the property-grandfathering option. If you intend to claim Section 54 on a 2018-purchased apartment, you make the Option A vs B choice on the taxable portion that remains after the exemption. Plan the order of events with a CA before signing the sale deed.

Debt mutual funds — the April 2023 cliff

The single most-misunderstood category in 2026 is debt mutual funds. The simplification:

• Units acquired ON OR AFTER 1 April 2023: always taxed at slab rate. There is no concept of LTCG / STCG anymore for these units. Holding period is irrelevant.
• Units acquired BEFORE 1 April 2023: retain LTCG eligibility after 24 months, taxed at 12.5% from 23 July 2024 (the rate flipped on Budget Day, but the LTCG bucket itself survives for these grandfathered units).

The cliff matters because most debt MF holders accumulate via SIP, and a single AMC folio can have dozens of tranches straddling the April 2023 line. Your CAS (Consolidated Account Statement from CAMS / KFintech) breaks tranches by date — use that, not your bank statement.

Why this affects regime choice

A non-trivial number of high earners on the old regime stayed there partly because debt MF LTCG with indexation was a real shelter. That shelter is gone for new units. If your portfolio's debt allocation is now all post-April-2023, and your other 80C / 80D / HRA / 24(b) deductions are modest, the old regime's residual advantage thins out further. Re-run the regime comparison with your updated post-debt-MF income mix.

Listed bonds, REITs, and InvITs

Listed bonds, listed debentures, REITs (Real Estate Investment Trusts), and InvITs (Infrastructure Investment Trusts) are treated as listed securities:

• Bonds / debentures (listed): 12-month long-term bucket. LTCG 12.5% no-indexation, STCG slab rate. Note: zero-coupon bonds have a special STCG/LTCG holding rule of 12 months under Section 50AA.
• REITs / InvITs: 12-month long-term, taxed at 12.5% above ₹1.25L (sharing the equity threshold), STCG 20%. The distributions from REITs are taxed differently — interest/dividend at slab rate, capital-return component reduces cost basis.

Unlisted bonds remain at slab rate for both STCG and LTCG.

Gold — ETFs vs physical vs SGBs

Three different products, three subtly different treatments after Budget 2024:

The SGB maturity exemption — capital gain on redemption at the 8-year maturity is fully exempt under Section 47 — is a planning-grade benefit. SGBs sold on the secondary market before maturity attract capital gains normally, so the maturity-hold is the only path to the exemption.

Cryptocurrency / Virtual Digital Assets (VDA)

Crypto is taxed under Section 115BBH as a separate head, not as a capital asset:

• Flat 30% on gains, irrespective of holding period.
• No deduction except cost of acquisition — gas fees, exchange fees, and infrastructure costs are not deductible.
• No set-off against other capital gains or any other head of income. Crypto losses can only be set off against future crypto gains, and only within the same FY (no carry-forward across years).
• 1% TDS under Section 194S on every transaction above ₹50,000 (₹10,000 for specified taxpayers).
• Surcharge and cess apply on top of the 30%.

The combined effective rate at the highest band: 30% × 1.15 × 1.04 ≈ 35.88%. Crypto is the most punitive head in the Income Tax Act outside lottery winnings.

Foreign shares and ESPP / RSU equity

For Indian residents, foreign-listed shares (US, UK, EU exchanges) follow a separate set of rules:

• Holding period: 24 months from purchase / vest.
• LTCG rate: 12.5% no-indexation. Same as Indian unlisted equity.
• STCG rate: slab rate (NOT the 20% special rate that applies to Indian listed equity). This is a frequent source of confusion — RSUs from US employers sold under 24 months attract slab-rate STCG, which at 30% bracket plus surcharge can exceed 39%.
• Schedule FA disclosure: Indian residents holding foreign assets at any point during the FY must disclose them in Schedule FA of the ITR. Non-disclosure invokes the Black Money Act with penalties up to ₹10 lakh per missed disclosure plus prosecution risk. This applies even when the foreign shares were acquired through an employer ESPP or RSU plan and are held in a US brokerage like ETrade or Fidelity.
• DTAA credit: US-source dividends are taxed at 25% in the US (FTC available), Indian tax then computed at slab rate with a tax credit for the US tax paid. Capital gains are typically taxable only in India under the India-US DTAA — no US tax for Indian residents on US share sales.

The two-stage taxation of ESOPs / RSUs (perquisite at exercise, capital gain at sale) is covered in How to evaluate a job offer beyond CTC — that guide covers the perquisite leg; this article handles the sale leg.

Set-off and carry-forward — the rules that determine net tax

Capital gains have a strict set-off hierarchy. Get the order wrong and you understate tax owed.

Within-year set-off (Section 70/71/74)

• STCL (short-term loss) can be set off against either LTCG or STCG.
• LTCL (long-term loss) can be set off ONLY against LTCG. Cannot offset STCG.
• Capital losses cannot be set off against any other head — not salary, not house property, not interest income.

Carry-forward (Section 74)

• Both STCL and LTCL can be carried forward for 8 assessment years following the AY in which they were incurred.
• Carry-forward is allowed only if the return is filed by the due date (typically 31 July for individuals not subject to audit). File a day late and the carry-forward is forfeited.
• Carried-forward STCL can offset future LTCG or STCG. Carried-forward LTCL can offset only future LTCG.

Worked example — set-off

In FY 2025-26 a taxpayer realises:

• ₹3 lakh equity LTCG (gain).
• ₹1 lakh equity STCL (loss).
• ₹50,000 unlisted equity LTCL (loss).

