- Article 14: LTCG on Equity Shares and Mutual Funds: Section 112A Explained with Examples and Tax-Saving Strategies
- Article 15: Capital Gains on Property Sale India FY 2025-26: Indexation Choice, Section 54, 54EC, and 54F Explained
- Article 16: Debt Mutual Fund Taxation After April 2023: Why Your FD-Like Returns Are Now FD-Like Taxed
Capital Gains Tax in India Post-Budget 2024: Everything Changed on 23 July 2024
Introduction: a watershed moment for Indian investors
The Finance (No.2) Act 2024 presented on 23 July 2024 was not a gentle nudge to capital gains tax — it was a structural overhaul. Three major changes landed simultaneously: the LTCG rate on equity was raised from 10% to 12.5%, the STCG rate on equity jumped from 15% to 20%, and the indexation benefit was removed for virtually all long-term assets. Budget 2025 did not touch these rates. Budget 2026 left them alone again. What changed on 23 July 2024 is now the settled framework for FY 2025-26.
This article gives you the complete picture — every asset class, every rate, the holding period rules, and the one surviving election for property owners. By the end, you will be able to compute your capital gains tax without needing to cross-reference three different sources.
The pivot date: 23 July 2024
For transactions completed on or before 22 July 2024, the old rates applied: 15% STCG on equity, 10% LTCG on equity above ₹1 lakh, 20%+indexation on other LTCG. For transactions from 23 July 2024 onwards, the new rates apply. Since FY 2025-26 started after 23 July 2024, the entire year's transactions fall under the new framework.
The complete capital gains rate matrix for FY 2025-26
| Asset class | STCG holding period | STCG rate | LTCG holding period | LTCG rate |
|---|---|---|---|---|
| Listed equity shares (STT paid) | ≤12 months | 20% (Sec 111A) | >12 months | 12.5% on gains above ₹1.25L (Sec 112A) |
| Equity-oriented MFs (>65% equity) | ≤12 months | 20% (Sec 111A) | >12 months | 12.5% on gains above ₹1.25L (Sec 112A) |
| Unlisted equity shares | ≤24 months | Slab rate | >24 months | 12.5% no indexation (Sec 112) |
| Immovable property (land/building) | ≤24 months | Slab rate | >24 months | 12.5% no index, or 20%+index if acquired pre-23 Jul 2024 (Sec 112) |
| Gold (physical, sovereign bonds) | ≤24 months | Slab rate | >24 months | 12.5% no indexation (Sec 112) |
| Debt MFs acquired before 1 Apr 2023 | ≤36 months | Slab rate | >36 months | 12.5% no indexation (Sec 112) |
| Debt MFs acquired on/after 1 Apr 2023 | Always (Sec 50AA) | Slab rate | Not applicable | Slab rate regardless of holding period |
| Listed bonds/debentures | ≤12 months | Slab rate | >12 months | 12.5% no indexation (Sec 112) |
| Unlisted bonds/debentures | ≤36 months | Slab rate | >36 months | 12.5% no indexation (Sec 112) |
| Units of business trusts (REITs/InvITs) | ≤12 months | 20% (Sec 111A) | >12 months | 12.5% (Sec 112A) |
| Four exceptions and special cases 1. ₹1.25 lakh annual exemption: Applies only to Section 112A (equity and equity MF LTCG). Not available for property, gold, or other assets. 2. Indexation election for property: Only resident individuals and HUFs selling property acquired before 23 July 2024 can choose between 12.5% (no index) or 20% (with CII index, FY 2025-26 CII = 376). 3. Buyback proceeds: From 1 October 2024, taxed as dividend at slab rate in shareholders' hands — not capital gains. 4. Section 87A rebate exclusion: Section 87A rebate cannot offset tax on LTCG under Section 112A. It can offset tax on other income. |
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Worked example 1: Priya sells HDFC Bank shares — equity LTCG
Priya bought 500 shares of HDFC Bank at ₹1,400 each (₹7,00,000 total) in March 2023. She sells them in September 2025 at ₹2,100 each (₹10,50,000). Holding period: 30 months > 12 months. STT paid on both buy and sell.
