Capital gains tax in India

Capital gains tax in India is the income-tax charged on profit from the transfer of a capital asset, levied since 1 April 2026 under Chapter IV Part E (sections 67 to 91) of the Income-tax Act 2025 and administered by the Central Board of Direct Taxes . Gains are short-term or long-term by holding period, and the rate depends on that split and on the asset.

For tax year 2026-27, short-term gains on listed equity shares and equity-oriented mutual fund units on which Securities Transaction Tax is paid are taxed at 20 per cent under section 196, and long-term gains on the same assets at 12.5 per cent above Rs 1,25,000 a year under section 198. Most other long-term gains are taxed at 12.5 per cent without indexation under section 197. Short-term gains on non-equity assets join total income at slab rates. These rates were set by the Finance (No. 2) Act 2024 from 23 July 2024 and were carried into the 2025 Act unchanged.

The 2025 Act renumbered the capital gains provisions and kept their rates and reliefs. Section 112A became section 198, section 111A became section 196, section 50AA became section 76, and section 54F became section 86. The Income-tax Act 1961 still governs every transfer made up to 31 March 2026, which is reported in the return for assessment year 2026-27, because section 536 of the 2025 Act keeps the old Act alive for tax years beginning before 1 April 2026.

The Finance Act 2026 (Act No. 4 of 2026, assented to on 30 March 2026) made three changes that matter to investors from 1 April 2026. Share buyback proceeds are now capital gains rather than dividend. Sovereign Gold Bond redemption stays exempt only for original subscribers who held to maturity. STT on futures and options rose to 0.05 and 0.15 per cent.

Applicable Act and the 2026 transition

The Income-tax Act 2025 (Act 30 of 2025) came into force on 1 April 2026 under its section 1(3) and repealed the Income-tax Act 1961 by section 536(1). The repeal does not reach back. Section 536(2)(c) keeps the 1961 Act applicable to any proceeding, including a return, assessment or reassessment, “in respect of any tax year beginning before the 1st April, 2026”.

The 2025 Act drops the pairing of previous year and assessment year. Section 3(1) defines a single “tax year” as the twelve months of the financial year beginning 1 April. Gains made between 1 April 2026 and 31 March 2027 belong to tax year 2026-27.

Three carry-over rules decide how the two Acts meet:

• Brought-forward losses. Section 536(2)(n) carries a capital loss computed under section 74 of the 1961 Act into the new Act, to be set off against capital gains for the balance of the eight years from the year in which it was first computed.
• Notifications and schemes. Section 536(2)(j) keeps rules, notifications, circulars and schemes issued under the 1961 Act in force so far as they are consistent with the 2025 Act. That is how the 1961 cost inflation index table and the Capital Gains Accounts Scheme 1988 continue to operate.
• Conditional exemptions. Section 536(2)(h) taxes the withdrawal, after 1 April 2026, of an exemption claimed under the 1961 Act. A house bought under section 54 in 2025 and sold within three years produces a clawback taxed under the new Act.

Statutory framework and the 1961 to 2025 section map

Capital gains occupy Chapter IV Part E of the Income-tax Act 2025, sections 67 to 91. The special rates sit in Chapter XIII Part B (sections 196 to 198), set-off and carry forward in Chapter VII (sections 108 to 111), and tax deduction at source in section 393. The 2025 Act prints no concordance with the 1961 Act. The table below is a webnotes.in construction, built by reading each 2025 section in the gazetted text of the Act (Gazette of India Extraordinary, Part II Section 1) and matching it to its 1961 predecessor by subject.

Section 54EE of the 1961 Act, the exemption for investment in units of a notified start-up fund, has no successor in sections 67 to 91 of the 2025 Act.

Capital asset, transfer and the charge

Section 67(1) of the Income-tax Act 2025 charges “any profits or gains arising from the transfer of a capital asset effected in a tax year” to tax under the head capital gains, as income of the tax year in which the transfer took place. Two definitions decide whether the charge applies.

