Capital Gains Tax in India: Holding Periods, Rates and What You Actually Pay

You sold something — listed shares, a flat, inherited gold, a mutual fund folio — and now there is a number to put on a return. This page covers what decides the tax on it: how long you held the asset, which rate follows, and what the arithmetic looks like.

Quick answer

Held for more than 12 months (listed securities) or 24 months (everything else), a gain is long-term and taxed at 12.5%, without indexation. Held for less, it is short-term: 20% on securities-transaction-tax-paid equity, your ordinary slab rate on everything else. Long-term gains on that equity are exempt up to ₹1,25,000 in aggregate for the year.

Who this page is for

Anyone who has already sold and now needs the number: an investor with a broker statement full of trades, someone who has just registered a sale deed, a parent liquidating gold, a founder selling unlisted shares. It assumes only that you know what you sold, when you bought it, and what each side cost.

It does not cover which ITR form to use or the documents to gather — our income tax return filing guide covers form selection, due dates and paperwork.

Which Act your sale sits under

Two Acts are live at once in 2026, and mixing them up puts the wrong section numbers on a return. The rate values are the same on both sides — only the citation moves.

The Income-tax Act, 2025 came into force on 1 April 2026, under its section 1(3). Note the sub-section: section 1(2) is the extent clause, not the commencement clause. So the 2025 Act governs the income of FY 2026-27, which it calls tax year 2026-27.

Assessment year 2026-27 is the income of FY 2025-26, a year that ended before the 2025 Act commenced, and it is governed by the Income-tax Act, 1961 — the return, the assessment and any proceeding on it, including one started after 1 April 2026. Section 536(2)(c) of the 2025 Act says so expressly: the repealed Act continues to apply to proceedings initiated on or after 1 April 2026 in respect of any tax year beginning before that date.

The Finance Act, 2026 proves the split by carrying two separate charging sections: section 2(1) charges assessment year 2026-27 under the Income-tax Act, 1961 at the rates in Part I-A of its First Schedule, and section 3(1) charges tax year 2026-27 under the Income-tax Act, 2025 at the rates in Part I-B.

Which means, for the sections you quote on a capital gains computation:

For the wider picture of what the new Act changed and what it merely renumbered, see our guide to the Income-tax Act, 2025; the TDS section crosswalk does the same for deductions.

Step 1: how long did you hold it?

Everything downstream depends on this, and the rules were simplified on 23 July 2024 into two holding periods.

The rule underneath the table is short: all listed securities, 12 months; everything else, 24 months. Under the 2025 Act, "listed securities" means securities listed on a recognised stock exchange in India, and "unlisted securities" is everything that is not — section 197(6).

Two practical notes. The 36-month period is gone entirely, so a bond or gold holding that used to be short-term at month 30 is now long-term. And these periods took effect for transfers on or after 23 July 2024, covering the whole of FY 2025-26 as well as FY 2026-27 — no split-year computation for either year now in play.

Step 2: work out the gain

The gain is what is left after taking the cost of acquisition, the cost of improvement and the expenditure incurred wholly in connection with the transfer out of the sale consideration.

The change that matters here is that indexation is gone. The second proviso to section 48 of the 1961 Act, which let you inflate the cost of property, gold and other unlisted assets by a notified index, was removed for computing long-term capital gains, and the 12.5% rate replaced it. So for almost every asset the computation is now plain arithmetic: sale price, minus actual cost, minus actual improvement, minus transfer expenses.

The one surviving exception is the land-and-building relief below, narrower than most people assume.

Step 3: the rate

Short-term

Only two possibilities, and only one is a special rate.

Twenty per cent applies where the asset is an equity share in a company, a unit of an equity oriented fund, or a unit of a business trust, and the transaction is chargeable to securities transaction tax — section 196(1) for tax year 2026-27, section 111A for assessment year 2026-27. The rate was raised to 20% from the earlier 15% with effect from 23 July 2024.

Everything else is taxed at your applicable slab rate. There is no separate short-term rate for property, gold, debt or unlisted shares — the gain is simply part of total income. The slab table for assessment year 2026-27 is in our income tax return filing guide; this page states no slab rate of its own.

One carve-out: the securities-transaction-tax condition does not apply to a transaction on a recognised stock exchange in an International Financial Services Centre where the consideration is paid or payable in foreign currency — section 196(3).