| Step | Amount (₹) |
|---|---|
| Sale proceeds | 10,50,000 |
| Cost of acquisition | 7,00,000 |
| Long-term capital gain | 3,50,000 |
| Less: ₹1.25 lakh annual exemption (Section 112A) | (1,25,000) |
| Taxable LTCG | 2,25,000 |
| Tax @ 12.5% (Section 112A) | 28,125 |
| Add: 4% cess | 1,125 |
| Total capital gains tax | 29,250 |
No indexation. No deduction from Chapter VI-A. No 87A rebate on this ₹28,125. Priya pays ₹29,250. If she had sold in the same month shares that generated another ₹50,000 of LTCG from a different equity MF, the ₹1.25 lakh exemption is already used — the full ₹50,000 would be taxable at 12.5%.
| *"The ₹1.25 lakh exemption is per year, not per sale. Spread equity profit-booking across years to use it efficiently — this is called LTCG harvesting."* |
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Worked example 2: Rahul sells equity MF — STCG
Rahul bought Mirae Asset Emerging Bluechip Fund units worth ₹4,00,000 in January 2025. He redeems in August 2025 for ₹4,70,000 — a gain of ₹70,000. Holding: 7 months = STCG.
| Step | Amount (₹) |
|---|---|
| Redemption value | 4,70,000 |
| Cost (purchase) | 4,00,000 |
| Short-term capital gain | 70,000 |
| Tax @ 20% (Section 111A) | 14,000 |
| Add: 4% cess | 560 |
| Total tax | 14,560 |
Note how the 20% STCG rate on a 7-month equity fund hold creates ₹14,560 of tax on ₹70,000 profit. The effective post-tax gain is ₹55,440. If Rahul had simply waited 5 more months (total 12 months+1 day), his LTCG at 12.5% would have been ₹8,750 — a ₹5,810 saving. This is the arithmetic behind "don't sell equity before 12 months".
Worked example 3: Mrs. Krishnamurthy sells gold — 24-month rule
Mrs. Krishnamurthy sold 100 grams of physical gold in November 2025 for ₹7,50,000. She bought it in June 2022 for ₹4,80,000. Holding: 41 months > 24 months = LTCG.
| Step | Amount (₹) |
|---|---|
| Sale consideration | 7,50,000 |
| Cost of acquisition | 4,80,000 |
| LTCG (no indexation available for gold post-Budget 2024) | 2,70,000 |
| Tax @ 12.5% (Section 112) | 33,750 |
| Add: 4% cess | 1,350 |
| Total tax | 35,100 |
Before Budget 2024, Mrs. Krishnamurthy could have used indexation on gold (old rate: 20% with indexation, CII-adjusted cost would have been higher). With CII 2022-23 = 331 and FY 2025-26 CII = 376, indexed cost = ₹4,80,000 × (376 ÷ 331) = ₹5,45,226 — LTCG with indexation would have been ₹2,04,774 at 20% = ₹40,955 plus cess. Compare to new rate: ₹35,100. Here, the Budget 2024 change actually saves her ₹5,855 on gold. This will not always be true — depends on purchase vintage and holding period.
The indexation election for property: how to decide
This is the most important planning decision for property sellers in FY 2025-26 who acquired their property before 23 July 2024. The choice: 12.5% on actual gains (no index), or 20% on CII-adjusted gains.
The formula: compute LTCG under both options, pick the lower tax.
| Compare | 12.5% (no index) | 20% (with index) |
|---|---|---|
| Cost used | Actual purchase price | Indexed cost = Purchase × (376 / CII of purchase year) |
| Capital gain | Sale price minus actual cost | Sale price minus indexed cost |
| Tax rate | 12.5% | 20% |
| When 12.5% wins | Short holding (less indexation uplift) | Old property with high indexation benefit |
| When 20%+index wins | Usually older vintage properties (pre-2015) | Acquired long ago at low price |
Property example: Flat bought in 2008, sold in 2025
Vivek bought a flat in Bengaluru in FY 2008-09 for ₹35,00,000. He sells it in October 2025 for ₹1,20,00,000. Transfer expenses: ₹3,00,000. Net sale: ₹1,17,00,000.