A capital asset, under section 2(22), is property of any kind held by the taxpayer, with exclusions for stock-in-trade, personal effects other than jewellery and works of art, and rural agricultural land. Shares held as stock-in-trade by a trader produce business income, not capital gains; the same shares held as an investment produce capital gains. The distinction turns on intention, frequency and the books of account. Futures and options income is treated as non-speculative business income, not capital gains.

A transfer, under section 2(109), covers sale, exchange, relinquishment, extinguishment of rights, compulsory acquisition and conversion of a capital asset into stock-in-trade. Section 70 lists transactions that are not transfers, including a gift or inheritance, a transfer in a scheme of amalgamation or demerger, the exchange of mutual fund units on consolidation of schemes (section 70(1)(zj)), and the redemption of a Sovereign Gold Bond by an original subscriber.

Common investor events and how they are treated:

Holding period: short-term and long-term

Section 2(101) of the Income-tax Act 2025 defines a short-term capital asset as one held “for not more than twenty-four months” immediately before transfer, and substitutes twelve months for four classes: a security listed on a recognised stock exchange in India, a unit of the Unit Trust of India , a unit of an equity-oriented fund, and a zero-coupon bond. Any asset that is not short-term is long-term under section 2(67). An asset held for exactly 12 months is still short-term, because the test is “not more than”.

Section 76 overrides the holding period for three classes and deems every gain on them short-term, taxed at slab rates:

1. Units of a specified mutual fund acquired on or after 1 April 2023.
2. Market linked debentures , whenever acquired.
3. Unlisted bonds and unlisted debentures transferred, redeemed or maturing on or after 23 July 2024.

The third class reverses the older rule. Before the Finance (No. 2) Act 2024, an unlisted debenture became long-term after 36 months. Since 23 July 2024 its gain is short-term however long it was held, and the 36-month threshold no longer applies to any security; it survives only for an undertaking transferred in a slump sale (section 77).

Section 2(101)(c) adds the previous owner’s holding period where the asset arrived by gift, will, amalgamation, demerger or the consolidation of mutual fund schemes, and counts the holding of a bonus or rights share from its own allotment date.

Rates by asset class, tax year 2026-27

The rates below apply to transfers made on or after 1 April 2026 under the Income-tax Act 2025 and the First Schedule to the Finance Act 2026. Surcharge on these gains is capped at 15 per cent, and health and education cess of 4 per cent applies on tax plus surcharge.

Section 197 of the 2025 Act carries a single 12.5 per cent rate. The 10 per cent rate that section 112(1)(c)(iii) of the 1961 Act offered on certain unlisted securities before 23 July 2024 has no counterpart.

Two concessions apply to a resident individual or Hindu undivided family. Sections 196(2), 197(2) and 198(3) let the taxpayer use any shortfall of other income below the basic exemption limit against these gains, so a retiree with Rs 1,00,000 of pension and a large equity gain pays tax only on the gain above the unused portion of the exemption. Non-residents get no such adjustment. Sections 196(4), 197(5) and 198(6) bar deductions under Chapter VIII, the successor to Chapter VI-A, against these gains, so a section 123 deduction cannot reduce them.

The rebate is restricted by two clauses. Section 198(7) allows the rebate under section 156 only from tax on total income “as reduced by tax payable on such capital gains”, and section 156(3) provides that the new-regime rebate “shall not exceed income-tax payable as per the rates provided in section 202(1)”, which are the slab rates. On the wording of the two clauses, the new-regime rebate does not absorb tax at the section 196 to 198 rates, so a taxpayer with total income under Rs 12 lakh pays tax on such gains to the extent they exceed the unused basic exemption (and, for section 198, the Rs 1,25,000 exclusion). The old-regime rebate in section 156(1), up to Rs 12,500 where total income does not exceed Rs 5,00,000, is different: section 198(7) keeps it off long-term section 198 gains, but section 196 has no equivalent clause, so it can reduce tax on short-term equity gains.