Long-term

Twelve and a half per cent, across the board. Section 197(1) for tax year 2026-27; section 112 for assessment year 2026-27. The long-term rate is 12.5% for all categories of assets — property, gold, unlisted shares, listed bonds and debentures alike. Listed bonds and debentures moved from 20% without indexation to 12.5%. For securities-transaction-tax-paid equity the same 12.5% applies, but only above an exemption — the next section.

The ₹1,25,000 exemption, and exactly what it covers

Long-term gains on equity shares, units of an equity oriented fund and units of a business trust are taxed at 12.5% only on the amount exceeding ₹1,25,000. The conditions are specific: securities transaction tax must have been paid on both acquisition and transfer for an equity share, and on transfer for a unit of a fund or business trust.

Three things people get wrong about it:

• It is an aggregate for the year, not a per-transaction allowance — one exemption, across every qualifying sale, every broker and every demat account.
• It does not travel. Long-term gains on a flat, on gold, on debt instruments or on unlisted shares get none of it.
• It is a slice off the top, not a threshold. Crossing ₹1,25,000 does not bring the whole gain into charge; only the excess is taxed.

The earlier exemption under this head was ₹1,00,000, raised to ₹1,25,000 with effect from 23 July 2024.

Land and building bought before 23 July 2024

The one place where indexation still does anything, and its scope is narrow enough to need stating precisely. For tax year 2026-27 it is section 197(3) of the Income-tax Act, 2025, and it applies only where all of the following are true:

• the transferor is a resident individual or Hindu undivided family — not a company, firm or non-resident;
• the asset is land or a building, or both — not gold, unlisted shares or a fund;
• the asset was acquired before 23 July 2024; and
• the gain is long-term.

Where they are, the tax is computed twice. A is the tax at 12.5% on the gain computed without indexation. B is the tax at 20% on the gain computed with the indexed cost of acquisition and the indexed cost of improvement. The excess of A over B is ignored.

That is not the same as a choice between two regimes:

• You pay the lower of the two figures. There is nothing to elect and no form to file.
• It is not a refund. Only the excess tax is ignored.
• It cannot create a loss. A negative indexed gain does not become a deductible loss by this route.

An honest caveat for assessment year 2026-27. This relief was added to the 2024 Bill between introduction and enactment, so it is not in the Budget memorandum we relied on for the assessment year 2026-27 figures, and the bare text of the Income-tax Act, 1961 could not be captured from the Government sources this page rests on. Its presence in section 197(3), with a 23 July 2024 cut-off predating that Act's own commencement, is strong evidence the same relief sits in section 112 of the 1961 Act — but we will not state that Act's text as if we had read it. If you are filing for assessment year 2026-27, the relief exists; have it confirmed against section 112 for your particular transfer before you rely on a figure.

The basic exemption is not wasted

A rule that quietly saves money for anyone whose income is mostly gains. For a resident individual or Hindu undivided family, where total income as reduced by the special-rate gains falls below the maximum amount not chargeable to tax, the gains are first reduced by that shortfall, and only the balance is taxed at the special rate.

It runs through all three special-rate provisions — section 196(2) for short-term equity gains, 197(2) for long-term gains generally, 198(3) for long-term equity gains. Worked example 4 shows what it is worth.

Easy to miss, and pulling the other way: deductions under Chapter VIII of the 2025 Act are computed on gross total income as reduced by these gains — sections 196(4) and 197(5). You cannot set an ordinary deduction against special-rate gains.

Unlisted bonds and debentures

An exception that catches anyone assuming every long-term gain is now 12.5%. Gains on unlisted bonds and unlisted debentures fall under section 50AA of the Income-tax Act, 1961 and are taxed at applicable rates whether the gain is short-term or long-term. No 12.5% concession, no holding-period benefit.

We have not published a section number from the Income-tax Act, 2025 for this item, because we did not verify one. If you are transferring an unlisted bond or debenture in tax year 2026-27, confirm the citation before quoting it.

The section 87A rebate does not reach these gains

Worth its own heading because of how much money it moves. The rebate under section 87A is not available against special-rate income, and capital gains taxed under the provisions above are special-rate income.

So two people with the same total income can pay very different amounts of tax depending on where that income came from. A salaried filer under the rebate ceiling may pay nothing; someone whose income is mostly capital gains still pays on the gains, because the rebate cannot be set against them. If you are modelling a sale in advance, our tax planning service works the position out before you transact.

Worked examples

Each example states its own assumptions. None includes surcharge or cess, neither of which this page computes, so read every figure as income-tax before those additions.

