Capital gains tax in India

What did the July 2024 Budget change about capital gains taxation?

The Finance (No. 2) Act 2024, announced on 23 July 2024, enacted the most far-reaching restructure of Indian capital gains taxation since the introduction of the listed-equity preferential regime in 1992. Before the overhaul, long-term capital gains on most assets were taxed at 20% with the benefit of indexed cost of acquisition (using the Cost Inflation Index, or CII, published annually by the Central Board of Direct Taxes). After 23 July 2024, the rate for long-term gains on most assets dropped to a flat 12.5%, but the indexation benefit was simultaneously removed for all asset classes except a grandfathered carve-out for immovable property acquired before that date. Short-term capital gains on listed equity (Section 111A) rose from 15% to 20%. The annual exemption on listed-equity long-term gains (Section 112A) was raised from INR 1 lakh to INR 1.25 lakh. Neither Budget 2025 nor Budget 2026 altered any of these rates or thresholds, so the post-23 July 2024 framework is the current operative regime for FY 2025-26 (Assessment Year 2026-27). The India country overview covers the broader income-tax and business environment.

What are the current LTCG and STCG rates by asset type?

Rates in the table below reflect the post-23 July 2024 framework confirmed by PwC Worldwide Tax Summaries (May 2026) and the Income Tax Department. All rates are before surcharge and cess.

A surcharge of up to 15% (capped at 15% for gains under Sections 111A, 112, and 112A regardless of total income) and a 4% health and education cess apply on top of the base tax. The Section 87A rebate is not available against capital gains taxed at special flat rates.

How does the property grandfathering option work?

The removal of indexation raised immediate concern from owners of long-held real estate where inflation had substantially eroded the real gain. In response, the Finance Act 2024 inserted a grandfathered option applicable only to immovable property (land, building, or both) acquired on or before 22 July 2024. Where such property is subsequently sold on or after 23 July 2024, resident individuals and Hindu Undivided Families (HUFs) may elect between two calculations and pay the one resulting in a lower tax liability: (a) 12.5% on the gain computed without indexation, or (b) 20% on the gain computed using indexed cost of acquisition based on the published CII. The CBDT notified CII 376 for FY 2025-26 (Notification No. 70/2025 dated 1 July 2025). Prior-year CII was 363 (FY 2024-25). Non-resident taxpayers and companies do not qualify for the grandfathered option -- the default 12.5% without indexation applies to them regardless of acquisition date. Practitioners typically model both calculations before advising clients to disclose under one or the other; the indexed route tends to favor properties held for many years with a low original cost relative to current market value. The grandfathering election is made in the capital-gains schedule of the relevant Income Tax Return (ITR-2 or ITR-3).

What exemptions reduce capital gains liability?

The Income Tax Act 1961 preserves several reinvestment-linked exemption routes. Section 54 exempts long-term capital gains arising from the sale of a residential house where the entire gain is reinvested in another residential property (purchased within one year before or two years after disposal, or constructed within three years). The exemption is capped at INR 10 crore (approx. USD 1.2 million) with effect from Assessment Year 2024-25 -- gains above that ceiling remain taxable. Section 54F extends similar treatment to long-term gains from any capital asset other than a house, where the full net sale consideration (not just the gain) is reinvested in residential property; the same INR 10 crore ceiling applies. Section 54EC allows long-term capital gains on land or buildings to be sheltered by investing the gain amount -- capped at INR 50 lakh per financial year -- in specified bonds within six months of disposal. The bonds carry a five-year lock-in. Qualifying issuers currently include NHAI, REC, PFC, IRFC, and HUDCO (HUDCO added by CBDT Notification No. 31/2025 dated 7 April 2025). Capital Gains Account Scheme deposits in designated public-sector bank accounts by the ITR due date preserve the exemption where reinvestment has not yet occurred by filing time. Losses on short-term capital assets may be set off against both short-term and long-term gains in the same year; long-term capital losses may be set off only against long-term gains. Unabsorbed capital losses may be carried forward for up to eight assessment years, provided the return was filed on time. For full details on India's international tax relief framework, see the India tax treaty overview.

Readers should consult a Chartered Accountant (CA) registered with the Institute of Chartered Accountants of India (ICAI) -- or a qualified tax professional -- before making decisions about capital asset sales, reinvestment elections, or cross-border reporting.