Computation of a capital gain

Section 72(1) of the Income-tax Act 2025 computes a capital gain as the full value of consideration less the expenditure incurred wholly and exclusively on the transfer, and less the cost of acquisition and the cost of improvement. Section 72(3)(b) disallows any deduction for Securities Transaction Tax paid. Brokerage, stamp duty paid by the buyer and exchange charges count as transfer expenditure or cost.

Full value of consideration

For listed securities the consideration is the sale price. Section 78, the successor to section 50C, substitutes the stamp duty value for land or a building where the stated consideration is lower, unless the stamp duty value does not exceed 110 per cent of the consideration. Where part of the consideration was paid by a banking or online mode on or before the date of the agreement, the stamp duty value on the agreement date applies. Section 79 does the same for unquoted shares, using fair market value under the prescribed method.

Cost of acquisition and the 2018 grandfathering rule

Cost is normally the price paid, plus brokerage and stamp duty. Section 73 sets cost by mode of acquisition: an asset received by gift, will or succession takes the previous owner’s cost. Bonus shares carry nil cost. A share allotted under an employee stock option plan takes the fair market value that was taxed as a perquisite on allotment.

Section 90(7) carries forward the grandfathering rule for equity shares, equity-oriented fund units and business trust units acquired before 1 February 2018. Cost is the higher of (a) the actual cost and (b) the lower of the fair market value on 31 January 2018 and the full value of consideration. Section 90(8) fixes the fair market value of a listed asset as the highest price quoted on the exchange on 31 January 2018, and of an unlisted fund unit as its net asset value on that date.

The second row shows the purpose of the “lower of” limb: the rule removes gains accrued up to 31 January 2018 but cannot create a loss from them. The fourth row shows a real loss is still allowed where actual cost exceeds the sale price. The equity mutual fund grandfathering of January 2018 page carries the scheme-level detail.

Section 90(9)(a) lets the taxpayer take the fair market value on 1 April 2001 as cost for any asset acquired before that date, capped for land and buildings at the stamp duty value on 1 April 2001.

Indexation, now confined to one case

Indexation adjusts cost for inflation using the cost inflation index , which section 72(8)(a) of the Income-tax Act 2025 directs the Central Government to notify “having regard to 75% of average rise in the Consumer Price Index (urban)”, with 2001-02 as the base year. Indexed cost is cost multiplied by the index for the year of transfer and divided by the index for the first year the asset was held (or 2001-02, if later).

Since 23 July 2024, indexation survives only through section 197(3). A resident individual or HUF transferring land, a building, or both, acquired before 23 July 2024, pays the lower of 12.5 per cent of the unindexed gain and 20 per cent of the indexed gain. Section 72(2) applies indexation solely for that comparison. The index values for 2025-26 and 2026-27 have been reported in the press as notified by CBDT, but the notifications could not be confirmed at a primary source, so no index value is stated here.

A worked comparison, with the indexed cost assumed rather than computed: a flat bought in 2012 for Rs 40,00,000 is sold in tax year 2026-27 for Rs 1,00,00,000.

Section 197(3) charges the lower figure in each case. Indexation wins only when the indexed cost is high relative to the sale price, which favours property bought long ago and sold with little real appreciation. A non-resident, a company, or any seller of an asset other than land and buildings has no option and pays 12.5 per cent on the unindexed gain.

Equity shares and equity-oriented funds

Listed equity shares and units of an equity-oriented fund are taxed under sections 196 and 198 of the Income-tax Act 2025, provided the sale is chargeable to Securities Transaction Tax. Section 198 also requires STT on acquisition for equity shares, except for modes of acquisition the Central Government notifies under section 198(5); shares allotted in an initial public offering , where no STT is charged on allotment, are one such case. Sections 196(3) and 198(4) waive the STT condition for trades on a recognised exchange in an International Financial Services Centre where consideration is paid in foreign currency.

