The complete capital gains guide for AY 2026-27
Capital gains is the area of personal tax that changed most in 2024, and the area where the largest sums are won or lost through correct planning. Whether you sold listed shares, redeemed mutual funds, exited a property, inherited and sold gold, traded derivatives or vested foreign RSUs, the rules now differ by asset class, holding period and date of acquisition. This guide brings the whole landscape together and links to the detailed article on each asset.
What is a capital gain
A capital gain arises when you transfer a capital asset — shares, mutual funds, property, gold, jewellery, foreign shares — for more than its cost. The gain is short-term or long-term depending on how long you held the asset, and the holding-period threshold and tax rate vary by asset class. Understanding which bucket your asset falls into is the first and most important step.
Holding periods by asset class
- Listed shares and equity mutual funds: long-term after more than 12 months.
- Immovable property (land, building): long-term after more than 24 months.
- Unlisted shares, foreign shares, gold and jewellery: long-term after more than 24 months.
- Debt mutual funds (bought on/after 1 April 2023): no long-term benefit — always taxed at slab rates.
The date of acquisition matters too, because the July-2024 changes created a before-and-after distinction for several assets.
Listed shares and equity mutual funds
After 23 July 2024, short-term gains (Section 111A) on listed equity and equity funds are taxed at 20%, and long-term gains (Section 112A) at 12.5% on the amount above ₹1.25 lakh a year (the first ₹1.25 lakh is exempt). Debt funds bought after 1 April 2023 are taxed entirely at slab rates. The set-off rules are where investors leave money behind: short-term losses offset both short- and long-term gains; long-term losses offset only long-term gains; and unused losses carry forward eight years only if you file on time. Read the full detail in our guide to capital gains on shares and mutual funds.
Sale of property
Property is where the 2024 change bites hardest. For property acquired on or after 23 July 2024, long-term gains are taxed at a flat 12.5% without indexation. For property acquired before that date, a resident individual or HUF may choose the lower of 12.5% without indexation or 20% with indexation — and for long-held Pune flats bought decades ago, the indexation route is often still cheaper. Exemptions under Sections 54, 54F and 54EC can shelter the gain entirely if you reinvest in a house or in specified bonds, and the Capital Gains Account Scheme preserves the exemption when reinvestment spans a deadline. Buyers must deduct 1% TDS under Section 194-IA above ₹50 lakh; for NRI sellers, Section 195 applies at higher rates. Our full guide covers capital gains on the sale of property.
Inherited property and gold
Inheriting an asset is not taxable — but selling it is, and the rules surprise people. Your cost is the previous owner's cost, your holding period includes theirs, and for assets acquired before 1 April 2001 you may use the fair market value as on 1 April 2001 as the cost base. This often dramatically reduces the taxable gain on an old family property or inherited gold. The detailed treatment is in our guide on capital gains on inherited property and gold.
F&O and intraday — not capital gains at all
A crucial classification point: F&O is business income, not capital gains, reported in ITR-3, with turnover computed on net differences plus option premium, and losses carried forward eight years against business income. Intraday equity is speculative business income with stricter set-off limits. Many traders wrongly file these as capital gains. See our guide to F&O trading taxation.
RSUs, ESOPs and foreign shares
Equity compensation is taxed at two moments — as salary at vesting/exercise, and as capital gains at sale (on the gain above the already-taxed FMV). Foreign shares are treated as unlisted: long-term after 24 months at 12.5%, with mandatory Schedule FA disclosure regardless of whether you sold. Getting the cost base and holding period right avoids double taxation; missing Schedule FA risks a ₹10 lakh penalty. Read RSU and ESOP taxation in India.
Crypto and virtual digital assets
Crypto is a special case, taxed at a flat 30% with a 1% TDS and no set-off of losses — quite unlike ordinary capital gains. If you traded virtual digital assets, see our dedicated crypto and VDA tax guide.
The set-off and carry-forward rules in one place
Across asset classes, two principles save the most tax. First, order your set-offs correctly: short-term losses are the most flexible (they offset both short- and long-term gains), so use them where they save the most. Second, always file by the due date, because the right to carry forward unused capital losses for eight years is forfeited the moment your return is late. A disciplined investor treats loss years as deductions banked for the future, not as setbacks to ignore.