1. Listed shares, both sides of the 12-month line

Assumptions: Anita is a resident individual who sells two lots of listed equity on the exchange, with securities transaction tax paid on every transaction. Lot A: bought for ₹3,00,000, held 9 months, sold for ₹4,10,000. Lot B: bought for ₹6,00,000, held 3 years, sold for ₹9,00,000. No other capital gains; her other income is well above the basic exemption.

• Lot A — 9 months is under 12, so this is a short-term gain of ₹1,10,000. Securities transaction tax was paid, so the special rate applies: 20% of ₹1,10,000 = ₹22,000.
• Lot B — 3 years is over 12, so this is a long-term gain of ₹3,00,000. The ₹1,25,000 aggregate exemption comes off first, leaving ₹1,75,000 chargeable. At 12.5% that is ₹21,875.
• Total: ₹43,875.

The exemption applied only to Lot B. It never touches short-term gains.

2. Gold held past the new 24-month line

Assumptions: Rakesh is a resident individual. He bought gold jewellery in March 2023 for ₹5,00,000 and sells it in FY 2026-27 for ₹8,20,000, with ₹20,000 of selling expenses incurred wholly in connection with the transfer, and no other capital gains.

• Holding is over 24 months, so the gain is long-term. Under the old 36-month rule for gold, the same holding would have been short-term.
• Gain = ₹8,20,000 − ₹5,00,000 − ₹20,000 = ₹3,00,000. There is no indexation to apply.
• Tax at 12.5% = ₹37,500. The ₹1,25,000 exemption does not apply — gold is not in the section 198 category.

Sold in month 20 instead, the whole ₹3,00,000 would have been short-term, added to total income and taxed at his slab rate, with no special rate available.

3. A flat bought before 23 July 2024

Assumptions: Sunita is a resident individual. She bought a flat in 2019 for ₹40,00,000 and sells it in FY 2026-27 for ₹90,00,000, with ₹1,00,000 of transfer expenses, and has no other capital gains. For the second limb we assume the indexed cost of acquisition is ₹58,00,000 — the cost inflation index numbers are notified by the tax authority and are not stated on this page, so substitute the notified figures for your own years.

• Computation A, at 12.5% without indexation. Gain = ₹90,00,000 − ₹40,00,000 − ₹1,00,000 = ₹49,00,000. Tax at 12.5% = ₹6,12,500.
• Computation B, at 20% with indexation. Gain = ₹90,00,000 − ₹58,00,000 − ₹1,00,000 = ₹31,00,000. Tax at 20% = ₹6,20,000.
• A is lower than B, so there is no excess to ignore and she pays ₹6,12,500.

Now change one fact. Had the flat cost ₹55,00,000 in 2019, with an indexed cost of ₹79,00,000, computation A gives a gain of ₹34,00,000 taxed at 12.5% = ₹4,25,000, and computation B a gain of ₹10,00,000 taxed at 20% = ₹2,00,000. The excess of ₹2,25,000 is ignored and she pays ₹2,00,000.

The relief is worth most where the asset was held long and appreciated modestly, and nothing where it appreciated sharply. Were Sunita a company, a firm or a non-resident, neither version of this comparison would be open to her.

4. A small gain and almost no other income

Assumptions: Meera is a resident individual. Her income other than capital gains for the year is ₹1,00,000 below the maximum amount not chargeable to tax in her case — we do not state that limit here, because it depends on your regime and status, and the slab table is in our income tax return filing guide. She has a long-term gain of ₹5,00,000 on a gold sale.

• Without the absorption rule, tax would be 12.5% of ₹5,00,000 = ₹62,500.
• With it, the gain is first reduced by the ₹1,00,000 shortfall, leaving ₹4,00,000 chargeable. Tax at 12.5% = ₹50,000.
• Saving: ₹12,500, from a rule that costs nothing to claim.

The same mechanism works for short-term equity gains at 20% and long-term equity gains at 12.5% above the exemption, and only for a resident individual or Hindu undivided family.

When the money is actually due

A capital gain does not wait for the return. It feeds advance tax, and a large sale late in the year can create a liability that was never in your instalment plan.

There is a relief for exactly that. For tax year 2026-27, section 425(4) of the Income-tax Act, 2025 provides that no deferment interest arises on a shortfall caused by underestimating or failing to estimate capital gains, provided the full tax on that income is paid in any of the remaining instalments, or by 31 March of the tax year. You are not penalised for failing to predict a sale, only for sitting on the tax after it. For assessment year 2026-27 the corresponding provision is section 234C; confirm the terms of its carve-out for your own year.

