Capital Gains Tax in India (2025): Short-Term & Long-Term, Rates & Exemptions
What Is Capital Gains Tax and How Does It Work?
Capital gains tax in India is a tax levied on the profit you earn from the sale of capital assets. These assets may include real estate, stocks, mutual funds, gold, or any other valuable property. The tax applies only when the asset is sold, and the gain is “realized.”
In this article, you’ll understand how capital gains tax works in India, the difference between short-term and long-term capital gains, applicable rates, and available capital gains exemptions in 2025.
What Are Capital Assets?
A capital asset is any property held by an individual—whether it’s tangible like land and buildings or intangible like shares, trademarks, and patents. Common examples include:
- Real estate (residential or commercial)
- Equity shares
- Mutual funds
- Bonds or debentures
- Gold or jewelry
Types of Capital Gains
Capital gains are classified into two types based on the holding period of the asset:
1. Short-Term Capital Gains (STCG)
When you sell a capital asset within a specified short holding period, the profit is termed short-term capital gain.
- Listed shares or equity mutual funds: Sold within 12 months
- Real estate or other property: Sold within 24 or 36 months, depending on the asset
2. Long-Term Capital Gains (LTCG)
If the asset is held beyond the short-term threshold, the gain is called a long-term capital gain.
Capital Gains Tax Rates in India (FY 2025-26)
| Asset Type | STCG Tax Rate | LTCG Tax Rate |
|---|---|---|
| Listed Shares / Equity Mutual Funds | 15% (with STT paid) | 10% over ₹1 lakh (without indexation) |
| Real Estate / Gold / Debt Funds | Added to income & taxed as per slab | 20% (with indexation) |
Note: Surcharge and cess apply additionally as per income slab.
How Is Capital Gain Calculated?
The capital gain is calculated as:
Short-Term Capital Gain = Sale Price – (Purchase Price + Expenses)
Long-Term Capital Gain = Sale Price – (Indexed Purchase Price + Expenses)
Indexation adjusts the purchase price for inflation.
Exemptions on Capital Gains Tax in India
To promote reinvestment and savings, the Indian Income Tax Act offers several capital gains exemptions:
Section 54
Exemption on sale of a residential property if proceeds are used to buy another residential house.
Section 54EC
Exemption on long-term capital gains from property if reinvested in specified bonds (NHAI/REC) within 6 months.
Section 54F
Exemption for sale of any asset (except a house) if proceeds are used to buy a residential house.
Capital Gains Tax on Mutual Funds and Shares
- Equity-oriented funds held for more than 12 months attract 10% LTCG tax on gains exceeding ₹1 lakh per financial year.
- Debt mutual funds are now treated like short-term gains (as per recent amendments), and taxed as per income slab rate regardless of holding period.
Capital Gains Tax for NRIs
Non-Resident Indians (NRIs) are also liable to pay capital gains tax on the sale of Indian assets. TDS (Tax Deducted at Source) is applicable on such gains:
- STCG: 15%
- LTCG: 20% (with indexation)
NRIs can also avail exemptions under Sections 54 and 54EC, subject to conditions.
Recent Updates in Capital Gains Tax (2025)
- As of FY 2025-26, debt mutual funds with less than 35% equity exposure no longer get indexation benefits.
- Digital assets like crypto are taxed at a flat 30% without any deductions or exemptions.
Tips to Save Capital Gains Tax
- Reinvest in specified assets like residential property or government bonds.
- Use indexation while calculating long-term gains.
- Invest through SIPs or hold assets long-term for better tax efficiency.
- Split ownership of property with family to reduce tax liability.
- Consult a tax advisor for exemptions and compliance.
Conclusion
Capital gains tax in India is an important part of your financial planning. Understanding the difference between short-term and long-term capital gains, the applicable rates, and how to claim capital gains exemption can help you save significantly on your tax bill. Whether you’re investing in stocks, real estate, or mutual funds, being aware of the tax implications in 2025 ensures better returns and legal compliance.
Frequently Asked Questions (FAQs) About Capital Gains Tax in India
1. What is capital gains tax in India?
Capital gains tax in India is a tax you pay on the profit made from selling capital assets like real estate, stocks, mutual funds, or gold. It applies only when the gain is realized—i.e., when the asset is sold.
2. How are short-term and long-term capital gains different?
Short-term capital gains arise when you sell an asset within a short period (less than 12 months for shares and 24/36 months for other assets), and they are taxed at higher rates. Long-term capital gains are gains from assets held for a longer period and usually benefit from lower tax rates and indexation.
3. What is the capital gains tax rate in India for FY 2025-26?
- Short-term capital gains (STCG) on equity are taxed at 15%.
- Long-term capital gains (LTCG) on equity over ₹1 lakh are taxed at 10%.
- STCG on other assets is taxed as per your income slab.
- LTCG on non-equity assets is taxed at 20% with indexation.
4. Are there any exemptions on capital gains tax in India?
Yes, under sections like Section 54, 54F, and 54EC, you can claim exemptions by reinvesting gains in residential property or specified government bonds within a prescribed time limit.
5. How is long-term capital gain calculated with indexation?
To calculate LTCG with indexation, the purchase cost of the asset is adjusted using the Cost Inflation Index (CII), which helps reduce the taxable gain by accounting for inflation.
6. Is capital gains tax applicable to NRIs?
Yes, NRIs are subject to capital gains tax on the sale of assets in India. TDS is also deducted at source: 15% on short-term gains and 20% on long-term gains, with exemptions available under certain sections.
7. Is there capital gains tax on mutual funds in India?
Yes.
- Equity mutual funds held for over 12 months attract 10% LTCG tax over ₹1 lakh.
- Debt mutual funds, as per new rules, are taxed as short-term gains (as per slab), regardless of the holding period.
8. Can I save capital gains tax without buying property?
Yes, you can invest in Section 54EC bonds (like NHAI or REC bonds) within 6 months of selling the asset to claim exemption on long-term capital gains.
9. Is advance tax payable on capital gains?
Yes. If you earn substantial capital gains during a financial year, you may need to pay advance tax in installments to avoid interest penalties under Section 234B and 234C.
10. Are digital assets like cryptocurrency subject to capital gains tax?
Yes. Profits from digital assets such as cryptocurrencies are taxed at a flat 30% rate, with no deductions allowed except the cost of acquisition. This applies even if the asset is held long term.
Related Articles:
How to File Income Tax Returns Step-by-Step