Reconcile every transaction with your AIS
Every share sale, mutual-fund redemption and property transaction is reported to the department and appears in your AIS. Before filing, reconcile your broker and AMC statements against it so your return doesn't trigger a notice — see AIS, TIS and 26AS reconciliation. Then report gains in the correct schedule of ITR-2 (or ITR-3 for F&O); our ITR form selector confirms which form you need.
Plan capital gains before year-end, not at filing
The best capital-gains outcomes are designed before 31 March — harvesting losses to offset gains, timing a sale to cross a holding-period threshold, or sequencing a property reinvestment to fit a Section 54 window. By filing season the facts are fixed; the planning value is in acting earlier. That said, even at filing there is real money in choosing the right property method, ordering set-offs, and claiming every exemption.
Cost of acquisition, improvement and selling expenses
The taxable gain is never simply "sale price minus purchase price". You may reduce the sale consideration by the cost of acquisition, the cost of improvement (genuine capital additions, not routine repairs), and the expenses incurred wholly for the transfer — brokerage, legal fees, and stamp duty on sale. For property, major improvement costs can be indexed (where indexation applies) from the year incurred. Keeping invoices for renovations, brokerage and legal work directly lowers your tax, yet these are exactly the records taxpayers most often fail to preserve. For inherited assets, the previous owner's cost and improvement costs flow through to you.
The Capital Gains Account Scheme
Exemptions under Sections 54 and 54F require you to reinvest the gain (or net consideration) in a new house within a set period of one to three years — but the return is filed long before that period ends. The Capital Gains Account Scheme (CGAS) bridges the gap: deposit the unutilised gain in a designated CGAS account with a bank before the return due date, and the exemption is preserved while you complete the purchase or construction. If the amount is not ultimately used within the window, it becomes taxable in that later year. Using CGAS correctly is often the difference between keeping and losing a large property exemption, and the timing is unforgiving — the deposit must precede the filing deadline.
Gold, jewellery and other capital assets
Physical gold and jewellery are capital assets: long-term after 24 months, taxed at 12.5% after the 2024 change, with the 1 April 2001 fair-value option for older holdings. Sovereign Gold Bonds carry their own favourable treatment on redemption. Listed bonds and debentures, unlisted shares and foreign assets each have specific holding periods and rates. The common thread is that the asset class, the holding period and the acquisition date together determine the tax — there is no single "capital gains rate", which is precisely why an asset-by-asset computation matters.
The most common capital-gains mistakes we fix
Season after season we correct the same errors: defaulting a long-held property to 12.5% without indexation when 20% with indexation was cheaper; paying tax twice on RSUs by ignoring the vesting cost base; treating F&O as capital gains; failing to offset losses or filing late and forfeiting the carry-forward; omitting brokerage and improvement costs that would have reduced the gain; and missing the CGAS deposit before the deadline, losing a property exemption. Every one is avoidable with a methodical pre-filing computation.
Plan around year-end: harvest losses, time your sales
The highest-value capital-gains work happens before 31 March: tax-loss harvesting to offset booked gains, timing a sale to cross a holding-period threshold (turning a 20% short-term equity gain into a 12.5% long-term one), and staggering a property sale to fit a Section 54 reinvestment window. A short annual portfolio review before year-end routinely saves far more than the cost of the advice — and leaves you with a clean, low-tax position at filing.
Capital-gains FAQs
Is the first ₹1.25 lakh of equity LTCG really tax-free each year? Yes — long-term gains on listed shares and equity funds up to ₹1.25 lakh a year are exempt; only the excess is taxed at 12.5%.
Can I carry forward a capital loss if I file late? No. Carry-forward of capital losses is allowed only if the return is filed by the due date, so timely filing is essential in a loss year.
Do I pay capital gains when I inherit property? No — inheritance itself is not taxed. Capital gains arise only when you later sell, using the original owner's cost and holding period.
How indexation works — and when it still helps
Indexation adjusts your purchase cost for inflation using the Cost Inflation Index (CII), so you are taxed only on the real gain. Although indexation was withdrawn for most assets after July 2024, it survives as an option for property acquired before 23 July 2024 (for resident individuals and HUFs), who may pay the lower of 12.5% without indexation or 20% with it. The longer and cheaper the original purchase, the more powerful indexation becomes — a flat bought in 2004 for ₹15 lakh has an indexed cost many times higher than its actual cost, sharply cutting the taxable gain. The only way to know which method wins is to compute the indexed figure and compare; defaulting to 12.5% can cost lakhs on an old property.
