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Capital gains tax directly affects every investor who sells property, shares, or mutual funds. The 2026 budget maintained stability: the framework from Budget 2024 largely continues, with specific updates for Sovereign Gold Bonds and derivatives.
This page covers:
- What capital gains tax is in India
- Budget 2026-27 key highlights — stability maintained
- Asset-wise tax treatment: equity, gold, mutual funds, property, SGBs, debt funds
- LTCG and STCG rates and holding periods — comprehensive table
- Key factors affecting tax liability
- Capital loss set-off and carry-forward rules
- Exemptions: Section 54, 54F, 54EC
- How to minimise capital gains tax legally
- How capital gains tax connects to property transactions and home loans
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What is capital gains tax in India?
Capital gains tax is the tax charged on the profit earned from selling a capital asset. A capital asset includes property (land and buildings), listed and unlisted shares, mutual funds, gold, bonds, and other investments. The profit from the sale, the sale price minus the cost of acquisition, is called a capital gain, which is taxable in the year the sale occurs.
Capital gains are classified as short-term or long-term based on the holding period of the asset before sale, each with different tax rates.
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Budget 2026-27 — capital gains tax key highlights
| Aspect | Status |
|---|---|
| LTCG rate (equity, equity MF) | 12.5% — unchanged |
| LTCG exemption (listed equity) | Rs. 1.25 lakh per year — unchanged |
| STCG rate (listed securities) | 20% — unchanged |
| LTCG on property | 12.5% without indexation (no change from 23 July 2024 amendment) |
| SGBs — secondary market buyers | Tax-free redemption at maturity only for original government-issue investors; secondary market buyers from 01 April 2026 taxed as capital assets |
| Debt mutual funds | All gains taxed as per slab rate — no LTCG benefit (unchanged from April 2023) |
| STT — futures | Increased to 0.05% (from 0.02%) |
| STT — options | Increased to 0.15% (from 0.10%) |
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LTCG and STCG rates — holding period and tax rate table
| Asset | Holding for LTCA | STCG rate | LTCG rate | Notes |
|---|---|---|---|---|
| Listed equity shares | 12 months | 20% | 12.5% (above Rs. 1.25 lakh exemption) | LTCG up to Rs. 1.25 lakh tax-free |
| Equity-oriented mutual funds | 12 months | 20% | 12.5% (above Rs. 1.25 lakh) | Same as equity shares |
| Units of business trust | 12 months | 20% | 12.5% | |
| Residential property | 24 months | Slab rate | 12.5% (no indexation from 23 July 2024) | Indexation removed |
| Other immovable property | 24 months | Slab rate | 12.5% | |
| Unlisted shares | 24 months | Slab rate | 12.5% | |
| Physical gold | 24 months | Slab rate | 12.5% | No indexation |
| Gold ETFs | 12 months | Slab rate | 12.5% | |
| Debt mutual funds (post Apr 2023) | All gains | Slab rate | Slab rate | No LTCG benefit at all |
| SGBs — original investor | At maturity | — | Tax-free at maturity | |
| SGBs — secondary market buyer (post April 01, 2026) | 12 months | Slab rate | 12.5% | New rule from April 01, 2026 |
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Key factors affecting capital gains tax liability
| Factor | How it affects tax |
|---|---|
| Type of asset | Different assets have different holding periods and tax rates |
| Holding period | Short-term gains taxed at higher rates; long-term at lower rates |
| Indexation (historical) | Indexation adjusted the purchase cost for inflation; removed for property and most assets from July 23, 2024 |
| Reinvestment exemptions | Gains can be exempt if reinvested in specified assets within prescribed timelines (Sections 54, 54F, 54EC) |
| Capital loss set-off | Losses from asset sales can reduce taxable gains |
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Capital loss set-off and carry-forward rules
| Rule | Details |
|---|---|
| STCL set-off | Short-term capital loss can be set off against both STCG and LTCG |
| LTCL set-off | Long-term capital loss can be set off only against LTCG, not against STCG |
| Carry-forward period | Both STCL and LTCL can be carried forward for 8 years |
| Filing requirement | Must file ITR before the due date to carry forward capital losses |
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Capital gains tax exemptions — Section 54, 54F, 54EC
| Section | What it exempts | Condition |
|---|---|---|
| Section 54 | LTCG on sale of residential property | Reinvest in another residential property within 2 years (purchase) or 3 years (construction); max exemption Rs. 10 crore |
| Section 54F | LTCG on sale of any long-term asset (not residential property) | Reinvest in residential property |
| Section 54EC | LTCG on property sale | Invest in specified government bonds (NHAI, REC) within 6 months; max Rs. 50 lakh |
These exemptions are particularly valuable for property sellers, using them effectively can eliminate or significantly reduce the LTCG tax liability.
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How to minimise capital gains tax legally
- Hold equity investments for more than 12 months to qualify for the lower 12.5% LTCG rate (vs 20% STCG)
- Use the Rs. 1.25 lakh LTCG exemption annually: stagger equity sales to stay within this limit each year
- Reinvest property sale proceeds under Section 54 or 54EC within the prescribed timelines
- Harvest STCL (short-term capital losses) by selling underperforming investments to offset STCG from other assets
- Use the CGAS (Capital Gains Account Scheme) if reinvestment cannot be completed before the ITR due date
Capital gains tax planning, particularly for property transactions, can save lakhs. The key is understanding holding periods, using available exemptions, and timing reinvestment correctly. When buying your next residential property to utilise a Section 54 exemption, Bajaj Finance offers home loans from 7.25% p.a.** with amounts up to Rs. 15 Crore* and tenures up to 32 years. Check your eligibility today.
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What is the capital gains tax on property sold in 2026?
For property held for more than 24 months (long-term), LTCG is taxed at 12.5% without indexation, following the removal of indexation from 23 July 2024. For property held for less than 24 months (short-term), the gain is added to your income and taxed at your applicable slab rate. The Section 54 exemption allows you to reinvest in another residential property and avoid the LTCG tax entirely (subject to conditions and the Rs. 10 crore cap).
Is the LTCG exemption on equity Rs. 1.25 lakh per person or per household?
The Rs. 1.25 lakh annual LTCG exemption on listed equity shares and equity-oriented mutual funds is per individual taxpayer, not per household. A husband and wife filing separate ITRs can each claim Rs. 1.25 lakh exemption on their own equity holdings, effectively doubling the household benefit.
What happened to indexation on property after the 2024 Budget?
Budget 2024 removed the indexation benefit for property sold after 23 July 2024. Previously, the purchase cost was indexed for inflation (using the Cost Inflation Index) before calculating gains, which significantly reduced the taxable gain. From 23 July 2024, LTCG on property is calculated at 12.5% on the actual gain (sale price minus original purchase cost) without any inflation adjustment. The Budget 2026 confirmed this continues.
How to calculate capital gain on property?
To calculate capital gain on property, deduct the purchase price, improvement costs, and sale-related expenses (such as brokerage or stamp duty) from the total selling price. The result is the taxable capital gain, which may be short-term or long-term depending on the holding period.
Does selling a property to repay a home loan attract capital gains tax?
Yes. If you sell a property, regardless of the reason, any gain above the cost of acquisition is subject to capital gains tax. The fact that the proceeds are used to repay a home loan does not exempt the transaction. However, if you reinvest the LTCG proceeds in another residential property within the Section 54 timeline, the tax can be avoided. Consult a tax advisor before selling a mortgaged property.
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