What are the current Capital Gains Tax rates in India for equity, mutual funds, and real estate?
Under the unified capital gains regime enacted by the Finance Act: Long-Term Capital Gains (LTCG) on listed shares and equity mutual funds are taxed at a flat 12.5% under Section 112A on profits exceeding ₹1,25,000 per financial year. Short-Term Capital Gains (STCG) on listed equity are taxed at 20% under Section 111A. For real estate property acquired before 23 July 2024, individual taxpayers have a grandfathering choice: pay 12.5% without indexation OR 20% with indexation, whichever is lower.
1. Master Capital Gains Matrix Across All Asset Classes
| Asset Class | Holding Period for LTCG | LTCG Tax Rate | STCG Tax Rate |
|---|---|---|---|
| Listed Equity Shares & Equity MFs | > 12 Months | 12.5% (Over ₹1.25L exemption) | 20% (Section 111A) |
| Unlisted Shares (Startups / Pre-IPO) | > 24 Months | 12.5% (No indexation) | Applicable Slab Rate |
| Real Estate (House, Flat, Land) | > 24 Months | 12.5% (or 20% with indexation if bought before 23-Jul-24) | Applicable Slab Rate |
| Gold ETFs & Gold Mutual Funds | > 12 Months | 12.5% (No indexation) | Applicable Slab Rate |
| Specified Debt Mutual Funds (≤35% equity) | Any period | Slab Rate (Deemed STCG Section 50AA) | Applicable Slab Rate |
2. Section 112A Deep Dive: How the ₹1.25 Lakh Exemption Operates
The annual tax-free threshold was increased from ₹1,00,000 to ₹1,25,000 per taxpayer per financial year:
Suppose you invested in Nifty 50 Index funds and earned total long-term capital gains of ₹3,00,000 during the financial year:
- Total LTCG Realized: ₹3,00,000
- Less Statutory Exemption under Section 112A: -₹1,25,000
- Net Taxable Long-Term Capital Gains: ₹1,75,000
- Tax Payable at 12.5%: ₹1,75,000 × 12.5% = ₹21,875
- Add 4% Health & Education Cess: ₹875 → Total Tax Due = ₹22,750
3. Real Estate Indexation Grandfathering: Which Option Should You Choose?
Ideal for properties that experienced rapid, high price appreciation (e.g. buying in Gurugram, Bengaluru, or Hyderabad at ₹50 Lakh and selling at ₹2.5 Crore). Here, 12.5% on nominal profit produces lower tax than indexed calculations.
Ideal for legacy ancestral properties or real estate held for 15–25 years where price growth was moderate. Factoring in the Cost Inflation Index (CII) lifts your acquisition cost substantially, reducing taxable gains to zero or near-zero.
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4. Frequently Asked Questions (FAQs)
Can I use capital losses to offset salary income or business profits?▼
No. Under Section 71, capital losses (whether long-term or short-term) cannot be set off against any other head of income, including salary, business profits, or house property. They can only be set off against capital gains, and can be carried forward for up to 8 assessment years.
What is Section 54EC and which bonds qualify for capital gain exemption?▼
Section 54EC allows you to save LTCG tax arising from the sale of land or building by investing the capital gain into specified bonds issued by REC, PFC, NHAI, or IRFC within 6 months of transfer. The maximum investment limit is ₹50 Lakh per financial year with a 5-year lock-in period.
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