Set-off ordering — a practical example
Suppose in one year you have a ₹2 lakh short-term equity loss, a ₹3 lakh long-term equity gain and a ₹1 lakh short-term equity gain. The short-term loss can offset either type of gain, so you would apply it where it saves the most tax — against the short-term gain (taxed at 20%) first, then the long-term gain (12.5%). After set-off, only the residual long-term gain remains, and the first ₹1.25 lakh of that is exempt. Ordering set-offs deliberately, rather than letting software apply them mechanically, frequently lowers the final bill. Any unabsorbed loss is then carried forward for eight years — provided you file on time.
Reporting capital gains in the ITR schedules
Capital gains are reported in dedicated schedules of ITR-2 (or ITR-3 if you also have business income such as F&O): Schedule CG for the gains themselves, Schedule 112A for the scrip-wise long-term equity details, and Schedule CFL for losses carried forward. Accurate scrip-wise reporting matters because it is matched against the data brokers report to the department. Reconciling your broker and AMC statements with your AIS before populating these schedules is what keeps the return notice-free.
Capital-gains FAQs (continued)
Are debt mutual funds eligible for the 12.5% long-term rate? No. Debt funds bought on or after 1 April 2023 are taxed at slab rates regardless of holding period, with no long-term benefit.
Can I claim both Section 54 and 54EC on the same property gain? Yes, with planning — you can combine reinvestment in a house (54) with up to ₹50 lakh in 54EC bonds for the balance, subject to the conditions of each.
Is Sovereign Gold Bond redemption taxable? Redemption of SGBs at maturity by an individual is exempt from capital gains; selling them in the secondary market before maturity follows normal capital-gains rules.
Advance tax on capital gains
Capital gains are notoriously hard to predict, so the law allows advance tax on a gain to be paid in the instalment falling due after the gain arises, rather than retrospectively. But once a large gain is booked — a property sale, a big equity exit — you should compute and pay the resulting advance tax in the next instalment to avoid 234C interest. A mid-year sale without a corresponding advance-tax payment is a frequent source of interest at filing, entirely avoidable with a quick computation when the gain occurs.
Gifts, inheritance and capital gains
Receiving an asset as a gift from a relative or by inheritance is not taxable in your hands. But when you later sell it, capital gains apply using the previous owner's cost and holding period, with the 1 April 2001 fair-value option for older assets. Gifts from non-relatives above ₹50,000 can, however, be taxable as income on receipt. Understanding the cost-base inheritance rule is essential before selling any gifted or inherited asset, because it usually reduces the taxable gain substantially.
Capital-gains FAQs (final)
Do I pay capital gains if I switch between mutual fund schemes? Yes — a switch is treated as a redemption and a fresh purchase, so it is a taxable transfer even though no money reaches your bank.
Is there TDS on my equity capital gains? Generally no TDS on listed-equity capital gains for residents (STT applies instead), but the gains are still fully taxable and must be reported.
How are bonus and rights shares taxed? Bonus shares have a nil cost of acquisition; their holding period runs from allotment, which affects whether the gain is short- or long-term.
The bottom line on capital gains
Capital-gains tax in AY 2026-27 rewards two things above all: knowing the rule for your specific asset, and acting early. The asset class sets the holding period and rate; the acquisition date decides whether indexation is on the table; the set-off order and timely filing protect your losses; and the exemptions under Sections 54, 54F and 54EC can shelter large property gains entirely. None of this is automatic — software computes what you tell it, not what is optimal. A short, deliberate review of each transaction, ideally before year-end and certainly before filing, is what turns a frightening capital-gains year into a well-managed one.
Is jewellery making-charge included in the cost of acquisition? The cost of jewellery includes the price paid; documented making charges that formed part of the acquisition cost can be considered, so keep the original purchase invoice.
File your capital-gains return with RDA, Pune
From a single equity portfolio to a complex year of property, RSUs and F&O, we compute every gain correctly, apply the optimal method and exemptions, reconcile against your AIS, and file the right form on time so your losses carry forward. Book a capital-gains review at rdatax.in or call +91 77570 45059 — RDA Tax Advisory Services, Office No. 102, Snehraj Apartment, Baner, Pune 411045. With the 31 July 2026 deadline near, book early.
