Capital gains tax on stocks and property, explained

Two clocks and three rates

Indian capital gains tax depends on two questions: how long you held the asset, and what kind of asset it is. Since 23 July 2024 the holding-period rule has been simple. Listed securities (shares, equity mutual funds, listed bonds) become long-term after 12 months. Everything else, including property, unlisted shares and gold held physically, needs 24 months.

Add 4% health and education cess to every rate, and surcharge for high incomes. Short-term gains on property and unlisted shares are added to your other income and taxed at your slab. The section 87A rebate cannot be used against the special rates on equity gains.

Shares and equity funds

The listed-equity regime is the friendliest one. Short-term gains are taxed at a flat 20%. Long-term gains are taxed at 12.5% only on the part above ₹1.25 lakh a year, an exemption shared across all your shares and equity funds.

Here is what that looks like on an actual fund category. As of 1 October 2026, the median flexi-cap fund (Direct plan, Growth option) returned 10.11% a year over five years. At that rate, ₹10 lakh invested five years ago is worth about ₹16.19 lakh:

That is about 10% of the gain. Selling in two different financial years, using two exemptions, would cut it by about ₹16,250. The capital gains tax calculator handles your own figures.

Three details matter for shares in particular:

• Units are matched oldest first. Shares in a demat account and mutual fund units both follow FIFO, so a partial sale comes out of your earliest purchases.
• Shares bought before 1 February 2018 have their cost stepped up to the 31 January 2018 price, if that is higher. This grandfathering still applies to old holdings.
• Losses. A short-term loss can be set against any capital gain; a long-term loss only against long-term gains. Unused losses carry forward eight years if you file on time. Our post on tax-loss harvesting shows how to use them.

Property

Property is where the rules have changed most and where most of the money is.

Bought on or after 23 July 2024: long-term gains are taxed at a flat 12.5%, without indexation.

Bought before 23 July 2024 and sold after it: a resident individual or HUF pays whichever is lower: 12.5% without indexation, or 20% on the indexed gain. Indexation uses the Cost Inflation Index, which is 384 for FY 2026-27 against 100 for the base year 2001-02. A property bought for ₹40 lakh in FY 2014-15 (index 240) has an indexed cost of ₹64 lakh. Sold for ₹1 crore, the two routes compare like this:

Here indexation wins narrowly. A property that rose much faster than inflation would tip the other way. The property capital gains calculator compares the two for any dates.

Non-residents, companies and firms get no choice; they pay 12.5% without indexation.

One point most summaries miss: the indexed route caps the tax, it does not change the gain. Reinvestment relief, set-off and carry-forward all work off the un-indexed figure, and the indexed route cannot turn a gain into a loss. Property capital gains after indexation explains why.

Other property rules worth knowing:

• If the sale price is more than 10% below the stamp-duty value, the stamp-duty value is treated as the sale price.
• Cost of improvement is added to your cost, and brokerage and other transfer expenses reduce the gain.
• The buyer deducts 1% TDS where the price is ₹50 lakh or more. For a non-resident seller TDS is much higher, at the capital gains rate plus surcharge and cess.

Reinvesting to reduce the tax

Three routes defer or remove long-term gains, known for decades as sections 54, 54F and 54EC:

• House to house (54). Gains from selling a residential house are exempt to the extent they are invested in another residential house, bought within one year before or two years after the sale, or built within three years. The exemption is capped at ₹10 crore.
• Any asset to a house (54F). Gains on other long-term assets, including shares, can be exempted by buying a house, but the whole sale proceeds have to be invested for full relief, and you may not own more than one other house at the time.
• Bonds (54EC). Up to ₹50 lakh of gains from land or buildings invested within six months in specified bonds is exempt. The bonds are locked in for five years.

Money not reinvested by the due date of your return can be parked in the Capital Gains Account Scheme at a bank to keep the claim alive.

Before you sell

Work out which clock applies, which rate and how much exemption is left this year. For a property sale, run both routes and check reinvestment options before the sale date, not after. For an overview of fund taxation, start with how mutual funds are taxed.

This is educational commentary, not tax or investment advice; rates and limits change with each Budget, and past fund returns do not predict future returns.