Tax Guide
Capital Gains Tax in India, Explained
Property, funds, shares, gold, crypto — what you owe on each, what you don't, and the rules that decide the difference. One page, plain English.
Updated for the current rates and holding periods.
A capital gain is simply what you sold it for, minus what it cost you. Everything else — the rate, the exemption, whether you owe anything at all — comes down to two questions: what did you sell, and how long did you hold it.
The two questions that decide everything
What you sold determines which rules apply. Shares and equity funds get one treatment, property another, debt funds another again, and crypto is in a category of its own misery.
How long you held it decides whether the gain is short-term or long-term. Long-term is almost always taxed more kindly. The threshold is not the same for every asset, which is where most confusion starts.
The whole picture, on one table
This is the table to bookmark. Everything below simply explains it.
| What you sold | Long-term after | Short-term rate | Long-term rate |
|---|---|---|---|
| Listed shares & equity funds | 12 months | 20% | 12.5% — first ₹1.25 lakh a year is free |
| Property (land, house) | 24 months | Your slab rate | 12.5%, no indexation |
| Debt funds bought on/after 1 Apr 2023 | Never — always short-term | Your slab rate | Not available |
| Gold, international funds, unlisted shares | 12 months if listed, else 24 | Your slab rate | 12.5%, no ₹1.25 lakh exemption |
| Crypto / VDA | Irrelevant — no distinction | Flat 30%, plus 1% TDS. No exemption, no set-off. | |
Add 4% cess to whatever comes out, and surcharge if your income is high — though surcharge on capital gains is capped at 15%.
Shares and equity funds
The most common case, and mercifully the simplest. Sell within 12 months and you pay a flat 20%. Sell after 12 months and you pay 12.5% — but only on gains above ₹1.25 lakh, which is free every year.
Two things people get wrong. That ₹1.25 lakh is an annual total across all your equity gains, not an allowance per stock or per fund. And the rate depends on when you sell, not when you bought.
The exemption doesn't roll over. Unused, it's gone on 31 March — which is why many investors deliberately realise about ₹1.25 lakh of long-term gains each year and immediately reinvest, resetting their cost base for free.
Property
Hold for more than 24 months and the gain is long-term, taxed at 12.5% without indexation. Sell sooner and it's added to your income at your slab rate — which can mean 30%. Simply waiting past the 24-month mark is often the cheapest tax planning available.
If you bought the property before 23 July 2024, you get a valuable choice: pay 12.5% without indexation, or 20% with indexation — whichever is lower. For older properties held through years of inflation, indexation often wins.
Property also has something no other asset has: you can reduce the tax to zero by reinvesting. See the full property guide for Sections 54, 54F and 54EC, which costs you can add to your purchase price, and the traps.
Debt funds: the rule that surprised everyone
Debt fund units bought on or after 1 April 2023 are always short-term, taxed at your slab rate, no matter how long you hold them. There is no long-term rate and no indexation. Hold for a decade — it changes nothing.
Units bought before that date are grandfathered and still get 12.5% after 24 months. Check your purchase dates; those old units may be worth keeping.
Crypto: a category of its own
Virtual digital assets are taxed unlike anything else, and uniquely harshly:
- A flat 30% on every gain. Holding period is irrelevant.
- 1% TDS on transactions.
- No deductions except your cost of acquisition.
- Losses cannot be set off against anything — not even other crypto gains — and cannot be carried forward.
That last point bears repeating, because it is the most punitive rule in Indian tax law. A gain on one coin and an equal loss on another leaves you taxed on the gain, with the loss simply evaporating.
Losses: the asset most people throw away
A loss isn't just a bad outcome — it's a tax asset, if you handle it right.
- A short-term loss can offset both short-term and long-term gains. It's the more useful of the two.
- A long-term loss can offset only long-term gains.
- Neither can touch your salary. Capital losses stay within capital gains.
- Unused losses carry forward 8 years — but only if you file your return by the due date. File late and they are lost permanently.
That last line is worth more than most tax advice you'll pay for. People with nothing to pay skip filing, and unknowingly throw away years of future tax relief.
How to pay less, legally
- Cross the holding-period line. A few extra weeks can move you from a 30% slab rate to 12.5%.
- Use the ₹1.25 lakh exemption every year. It doesn't carry forward.
- Harvest losses before 31 March to offset gains you've already booked.