Section 198(8) defines an equity-oriented fund as one that invests at least 65 per cent of its total proceeds in equity shares of domestic listed companies, or a fund of funds that invests at least 90 per cent in units of exchange-traded funds which themselves hold at least 90 per cent in listed domestic equity, measured on the annual average of monthly averages of opening and closing figures. Arbitrage funds , equity savings funds and balanced advantage funds that hold at least 65 per cent in equity, including hedged positions, qualify. ELSS units are equity-oriented and can be redeemed only after a three-year lock-in, so their gains are always long-term.

Worked example. A resident sells listed shares in tax year 2026-27 and books a long-term gain of Rs 3,00,000 and a short-term gain of Rs 1,00,000, with salary taking total income above the basic exemption limit. Section 198 tax is 12.5 per cent of Rs 1,75,000 (Rs 3,00,000 less Rs 1,25,000), which is Rs 21,875. Section 196 tax is 20 per cent of Rs 1,00,000, which is Rs 20,000. With 4 per cent cess, the total is Rs 43,550.

The Rs 1,25,000 exemption is per taxpayer per tax year, across all section 198 gains together, not per scheme or per broker. Booking long-term gains up to that amount each year and reinvesting, sometimes called tax gain harvesting , resets the cost to the reinvestment price. A short-term loss booked in the same year can be set off against either kind of gain, which is the basis of tax-loss harvesting . Redemptions through a systematic withdrawal plan or SIP units sold in order follow first-in-first-out by section 67(7)(c).

Debt funds and other mutual funds

Section 76 of the Income-tax Act 2025 deems every gain on a unit of a “Specified Mutual Fund” acquired on or after 1 April 2023 to be short-term, computed without indexation and taxed at slab rates. Section 76(5)(b) defines a specified mutual fund as one that “invests more than 65% of its total proceeds in debt and money market instruments”, or a fund that invests 65 per cent or more of its proceeds in units of such a fund, measured on the annual average of daily closing figures.

The section 76(5)(b) test looks at debt holdings, not at equity. A gold ETF or an overseas fund of funds holds neither debt nor domestic equity above 65 per cent, so under the definition in force for tax year 2026-27 it is not a specified mutual fund and its long-term gain is taxed at 12.5 per cent under section 197. The Act does not name exchange-traded funds or funds of funds; their holding period follows from reading section 2(101)(b)(i), which gives 12 months to a listed security, with section 76(5)(b). The webnotes.in pages on gold and silver ETF taxation and international mutual fund taxation cover units bought under the earlier section 50AA definition.

The cut-off is the date of acquisition, not the date of investment in the scheme. Each SIP instalment is a separate acquisition: a debt fund folio started in 2021 can hold both grandfathered units and section 76 units. The debt mutual fund taxation and hybrid fund taxation pages carry the scheme-level treatment, and the mutual fund taxation hub covers IDCW payouts, which are dividend income and not capital gains.

Bonds, debentures and market linked debentures

Listed bonds, debentures and government securities become long-term after 12 months under section 2(101)(b)(i) and their long-term gain is taxed at 12.5 per cent without indexation under section 197. Short-term gains, and all interest, are taxed at slab rates. A zero-coupon bond is also long-term after 12 months under section 2(101)(b)(iv).

Section 76(2)(b) deems the gain on an unlisted bond or unlisted debenture short-term where it is transferred, redeemed or matures on or after 23 July 2024. Section 76(2)(a) does the same for a market linked debenture, a security whose returns are tied to an underlying index or market variable. Both classes are taxed at slab rates whatever the holding period.

Two consequences follow for retail holders. A listed corporate bond bought on an exchange platform and sold after 12 months gets the 12.5 per cent rate, but the same bond held to maturity produces interest at slab rate on the coupon and a capital gain or loss only on the difference between purchase price and redemption value. A tax-free bond’s interest is exempt, but a gain on its sale is not.

