Capital Gains Tax in India: A Practical Guide for Tax Year 2026–27
Sold shares, mutual funds, land, a house or another investment? The tax depends on the asset, when it was acquired, when it was transferred and how the gain is calculated. This guide explains the key capital gains rules under the Income-tax Act, 2025 in plain language.
What Is Capital Gains Tax?
Capital gains tax may arise when you transfer a capital asset and make a profit. It commonly applies to property, listed shares, mutual fund units, bonds, gold and other investments. The exact treatment depends on the nature of the asset and the provisions that apply to the transaction.
From 1 April 2026, the Income-tax Act, 2025 applies to the relevant tax year. The Act reorganises and renumbers provisions from the earlier law. For capital gains, Section 67 deals with chargeability and Section 72 sets out the general method of computation. A section number changing does not, by itself, mean that every tax rate or condition has changed.
Which Transactions May Give Rise to Capital Gains?
Sale of Land or House Property
Sale of a plot, flat, house or commercial property may create a capital gain. Purchase records, improvement costs, transfer expenses and stamp-duty valuation may need review.
Shares and Mutual Funds
Listed shares, equity-oriented funds, debt-oriented funds and other securities may have different holding-period and rate rules. Broker and fund statements are important.
Gold and Other Investments
Physical gold, certain bonds, units and other investment assets can have their own tax treatment. Keep acquisition evidence and sale or redemption statements.
NRI Transactions
Non-residents selling Indian property or investments should also check withholding tax, residential status, treaty considerations where relevant and repatriation documentation.
Business Assets
Sale of depreciable assets, business undertakings or assets held as stock-in-trade may be governed by special rules or a different head of income.
Gift, Inheritance or Joint Ownership
For assets received by gift, inheritance or through family arrangements, the cost and holding period may depend on the mode of acquisition and specific provisions.
How Is Capital Gain Calculated?
The general computation starts with the full value of consideration and deducts eligible transfer expenses and the cost of acquisition and improvement. Special provisions can modify this calculation, so the formula should be treated as a starting point rather than a substitute for checking the facts.
| Particulars | What to check |
|---|---|
| Sale consideration | The amount received or receivable, together with any valuation rule that may apply to the transaction. |
| Less: transfer expenses | Expenses incurred wholly and exclusively in connection with the transfer, supported by records. |
| Less: cost of acquisition | The original purchase cost or the cost determined under the applicable rules for gifts, inheritance and other special cases. |
| Less: cost of improvement | Eligible capital improvement costs, supported by invoices and payment evidence. |
| Result | The resulting gain is then classified and tested against the relevant tax rate, exemption and reporting provisions. |
Short-Term and Long-Term Capital Gains
The distinction between short-term capital gains (STCG) and long-term capital gains (LTCG) is based mainly on the period for which the asset was held. The required holding period is not identical for every type of asset, and special rules may apply.
Short-Term Capital Gains (STCG)
A gain may be short-term when the asset is sold before the applicable holding-period threshold is met.
- Confirm the acquisition and transfer dates.
- Check whether a special rate applies to the asset.
- For other assets, the gain may be taxed at the applicable rates for the taxpayer.
Long-Term Capital Gains (LTCG)
A gain may be long-term when the relevant holding-period requirement is satisfied.
- Check the asset-specific holding period.
- Confirm whether indexation is permitted or excluded for the transaction.
- Review any threshold, exemption or special rate before calculating the final tax.
For many transfers taking place on or after 23 July 2024, the familiar framework includes a 12.5% rate for several categories of long-term capital gains without indexation, and a 20% rate for certain STCG on specified listed securities subject to securities transaction tax. These are not universal rates for every asset or taxpayer. Verify the precise provision and any later amendments applicable to the transfer and tax year.
Capital Gains on Property, Shares and Mutual Funds
Property Sale
Check the purchase deed, sale deed, acquisition cost, eligible improvement expenses, transfer expenses and the stamp-duty value where relevant. Also examine whether a reinvestment exemption may be available and whether its conditions can be met.
Listed Shares
Use broker contract notes and capital-gains statements to reconcile purchase dates, sale dates, quantity, cost and sale value. Where applicable, confirm securities transaction tax and the specific STCG or LTCG provision.
Mutual Funds
Download consolidated account statements and capital-gains reports from the relevant fund houses or platforms. Different schemes and acquisition dates may receive different treatment, so avoid relying only on the name of the fund.