- Reinvest property gains under Sections 54, 54F or 54EC to bring the tax to zero.
- Don't switch funds casually. A switch is a sale — tax is triggered even though no money reaches your bank.
One caution: don't let the tax tail wag the dog. Churning a good investment, or paying exit loads, to save a little tax usually costs more than it saves.
Reporting it properly
Any capital gain generally pushes you out of ITR-1 and into ITR-2 — the one exception being small equity long-term gains within the ₹1.25 lakh allowance, which ITR-1 now accommodates. Gains go in Schedule CG.
Two practical points. The tax department already has your trade data in your Annual Information Statement, so a small unreported redemption is a mismatch waiting to become a notice. And if your gain is large, you may owe advance tax — though the law lets you pay it in the instalments remaining after the gain arises, rather than penalising you for failing to predict it.
Tax Guide
Frequently Asked Questions
Capital gains on property, funds, shares, gold and crypto — the questions people actually ask.
The profit you make when you sell an asset for more than it cost you. What you pay on it depends on two things: what you sold, and how long you held it before selling.
It is simply how long you held the asset. Long-term gains are almost always taxed more kindly. The threshold differs by asset — 12 months for listed shares and equity funds, 24 months for property and most other assets.
Sell within 12 months and the gain is taxed at a flat 20%. Sell after 12 months and it is taxed at 12.5%, but only on gains above ₹1.25 lakh — the first ₹1.25 lakh each year is free.
Per year, and it is a total across all your equity gains combined — shares and every equity fund together. It is not an allowance per stock, per fund or per transaction. It also does not carry forward: unused, it is lost on 31 March.
Hold more than 24 months and the gain is long-term, taxed at 12.5% without indexation. Sell sooner and the gain is added to your income at your slab rate, which can mean 30%. Waiting past the 24-month mark is often the simplest saving available.
Only in one case. If you are a resident individual or HUF who bought the property before 23 July 2024, you can choose between 12.5% without indexation and 20% with indexation, whichever is lower. For older properties, indexation often wins.
Units bought on or after 1 April 2023 are always short-term, taxed at your slab rate, no matter how long you hold them. There is no long-term rate and no indexation. Units bought before that date still get 12.5% after 24 months.
Gold is not an equity asset, so it needs the longer holding period before the gain becomes long-term — after which it is taxed at 12.5%. It does not get the ₹1.25 lakh exemption, which belongs to equity alone. Physical gold, gold ETFs and sovereign gold bonds each have their own nuances.
Uniquely harshly. A flat 30% on every gain regardless of holding period, plus 1% TDS. No deductions except your cost. Worst of all, crypto losses cannot be set off against anything — not even other crypto gains — and cannot be carried forward.
Yes, within the capital gains head. A short-term loss can offset both short-term and long-term gains. A long-term loss can offset only long-term gains. Neither can be set off against your salary.
Eight years — but only if you file your income tax return by the due date. File late and the carry-forward right is destroyed permanently. People with no tax to pay often skip filing and unknowingly throw away years of future relief.
No. Capital losses stay within the capital gains head. They cannot reduce salary, business income, rent or interest income.
Yes. A switch is treated as a sale followed by a fresh purchase, so capital gains tax is triggered even though no money reaches your bank account. This surprises a great many investors.
Deliberately booking a loss before the year ends so it offsets gains you have already realised. India has no wash-sale rule, so you can repurchase the asset — though transactions lacking commercial substance can be challenged. It works for shares, funds, property and gold, but never for crypto.
By reinvesting. Section 54 lets you roll the gain into another residential house, 54F covers other long-term assets, and 54EC allows investment in specified bonds up to ₹50 lakh. Used properly these can reduce the tax to nil. See our property guide for the conditions and deadlines.
Generally ITR-2, since any capital gain pushes you out of ITR-1. The one exception is small equity long-term gains within the ₹1.25 lakh allowance, which ITR-1 now accommodates provided you have no losses to carry forward.
Possibly, if your total tax after TDS reaches ₹10,000. Because gains are hard to forecast, the law lets you pay the advance tax on a gain in the instalments remaining after it arises, rather than penalising you for not predicting it.
Yes. The tax department already sees your transactions in your Annual Information Statement. Skipping a small gain because it looks tax-free creates a mismatch, and mismatches are the most common trigger for a notice.
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