Land, buildings and other immovable property

Land and buildings become long-term after 24 months under section 2(101)(a) of the Income-tax Act 2025, and long-term gains are taxed at 12.5 per cent without indexation under section 197, subject to the section 197(3) option for resident individuals and HUFs on property acquired before 23 July 2024. Short-term gains are taxed at slab rates.

Section 78 substitutes the stamp duty value for the stated price where that value exceeds 110 per cent of the consideration. Section 77 taxes a slump sale of an undertaking as a long-term gain, unless the undertaking was held for 36 months or less, the only place the 36-month figure survives in the capital gains chapter.

A buyer of immovable property other than agricultural land deducts tax at 1 per cent of the higher of the consideration and the stamp duty value, where that amount is Rs 50 lakh or more, under section 393(1) Table serial 3(i) of the 2025 Act (formerly section 194-IA). The Rs 50 lakh threshold is tested on the aggregate across all buyers and sellers. A buyer paying a non-resident seller deducts under section 393(2) at the rates in force on the sum chargeable to tax; without a lower-deduction certificate from the assessing officer, that sum is the whole consideration, not the gain.

Gold and Sovereign Gold Bonds

Physical gold, jewellery and unlisted gold funds of funds become long-term after 24 months; listed gold ETFs after 12 months. Long-term gains on all of them are taxed at 12.5 per cent without indexation under section 197 of the Income-tax Act 2025, and short-term gains at slab rates.

Sovereign Gold Bonds are issued by the Reserve Bank of India on behalf of the Government of India under the Sovereign Gold Bond Scheme 2015 and its successors. Interest on the bonds is taxable at slab rates. A sale on a stock exchange before maturity is a transfer of a listed security, long-term after 12 months and taxed at 12.5 per cent.

Section 43 of the Finance Act 2026 substituted section 70(1)(x) of the 2025 Act from tax year 2026-27. Redemption is now not a transfer only for a bond “held by an individual from the date of original issue till maturity”. The Memorandum to the Finance Bill 2026 states the exemption applies “only where the Sovereign Gold Bond is subscribed to by a subscriber at the time of original issue and is held continuously until redemption on maturity”.

Older pages, including earlier versions of this one, describe SGB redemption as exempt for every holder under section 47(viic) of the 1961 Act. That is correct for redemptions up to 31 March 2026 and wrong from tax year 2026-27 for a bond bought on NSE or BSE. A bond bought in the secondary market and held to maturity now produces a taxable gain on redemption equal to the redemption value less the purchase price. The SGB tax treatment and gold ETF versus SGB versus gold fund pages apply this to the Zerodha holding flow.

Share buybacks

From 1 April 2026, the consideration a shareholder receives when a company buys back its shares is taxed as capital gains, not as dividend. Section 35 of the Finance Act 2026 omitted section 2(40)(f) of the Income-tax Act 2025, and section 42 substituted sections 69(2) and 69(3). The change reverses the regime the Finance (No. 2) Act 2024 had introduced from 1 October 2024, under which the whole buyback receipt was dividend taxed at slab rate and the cost of the shares was a separate capital loss; the 2024 buyback tax reform page describes that regime.

A non-promoter shareholder now pays tax on the gain (buyback price less cost) at the ordinary capital gains rates for the shares tendered, for STT-paid listed shares, 20 per cent short-term under section 196 and 12.5 per cent long-term under section 198. A promoter pays an additional income-tax on top:

Section 69(3)(a) takes the definition of promoter for a listed company from regulation 2(k) of the SEBI (Buy-Back of Securities) Regulations 2018. For an unlisted company, section 69(3)(b) treats as a promoter both a promoter under section 2(69) of the Companies Act 2013 and any holder of more than 10 per cent of the shares. The Memorandum to the Finance Bill 2026 explains the extra charge by “the distinct position and influence of promoters in corporate decision-making”. Section 3(6) of the Finance Act 2026 adds a surcharge of 12 per cent on tax charged under section 69; the text does not say whether it reaches only the promoter’s additional tax or all tax on the buyback gain.

