Capital gains and investments · Tax Year 2025-26
Short-term vs long-term capital gains
A gain is short-term or long-term depending on how long you held the asset: 12 months for listed shares and equity funds, 24 months for most other assets. The tax rate depends on it. Learn the holding periods, rates and exemptions.
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A capital gain is short-term if you held the asset for 12 months or less (listed shares, equity funds) or 24 months or less (most other assets), and long-term if you held it longer. For transfers on or after 23-Jul-2024, short-term gains on listed shares are taxed at 20%, long-term gains on listed shares at 12.5% above ₹1,25,000 a year, and most other gains follow the rates in the table below.
These are the rules TaxCare applies for the tax year 2025-26, which are signed off. For the tax year 2026-27 they are carried forward provisionally and are not yet signed off against the Income-tax Act, 2025.
The section numbers in this guide are those of the Income-tax Act, 1961, which governs the tax year 2025-26. Under the Income-tax Act, 2025, which applies from the tax year 2026-27, the special rate for short-term gains on listed shares and equity funds (old section 111A) is in section 196, long-term gains on them above ₹1,25,000 (old section 112A) are in section 198, and other long-term gains (old section 112) are in section 197.
Holding periods
Asset | Long-term if held for more than | Notes |
|---|---|---|
Listed shares, equity-oriented mutual fund units, business-trust units | 12 months |
|
Zero-coupon bonds | 12 months |
|
Other assets: land, buildings, unlisted shares, gold, debt funds and others | 24 months | For transfers on or after 23-Jul-2024 |
Before 23-Jul-2024 the period was 36 months for assets such as gold and debt units and 24 months for unlisted shares and immovable property. The longer 36-month rule applies to old transfers, not to anything you sell now.
A special rule treats gains on specified mutual fund units (market-linked debt funds acquired on or after 1-Apr-2023) as short-term whatever the holding period. This is section 50AA of the Income-tax Act, 1961.
Tax rates
Gain | Rate | Section |
|---|---|---|
Short-term gain on listed shares and equity funds (transfer on or after 23-Jul-2024) | 20% | 111A |
Long-term gain on listed shares and equity funds (on or after 23-Jul-2024) | 12.5%, only on the gain above ₹1,25,000 in the year | 112A |
Long-term gain on other assets | 12.5% without indexation; 20% with indexation allowed for land and buildings acquired before 23-Jul-2024 | 112 |
Short-term gain on other assets | Slab rate, like any other income |
|
Virtual digital assets (crypto) | 30%, no deduction except cost, no set-off of losses | 115BBH |
Before 23-Jul-2024 the rates were 15% (short-term) and 10% (long-term on listed shares). Health and education cess of 4% is added in all cases.
The choice of 20% with indexation is open only to a resident individual or HUF, for land or a building acquired before 23-Jul-2024.
Examples
These examples are for the tax year 2025-26 and assume your other income already uses up the basic exemption limit, so the whole gain is taxed. They were worked out with TaxCare's tax engine.
Example 1: listed shares
You bought shares for ₹1,00,000 and sold them after 8 months for ₹1,50,000. The gain is ₹50,000, short-term. Tax is 20% = ₹10,000 plus 4% cess, or ₹10,400.
Example 2: equity fund held for 3 years
Your long-term gain on listed equity and equity funds in the year is ₹2,00,000. The first ₹1,25,000 is exempt. Tax is 12.5% × ₹75,000 = ₹9,375, plus cess, ₹9,750.
Example 3: property sold after 5 years
You sold a flat for ₹80,00,000, bought for ₹50,00,000, held for 5 years. The gain is ₹30,00,000 and is long-term. Tax at 12.5% is ₹3,75,000, plus 4% cess, ₹3,90,000.
If you are a resident and bought the flat before 23-Jul-2024, you may instead choose 20% with indexation. Say you bought it in July 2020 (cost inflation index 301) and sold it in August 2025 (index 376). The indexed cost is ₹50,00,000 × 376 ÷ 301 = ₹62,45,847, so the indexed gain is ₹17,54,153. Tax at 20% is ₹3,50,831, which is ₹24,169 less than ₹3,75,000, so indexation is the better choice here.
Exemptions and set-off
- ₹1,25,000 exemption on long-term gains from listed shares and equity funds, per year.
- Grandfathering: for equity shares and equity-oriented units bought before 1-Feb-2018, the cost is the higher of the actual cost and the lower of the fair market value on 31-Jan-2018 and the sale value.
- Property: gains can be exempted by buying another house (section 54, 54F; the new house cost counted up to ₹10 crore) or by investing within six months in specified bonds (section 54EC, up to ₹50 lakh).
- Losses: a short-term loss can be set off against any capital gain; a long-term loss only against a long-term gain. You carry forward what is left, but only if your return is filed on time. A belated return carries forward only house property loss and unabsorbed depreciation.
Which ITR form?
- ITR-1: only if your capital gains are long-term on listed shares or equity funds up to ₹1,25,000 and nothing else.
- ITR-2: for most people with capital gains.
- ITR-3: if you also have business income with books, or trading in F&O.
See which ITR form should I file. Selling shares gets reported in your AIS under "sale of securities". See capital gains statement from your broker.
Special rate income and the new regime rebate
Under the new regime the ₹60,000 rebate covers tax on normal slab income only, not tax on special-rate income such as short-term gains on shares. So a ₹12 lakh taxable income made partly of such gains may still pay tax.
How TaxCare helps
TaxCare brings in your sale and purchase data where the portal has it, sorts each gain into short-term or long-term, applies the rate, the exemption and set-off, and chooses the right ITR form. It shows the gains in your AIS so you can see if something is missing. A Tax Expert can handle property sales and complex cases. See pricing.
This guide gives general information and is not professional tax advice.
Questions on this topic
What is the holding period for long-term gains?
12 months for listed shares, equity-oriented mutual fund units and similar. 24 months for most other assets, such as property and unlisted shares, for transfers on or after 23-Jul-2024.
What is the tax rate on short-term gains from listed shares?
20% on transfers on or after 23-Jul-2024, under section 111A.
What is the tax rate on long-term gains from listed shares?
12.5% on the gain above ₹1,25,000 in a year, under section 112A, for transfers on or after 23-Jul-2024.
Which ITR form do I use for capital gains?
ITR-1 allows only long-term gains on listed shares and equity funds up to ₹1,25,000. Any other capital gains need ITR-2 or ITR-3.
Can I set off a capital loss?
Short-term losses can be set off against both short-term and long-term gains; long-term losses only against long-term gains. Unused losses can be carried forward if the return is filed on time.
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