Our advance tax guidance covers the instalment dates and interest mechanics, which this page does not restate.

What this page does not cover, and why

There is a version of this article that would have been longer and less reliable. These are the parts left out on purpose, each because we could not verify it from the primary sources this page rests on. Every one can change your final number materially.

• Reinvestment exemptions — the section 54 family. Rolling a house gain into another house, or into specified bonds, can reduce or defer the tax. We state no figure, no time limit and no cap for any of them.
• Surcharge. It applies above certain income levels and has its own caps for capital gains. We have not verified those, so every figure above is before surcharge.
• Grandfathering of pre-1-February-2018 equity cost. A rule substitutes a higher deemed cost for listed equity acquired before that date, which can cut a long-term equity gain substantially. We did not capture its text and state no figure. If you hold shares bought before February 2018, ask about it specifically.
• Carry-forward periods for losses. The settled shape is that long-term losses are set off against long-term gains, and short-term losses against either. We state that shape without a citation because we did not verify one, and state no carry-forward period at all.
• Non-resident capital gains. Outside this page's scope, beyond saying the rules differ and interact with treaty relief.

Take each to a professional with your dates and documents — they turn on facts a general page cannot see.

Common mistakes

• Treating the ₹1,25,000 exemption as available on any long-term gain. It reaches securities-transaction-tax-paid equity, equity oriented fund units and business trust units. Nothing else.
• Assuming 36 months still applies to gold or bonds. Both moved to 24 months on 23 July 2024.
• Applying 20% to every short-term gain. That rate is only for securities-transaction-tax-paid equity and the two unit categories; short-term gains on property, gold, debt and unlisted shares have no special rate at all.
• Indexing the cost out of habit. The only place indexation survives is the land-and-building comparison, for a resident individual or Hindu undivided family on an asset acquired before 23 July 2024.
• Expecting the section 87A rebate to wipe out a small capital gain. It is not available against special-rate income.
• Quoting the wrong Act's section numbers. For a sale in FY 2025-26 use sections 111A, 112 and 112A; for a sale on or after 1 April 2026, sections 196, 197 and 198.
• Treating the buyer's withholding on a property sale as the end of it. Tax deducted is a credit against your liability, not a settlement — you still compute the gain and pay the balance. If a return already went in with the gain wrong, revised return filing is the repair route.

If the sale is done and you want the computation checked before it goes on a return, we file capital gains returns with the working shown line by line.

Sources and currency

Applies to: Transfers on or after 23 July 2024. That covers assessment year 2026-27 (the income of FY 2025-26, governed by the Income-tax Act, 1961) and tax year 2026-27 (the income of FY 2026-27, governed by the Income-tax Act, 2025). The rate values are the same on both sides; only the section number moves.

Every rate, holding period and threshold on this page was read on 20 August 2026 from the Gazette of India text of the Income-tax Act, 2025 and the Finance Act, 2026, and from the Budget memoranda listed below. One limitation is disclosed in the page itself and repeated here: the bare text of the Income-tax Act, 1961 could not be captured — the Government hosts that returned it were unreachable — so the assessment year 2026-27 position rests on the Budget memorandum text rather than on a quotation from that Act. Capital gains provisions change at each Finance Act, and the outcome in any real sale depends on your own records. Confirm the current position before you file.

• Income-tax Act, 2025 (No. 30 of 2025) — Gazette of India Extraordinary, 21 August 2025: s.1(3) commencement, s.196 short-term gains, s.197 long-term gains including the s.197(3) land-and-building relief, s.198 long-term gains on STT-paid equity, s.425 advance-tax interest, s.536 repeal and savings
• Memorandum to the Finance (No. 2) Bill, 2024, pages 34 to 36 — Rationalisation and Simplification of taxation of Capital Gains: the two holding periods, the 20% short-term rate, the 12.5% long-term rate, removal of indexation, the ₹1,25,000 exemption and the 23 July 2024 effective date
• Finance Act, 2026 (No. 4 of 2026) — Gazette of India Extraordinary, 30 March 2026: s.2(1) charges assessment year 2026-27 under the Income-tax Act, 1961 at Part I-A rates, and s.3(1) charges tax year 2026-27 under the Income-tax Act, 2025 at Part I-B rates
• Memorandum to the Finance Bill, 2025 — the s.115BAC(1A) slab rates and the s.87A rebate for assessment year 2026-27, the rebate that cannot be set against special-rate capital gains