The tender process on a broker platform is unchanged; the buyback tender guide covers it.

Virtual digital assets

Income from the transfer of a virtual digital asset, defined in section 2(111) of the Income-tax Act 2025 and covering cryptocurrencies and non-fungible tokens, is taxed at a flat 30 per cent under section 194(1) Table serial 4, the successor to section 115BBH of the 1961 Act. No deduction is allowed other than the cost of acquisition, a loss on one asset cannot be set off against any other income, and the loss cannot be carried forward. The holding period is irrelevant. Section 393(1) Table serial 8(vi) requires 1 per cent tax deduction at source on the consideration for the transfer. The crypto trading page carries the platform side.

Exemptions on reinvestment

The Income-tax Act 2025 carries the reinvestment exemptions of the 1961 Act into sections 82 to 89, with the same caps and windows. Sections 82, 85 and 86 apply only to long-term gains; section 83 applies to any gain made by an individual or HUF on land used for agriculture in the two years before transfer.

Section 82(5) allows the two-house option only where the long-term gain does not exceed Rs 2 crore, and section 82(6) bars using it again in any other tax year. Under section 86 the exemption is proportionate: it is the gain multiplied by the amount invested and divided by the net consideration, so an investor who sells equity fund units for Rs 1 crore with a gain of Rs 40 lakh and invests Rs 50 lakh in a house exempts Rs 20 lakh. Section 86(5) denies the exemption to a taxpayer who owns more than one residential house, other than the new one, on the date of transfer. The section 54F for mutual funds page works through the equity fund case.

Section 85(3) reverses the exemption if the bonds are transferred or converted into money within five years, and section 85(4) treats a loan taken against them as such a conversion. Section 85(5) bars a section 123 deduction on the same investment. The 54EC bonds page covers the subscription process.

Where the new house is not bought before the return due date, sections 82(2) and 86 require the unused amount to be deposited in the Capital Gains Accounts Scheme before the due date under section 263(1); the deposit counts as the investment, and section 82(4) taxes any amount not used as income of the tax year in which three years from the original transfer expire.

Set-off and carry forward of capital losses

Section 108(2) of the Income-tax Act 2025 sets off a short-term capital loss against any capital gain, short-term or long-term, in the same tax year, and a long-term capital loss only against long-term capital gains. Section 109(2) provides that a loss under the head capital gains “shall not be set off against income under any other head”. A loss on shares cannot reduce salary, interest or business income.

Section 111 carries an unabsorbed capital loss forward, keeping the same short-term and long-term character. Section 111(2) limits the carry forward to “eight tax years immediately succeeding the tax year for which the loss was first computed”. Section 121 allows the carry forward only for a loss determined in a return filed under section 263(1), that is, by the due date; a belated return loses it.

A long-term loss on equity is set off against long-term gains before the Rs 1,25,000 exemption is applied, which can waste part of the exemption. Losses computed under the 1961 Act in, for example, 2023-24 can be set off under the new Act through 2031-32, under section 536(2)(n). The carry forward and set-off how-tos show the return schedules.

Non-resident investors

Non-residents pay the same capital gains rates as residents on listed equity and fund units: 20 per cent short-term under section 196 and 12.5 per cent long-term above Rs 1,25,000 under section 198 of the Income-tax Act 2025. They cannot use the basic exemption shortfall. Section 72(6), the successor to the first proviso to section 48, computes gains on shares and debentures of an Indian company bought in foreign currency in that currency and converts the gain back to rupees, which removes the effect of rupee depreciation; it does not apply to section 198 equity.

Foreign portfolio investors are taxed under section 210 (formerly 115AD) at 20 per cent on section 196 gains, 30 per cent on other short-term gains, and 12.5 per cent on long-term gains. A non-resident Indian who opts into the special provisions of sections 212 to 218 (formerly Chapter XII-A) pays 12.5 per cent on long-term gains from foreign exchange assets under section 214, and section 215 exempts such a gain where the net consideration is invested in a specified asset within six months of the transfer.