Computation:

• STCL ₹1L offsets LTCG. Net LTCG = ₹2L.
• LTCL ₹50K offsets remaining LTCG. Net LTCG = ₹1.5L.
• Net LTCG ₹1.5L − ₹1.25L exemption = ₹25K taxable @ 12.5% = ₹3,125 + cess.

Without set-off discipline, the taxpayer might compute ₹3L − ₹1.25L = ₹1.75L × 12.5% = ₹21,875 + cess — overstating tax by ~₹19K.

How surcharge interacts with capital gains

Capital gains follow a different surcharge ladder than slab-rate income. The ceiling is 15% in both regimes, regardless of total income. This is one of the few places the Income Tax Act explicitly favors capital gains over salary.

For a high earner, the cap is large in absolute rupees. On ₹50 lakh of LTCG with total income of ₹3 crore, surcharge is calculated at 15% (capped) rather than 25% — a saving of roughly ₹3.1 lakh. This is why founders and senior executives intentionally realise gains in batches when their salary income is in the high-surcharge bands.

How AIS, TIS, and Form 26AS reconcile to your filing

The CPC (Centralized Processing Centre) reconciles your declared capital gains against the Annual Information Statement (AIS) line by line. The data flows in from:

• Stock exchanges (BSE, NSE) — equity and listed bond trades.
• Depositories (NSDL, CDSL) — share transfer records.
• AMCs / RTAs (CAMS, KFintech) — mutual fund redemptions.
• Sub-registrars — real estate transfers (the registry uplinks property sale data via Section 285BA).
• Crypto exchanges — VDA transactions.

Three reconciliation rules:

1. Match every line. If AIS shows 14 mutual fund redemptions in FY 2025-26, your filing should show the same 14. Aggregating into a single line will trigger a mismatch flag.
2. Don't miss broker corrections. Brokers occasionally report wrong cost basis (especially after corporate actions like mergers, demergers, bonus issues). Use your own contract notes as authoritative; flag broker mistakes via AIS feedback.
3. Account for off-AIS transactions. Foreign shares, P2P-transferred unlisted equity, and physical-gold sales may not appear in AIS. You must still report them — non-disclosure does not become safe just because AIS doesn't see them.

The reconciliation step is the single highest-leverage 30 minutes of capital gains filing. A reconciled return compiles cleanly. An unreconciled return collects 143(1) intimations weeks later and absorbs hours of correspondence.

Run your slab-tax separately from your CG tax

Your salary tax and capital gains tax are computed independently. The 87A rebate, slab structure, surcharge ladder, and standard deduction apply to slab-rate income only. Capital gains have their own rate, their own threshold, their own surcharge cap.

The five mistakes that show up in filings

After several filing seasons under the new regime, the same five patterns recur:

1. Wrong holding-period bucket on real estate

The pre-Budget 36-month rule is well-remembered; the new 24-month rule is not. Selling a property at month 25 and assuming it's STCG (slab-rate) over-pays meaningfully. Selling at month 23 and assuming it's LTCG (12.5%) under-pays. Check the buy date carefully.

2. Missing the property grandfathering choice

Many taxpayers default to the new 12.5% no-indexation rate without computing Option B. If your property is older than ~10-15 years, the indexed cost path frequently wins — the ₹1-3 lakh saving is missed if you default.

3. Treating debt MF post-April-2023 as LTCG

Tax software and brokers occasionally still show "LTCG" labels on post-April-2023 debt-fund redemptions. Verify the original purchase date of each tranche; anything bought on/after 1 April 2023 is slab-rate full stop.

4. Not filing the return when only a loss exists

A loss-only year still requires filing a return on time to preserve carry-forward. The most common version of this mistake: a taxpayer realises a ₹2 lakh equity loss in FY 2025-26, has no other tax to pay because of the ₹12L 87A rebate, and skips filing. The carry-forward is then forfeited and ₹25,000 of future tax saving (₹2L × 12.5%) is lost.

5. Forgetting Schedule FA on foreign shares

Vested RSUs sitting in a US brokerage are reportable under Schedule FA every FY in which they were held — not just the year of sale. Indian employees of US tech companies frequently miss this for years. Black Money Act penalties are not bluffs; the Department has actually enforced them.

Run both regimes — capital gains can flip the choice

A high earner with substantial equity capital gains may find that the regime decision tips by the surcharge cap on CG and the 14% 80CCD(2) limit in the new regime. Use the comparison calculator with your actual realised gains plugged in, not just salary.

Where this article connects

For the slab-rate side of the regime decision, see Old vs New Tax Regime for AY 2026-27. For the surcharge ladder above ₹50 lakh of total income, see Surcharge & marginal relief at ₹50 lakh+. For ESOP / RSU perquisite tax (the first leg of the two-stage employer-equity taxation), see Evaluate a job offer beyond CTC. For the 87A rebate that explicitly does not apply to CG, see Section 87A rebate and the marginal-relief band.

Honest disclosure on accuracy

Capital gains computation is one of the highest-stakes parts of an Indian return. The rules above reflect the law as of AY 2026-27 — Budget 2024 amendments effective 23 July 2024, plus subsequent CBDT clarifications. They do not constitute tax advice for any specific transaction. Three situations always justify a CA review pre-filing:

• A real estate sale where the grandfathering choice is close.
• Any foreign-asset disposition (Schedule FA + DTAA + currency conversion).
• Total income clearing ₹2 crore where surcharge interactions become non-trivial.

Where the rule is ambiguous and a strict reading saves tens of thousands of rupees, the conservative path almost always pays off in the long run. Aggressive interpretations on AIS-visible transactions are not worth the recovery interest.