Can You Claim an Exemption on Capital Gains?
In specified circumstances, the law allows relief when the taxpayer invests in a qualifying asset or meets other prescribed conditions. Property-related provisions often have strict timelines and eligibility requirements. The exemption is not automatic merely because the sale proceeds are used for another investment.
Residential House Reinvestment
Where the relevant conditions are satisfied, a qualifying individual or HUF may be able to claim relief on eligible long-term gains from a residential house by purchasing or constructing another residential house in India.
Specified Bonds or Other Assets
Some provisions may permit relief for investment in specified bonds, agricultural land or other qualifying assets. Each provision has its own eligibility, investment limit and time period.
Our Capital Gains Tax Review Process
Understand the transaction
We identify the asset, ownership, acquisition method, purchase date, transfer date and taxpayer's residential status where relevant.
Review the records
Purchase and sale documents, broker statements, mutual fund reports, improvement bills and tax deduction records are checked for completeness.
Compute the gain
The working considers the applicable cost rules, transfer expenses, holding period, valuation provisions and any special treatment.
Check rates and exemptions
We review the relevant provisions, possible reinvestment relief, tax already deducted and any advance-tax implications based on the facts provided.
Prepare for reporting
The computation and supporting information can then be used for the relevant income-tax return and related compliance, subject to the agreed scope.
Documents to Keep for Capital Gains Tax
For Property
- Purchase and sale deeds
- Stamp-duty and registration details
- Brokerage and transfer-expense bills
- Improvement or construction invoices
- Loan and ownership records, where relevant
For Shares and Funds
- Broker capital-gains report
- Contract notes and trade ledger
- Mutual fund capital-gains statement
- Consolidated account statement
- Dividend and corporate-action details, where relevant
For Tax Filing
- PAN and residential-status details
- Previous income-tax return
- AIS and Form 26AS
- TDS certificates and tax-payment challans
- Reinvestment evidence, if claiming relief
Frequently Asked Questions
When does the Income-tax Act, 2025 apply?
The Income-tax Act, 2025 comes into effect from 1 April 2026. For a transaction, confirm the relevant tax year and the applicable transitional or specific provisions rather than relying only on the date the return is filed.
Which section covers capital gains under the new Act?
Section 67 deals with chargeability of capital gains, while Section 72 sets out the general method of computation. Other sections cover cost, special transactions, exemptions and tax rates.
Are capital gains always taxed at 12.5%?
No. The rate depends on the type of asset, whether the gain is short-term or long-term, the date of transfer, the taxpayer and the relevant special provision. A single rate should not be applied to every capital gain.
Is indexation available for all long-term capital gains?
No. Indexation depends on the asset and the applicable provision. Several categories of transfers made on or after 23 July 2024 are generally computed without indexation, while limited special or transitional rules may apply in specific cases.
Can I reduce capital gains tax by buying another property?
Potentially, if the facts meet the conditions of a relevant exemption provision. The eligible taxpayer, original asset, new asset, investment amount and statutory timelines must all be checked.
What if tax was already deducted when I sold property?
TDS is generally a tax credit, not necessarily the final tax liability. Reconcile the deduction with Form 26AS and AIS, calculate the actual gain and determine whether further tax is payable or a refund may arise.
Do I need to report a capital gain if tax was not deducted?
Absence of TDS does not by itself make a gain non-taxable or remove reporting obligations. Review the transaction and applicable return requirements.
Can you review capital gains from multiple brokers or fund houses?
Yes. The records can be consolidated and checked for missing transactions, cost details and inconsistencies before the tax computation is finalised. The work required depends on the volume and quality of the records.
Need Help Calculating Your Capital Gains Tax?
Before filing your return, have your property, share or mutual fund transactions reviewed against the applicable provisions. A clear working can help you understand the gain, possible relief and records required for reporting.
JPR Capital Works • Chartered Accountants • Tax and compliance support
Disclaimer: This page is for general information and should not be treated as a tax opinion for a specific transaction. Tax treatment depends on the facts, the type of asset, the date of transfer and the law and rules in force for the relevant tax year. Please obtain a transaction-specific review before acting. Legislative amendments and notifications may change the position.
Primary reference: Income-tax Act, 2025, including Sections 67 and 72, and the official Income Tax Department material. Always verify the current Act, rules, notifications and applicable rate provisions before finalising a computation.