Mutual fund houses and buyers deduct tax at source from payments to a non-resident under section 393(2) at the rates in force, which for listed equity gains are the section 196 and 198 rates with surcharge and cess. A lower rate under a Double Taxation Avoidance Agreement applies where the investor furnishes a tax residency certificate. The NRI mutual fund TDS page covers the redemption workflow.

Securities Transaction Tax and other levies

Securities Transaction Tax is levied under Chapter VII of the Finance (No. 2) Act 2004, not under the Income-tax Act, and is collected by the exchange or the mutual fund. STT is not deductible in computing a capital gain (section 72(3)(b) of the Income-tax Act 2025), but payment of STT is the condition for the section 196 and 198 rates.

The futures and options increases were made by section 159 of the Finance Act 2026 and applied from 1 April 2026 under NSE circular NSE/FATAX/73524 (Circular 02/2026) of 31 March 2026. They followed the increases of 1 October 2024 covered on the October 2024 STT hike page. Mutual fund purchases also carry stamp duty , which forms part of the cost of acquisition.

Reporting, due dates and the Annual Information Statement

Transfers made up to 31 March 2026 are reported in the capital gains schedule of the return for assessment year 2026-27 under the Income-tax Act 1961; the ITR-2 and ITR-3 pages describe the forms used for capital gains under the Income-tax Rules 1962. Section 5 of the Finance Act 2026 amended section 139 of the 1961 Act with effect from 1 March 2026 to set the due dates: 31 July 2026 for a taxpayer with no business income, 31 August 2026 for a non-audited business or profession, 31 October 2026 for audit cases, and 30 November 2026 for transfer-pricing cases.

Section 66 of the Finance Act 2026 wrote the same four dates into section 263(1) of the Income-tax Act 2025 for returns of tax year 2026-27 onward, filed in 2027, and set the revised-return window at 12 months from the end of the tax year or the completion of assessment, whichever is earlier. The return forms prescribed under the 2025 Act for tax year 2026-27 could not be confirmed at a primary source, so they are not named here.

The Annual Information Statement on the e-filing portal lists sale transactions reported by brokers, depositories and the registrars CAMS and KFin Technologies, and is the department’s reconciliation baseline. It reports sale value, not gain, so the return is built from the broker’s tax profit and loss statement or the registrar’s capital gains statement , which carry cost and holding period. The department matches the return against the AIS, and an unexplained mismatch can lead to a notice. The AIS for mutual funds and reporting mutual fund gains in the ITR pages give the line-by-line mapping.

Capital gains are not subject to tax deduction at source for a resident selling shares or fund units; the tax is paid as advance tax or as self-assessment tax before filing.

Reform timeline

The 2024 rate changes applied to transfers on or after 23 July 2024, and the financial year 2024-25 therefore carried two sets of equity rates, a split the equity capital gains page sets out transaction by transaction. The section 112A and section 111A pages describe the 1961 provisions that still govern returns up to assessment year 2026-27.

Common computation errors

Computation errors, with the provision that settles each:

• Treating an unlisted debenture as long-term after 36 months. Section 76(2)(b) makes any gain on an unlisted bond or debenture transferred or maturing on or after 23 July 2024 short-term at slab rate.
• Claiming indexation on debt funds or gold. Section 197(3) confines indexation to land and buildings held by resident individuals and HUFs and acquired before 23 July 2024.
• Treating every SGB redemption as exempt. From tax year 2026-27, section 70(1)(x) exempts only bonds held by an individual from original issue to maturity.
• Using actual cost for pre-2018 equity. Section 90(7) substitutes the higher of cost and the lower of 31 January 2018 value and sale price.
• Applying the Rs 1,25,000 exemption per scheme. It is one exemption per taxpayer per tax year under section 198.
• Setting a long-term loss against a short-term gain. Section 108(2) allows a long-term loss only against long-term gains.
• Filing late with a loss. Section 121 carries a capital loss forward only if the return for the year of loss is filed by the section 263(1) due date (section 139(1) for years under the 1961 Act).
• Ignoring a fund switch. A switch between schemes, or between growth and IDCW options of one scheme, is a redemption and a fresh purchase, and resets the holding period.
• Mixing Acts across 31 March 2026. A sale on 31 March 2026 is reported under section 112A of the 1961 Act; a sale on 1 April 2026 under section 198 of the 2025 Act.