Option A: 12.5% without indexation
| Step | Amount (₹) |
|---|---|
| Net sale consideration | 1,17,00,000 |
| Cost of acquisition | 35,00,000 |
| LTCG | 82,00,000 |
| Tax @ 12.5% | 10,25,000 |
| Cess @ 4% | 41,000 |
| Total tax (Option A) | 10,66,000 |
Option B: 20% with indexation
CII for FY 2008-09 = 137. CII for FY 2025-26 = 376. Indexed cost = ₹35,00,000 × (376 ÷ 137) = ₹96,06,569.
| Step | Amount (₹) |
|---|---|
| Net sale consideration | 1,17,00,000 |
| Indexed cost of acquisition | 96,06,569 |
| LTCG (with indexation) | 20,93,431 |
| Tax @ 20% | 4,18,686 |
| Cess @ 4% | 16,747 |
| Total tax (Option B) | 4,35,433 |
| Verdict for Vivek Option B (20% with indexation) saves ₹6,30,567 compared to Option A. A flat bought in 2008 at ₹35 lakh has a heavily indexed cost of ₹96 lakh — this dramatically reduces the taxable gain. General rule: the older the property (pre-2015 acquisition) and the longer held, the more likely Option B wins. For recent purchases (post-2019), Option A often wins because the index uplift is modest. Always compute both and pick the lower. Your chartered accountant can do this in minutes with the CII table. |
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Debt mutual funds: the two-tier system you must understand
The debt MF taxation now has a hard dividing line at 1 April 2023:
| Category | Acquired before 1 Apr 2023 | Acquired on/after 1 Apr 2023 |
|---|---|---|
| Holding ≤ 36 months | STCG — slab rate | Always slab rate (Sec 50AA) |
| Holding > 36 months | LTCG — 12.5% no indexation (post Budget 2024) | Always slab rate (Sec 50AA) |
| Indexation | Not available (Budget 2024 removed it) | Not applicable |
| Annual exemption | None (112A exemption is for equity only) | None |
This means a debt MF bought in June 2023 and redeemed in June 2026 (3 years) generates income taxable at 30% (for someone in the highest slab) — the same as a bank FD. The LTCG treatment is completely gone for post-April 2023 debt MFs. This is why many investors shifted to bank FDs, target maturity funds with different classification, or corporate bond funds with specific structures after April 2023.
Capital loss set-off: the rules that can save you tax
If you have both gains and losses from capital asset sales, the set-off rules reduce your net tax:
| Loss type | Can be set off against |
|---|---|
| Short-term capital loss | Any STCG + any LTCG |
| Long-term capital loss | LTCG only (not STCG) |
| Capital loss (either) | NOT against salary, rental, or business income |
| Unabsorbed capital loss | Carried forward for 8 assessment years |
| Tax planning with loss set-off If you have LTCG of ₹3 lakh on equity and STCL of ₹1 lakh on another equity position, net LTCG = ₹2 lakh. After ₹1.25 lakh exemption: taxable LTCG = ₹75,000. Tax = ₹9,375. Without deliberate loss harvesting in the same year, you would have paid ₹21,875 on the full ₹3 lakh gain minus exemption. Strategy: review your portfolio in February-March. If any holdings are in loss, consider selling them before 31 March to offset gains from the year. |
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Common mistakes investors make post-Budget 2024
Mistake 1: Forgetting the ₹1.25 lakh exemption is only for Section 112A
The ₹1.25 lakh annual exemption applies only to LTCG from listed equity and equity MFs under Section 112A. It does not apply to LTCG on property, gold, debt funds, bonds, or unlisted shares. Using it incorrectly in ITR leads to a demand notice.
Mistake 2: Not computing both options for pre-July 2024 property
Many taxpayers default to 12.5% because it sounds lower. But for property bought before 2015-16, the 20%+indexation option often produces a dramatically lower tax. Running the calculation takes five minutes and can save lakhs.
Mistake 3: Treating buyback proceeds as capital gains after October 2024
From 1 October 2024, shares bought back by a company generate dividend income — not capital gains — in the shareholder's hands. This is taxed at slab rates and reported under "Income from Other Sources", not the capital gains schedule. Many shareholders filed incorrectly in FY 2024-25. Verify with your broker statements.