The webnotes.in Income-tax Act 2025 page and the income tax in India hub carry the wider regime, including slab rates and the choice between the new and old regimes, which does not change any capital gains rate.

See also

• Income-tax Act 2025
• Income-tax Act 1961
• Finance Act 2026
• Central Board of Direct Taxes
• Income tax in India
• Capital gains tax on equity in India
• Section 112A
• Section 111A
• LTCG on equity mutual funds under section 112A
• STCG on equity mutual funds under section 111A
• Grandfathering rule for LTCG
• Equity mutual fund grandfathering of January 2018
• Mutual fund taxation in India
• Equity mutual fund taxation
• Debt mutual fund taxation after 2023
• Hybrid mutual fund taxation
• Arbitrage fund taxation
• Gold and silver ETF taxation
• International mutual fund taxation
• Market linked debentures
• Sovereign Gold Bonds
• SGB tax treatment
• Share buyback
• Buyback tax reforms of 2024
• F&O taxation in India
• Securities Transaction Tax
• STT hike on F&O, October 2024
• Cost inflation index
• Section 54F for mutual funds
• 54EC bonds
• Capital Gains Accounts Scheme
• SIP taxation and FIFO
• SWP taxation
• Switch as a taxable event
• How to set off mutual fund capital losses
• How to carry forward mutual fund capital losses
• How to do tax-loss harvesting on Zerodha
• Annual Information Statement
• Capital gains statement for mutual funds
• ITR-2
• ITR-3
• How to report mutual fund capital gains in the ITR
• Foreign portfolio investor
• Non-resident Indian
• DTAA for NRI mutual fund investors
• Crypto trading in India
• New tax regime

External references

• Income-tax Act 2025, Gazette of India
• Finance Act 2026, Gazette of India
• Memorandum explaining the provisions in the Finance Bill 2026
• NSE circular NSE/FATAX/73524 on STT rates, 31 March 2026
• Income Tax Department e-filing portal
• Central Board of Direct Taxes

References

1. Income-tax Act 2025 (Act 30 of 2025), Chapter IV Part E (sections 67 to 91), sections 2(22), 2(67), 2(101), 2(109), 3, 108 to 111, 156, 194, 196 to 198, 210, 214, 215, 393 and 536. Gazette of India Extraordinary, Part II Section 1.
2. Finance Act 2026 (Act No. 4 of 2026), assented 30 March 2026: sections 3(6), 5, 35, 42, 43, 66 and 159, and the First Schedule Part I-B. Gazette of India Extraordinary, CG-DL-E-31032026-271439.
3. Ministry of Finance, Memorandum explaining the provisions in the Finance Bill 2026 (Bill No. 3 of 2026), on buyback taxation (clauses 27 and 34), Sovereign Gold Bonds (clause 35) and STT (clause 143).
4. National Stock Exchange of India, circular NSE/FATAX/73524 (Circular 02/2026), Securities Transaction Tax rates with effect from 1 April 2026, 31 March 2026.
5. Income-tax Act 1961, sections 2(42A), 45 to 55A, 111A, 112, 112A and 139, as amended by the Finance (No. 2) Act 2024 and the Finance Act 2026.
6. Finance (No. 2) Act 2024, capital gains amendments effective 23 July 2024 and buyback amendments effective 1 October 2024.
7. Finance (No. 2) Act 2004, Chapter VII (Securities Transaction Tax), section 98.
8. SEBI (Buy-Back of Securities) Regulations 2018, regulation 2(k).