Mistake 4: Missing the ITR filing deadline and losing carry-forward
Capital losses can be carried forward only if the ITR for the year of loss is filed by the original due date (31 July 2026 for FY 2025-26). A belated return filed in September does not preserve the carry-forward. If you have significant capital losses this year, filing on time is critical.
A practical takeaway for investors
Run one simple check at year-end: list all sales of capital assets during the year, classify each as LTCG or STCG by asset type and holding period, compute the gain on each, and total them by category. Then compare the ₹1.25 lakh exemption (equity LTCG only), any loss set-offs, and exemptions you plan to claim under Section 54/54EC. This overview — which your broker's annual capital gains statement helps with — tells you your net tax position before filing.
And for anyone holding equity MF units with large unrealised gains, the ₹1.25 lakh annual LTCG harvesting strategy is straightforward: sell enough units each year to book ₹1.25 lakh of gains tax-free, then immediately repurchase to reset the cost basis. Done consistently, it compounds your after-tax returns over time.
Key Takeaways
- 23 July 2024 is the pivot date: Finance (No.2) Act 2024 changed rates, holding periods, and indexation rules from this date.
- Equity LTCG (Section 112A): 12.5% on gains above ₹1.25 lakh per year (up from 10% on gains above ₹1 lakh). Holding period: over 12 months.
- Equity STCG (Section 111A): 20% (up from 15%). Holding period: 12 months or less.
- All other LTCG (Section 112): 12.5% without indexation for transfers after 23 July 2024. For property acquired before 23 July 2024, resident individuals and HUFs can choose: 12.5% without indexation or 20% with indexation.
- Holding periods simplified: 12 months for listed equity/equity MFs; 24 months for all other assets (gold, bonds, unlisted shares, property).
- Debt mutual funds acquired after 1 April 2023: taxed at slab rate regardless of holding period (Section 50AA). Budget 2024 did not change this.
- Buyback of shares: from 1 October 2024, proceeds taxed as dividend in shareholder's hands at slab rate — no more buyback capital gains treatment.
Frequently Asked Questions
What is the LTCG tax rate on equity mutual funds for FY 2025-26?
Long-term capital gains on equity-oriented mutual funds (funds with over 65% equity allocation) are taxed at 12.5% under Section 112A for gains exceeding ₹1.25 lakh per financial year. Gains up to ₹1.25 lakh in a year are completely exempt. No indexation benefit. The holding period for LTCG on equity mutual funds is over 12 months.
Can I still claim indexation benefit on property sold in FY 2025-26?
It depends on when you acquired the property. If acquired before 23 July 2024 and you are a resident individual or HUF, you have a choice: pay 12.5% without indexation or 20% with indexation using the Cost Inflation Index. The CII for FY 2025-26 is 376. For property acquired on or after 23 July 2024, only 12.5% without indexation applies. For all transfers, the option to choose applies only to immovable property (land and building) — not gold, bonds, or unlisted shares.
My debt mutual fund was bought before April 2023 and held for 5 years. What rate applies?
If the debt mutual fund was acquired before 1 April 2023, the old rules apply: capital gains are classified based on holding period. Held over 3 years = LTCG taxable at 12.5% (after Budget 2024 change from 20%+indexation) without indexation for transfers after 23 July 2024. Held under 3 years = STCG taxable at slab rates. For debt mutual funds acquired on or after 1 April 2023, Section 50AA applies — gains are always taxed at slab rate regardless of how long held.
Are capital losses set-off rules the same after Budget 2024?
Yes, the set-off rules remain: short-term capital losses can be set off against both STCG and LTCG. Long-term capital losses can only be set off against LTCG. Neither can be adjusted against salary, rental, or business income. Unabsorbed capital losses can be carried forward for eight assessment years (must file ITR by the due date to carry forward).
What happened to the buyback tax after October 2024?
Before 1 October 2024, when a company bought back its shares, the gain in the shareholder's hands was treated as capital gains — the company paid a 20% buyback tax separately. From 1 October 2024, buyback proceeds are treated as dividend income in the shareholder's hands and taxed at their applicable slab rate. The company no longer pays the buyback tax. This was a significant change for high-income shareholders who now pay 30% instead of a flat effective rate.
Internal Links
- LTCG on Equity Shares and Mutual Funds: Section 112A Tax Guide → /ltcg-equity-shares-mutual-funds-section-112a