Capital Gains Tax in India
Complete Guide for FY 2026-27 โ With Examples, Exemptions & Tax-Saving Strategies
Amended upto: Jul 2026 ย |ย By Abhilash |ย taxandfinancehub.com
โ New Law Alert: The Income Tax Act, 2025 (effective 1 April 2026) is a comprehensive recodification of the Income-tax Act, 1961, governed by Income-tax Rules, 2026. Key terms “Previous Year” and “Assessment Year” are replaced by “Tax Year”. This article references section numbers from both laws wherever confirmed. New section numbers have been verified against available secondary sources and the official tax portal as of July 2026. Rates and substantive law remain the same for FY 2026-27 unless otherwise noted. Always cross-check with the official Income Tax portal.
“Profit earned on selling an asset is sweet โ but the tax department always wants its share of the sweetness. The smart taxpayer plans ahead!”
โ Every wise investor who consulted a tax professional before selling
Whether you are selling shares, mutual funds, land, gold, a flat, or even your digital assets (crypto) โ understanding Capital Gains Tax is non-negotiable. Yet, it remains one of the most misunderstood topics in Indian taxation.
Many taxpayers wrongly assume that tax is payable only when they receive cash. In reality, under the Income-tax Act, 1961 (now re-codified as the Income Tax Act, 2025 effective 1 April 2026), tax implications arise as soon as a capital asset is transferred โ whether for cash or not!
| โ Meaning & Charging Provision โ Capital Asset & Transfer โ Short-Term vs Long-Term โ Tax Rates for FY 2026-27 โ Indexation & CII |
โ Section 50C Stamp Duty Trap โ All Exemptions (Sec 54, 54F, 54ECโฆ) โ Capital Loss Set-off Rules โ NRI Taxation & TDS โ Tax Saving Strategies & Case Studies |
โฐ Quick Navigation
1. What is a Capital Gain?
Capital Gain means the profit arising from the transfer of a capital asset. It is a special category of income โ not from salary, business, or regular activity โ but from the occasional sale of an asset you own.
The charging provision โ the provision that actually levies the tax โ is Section 45 of the Income-tax Act, 1961 (equivalent provision under the new Income Tax Act, 2025 for FY 2026-27).
Master Formula
Capital Gain = Sale Consideration โ Cost of Acquisition โ Cost of Improvement โ Expenses on Transfer
โถ Basic Example โ Mr. Raj’s Plot
Mr. Raj purchased a plot in 2020 for โน20 lakh. He sold it in March 2026 for โน35 lakh. Brokerage paid = โน50,000. Holding period = 6 years > 24 months โ Long-Term Capital Gain.
| Particulars | Amount (โน) |
|---|---|
| Sale Consideration | 35,00,000 |
| Less: Cost of Acquisition | (20,00,000) |
| Less: Brokerage / Transfer Expenses | (50,000) |
| Long-Term Capital Gain | 14,50,000 |
2. What is a Capital Asset? โ Section 2(14)
As per Section 2(14), a capital asset means property of any kind held by a person, whether or not connected with business or profession.
| โ IS a Capital Asset | โ NOT a Capital Asset |
|---|---|
| Land & Building, House Property | Stock-in-trade (taxable as Business Income) |
| Listed / Unlisted Shares & Securities | Personal effects: clothes, furniture, personal car |
| Mutual Fund Units (Equity & Debt) | Rural agricultural land (distance conditions apply) |
| Jewellery, Gold, Bullion, Paintings, Sculptures | Consumable stores & raw materials (in business) |
| Virtual Digital Assets / Cryptocurrency | 6.5% / 7% Gold Bonds issued by RBI (notified) |
โ Common Misconception: Many taxpayers assume jewellery is a “personal effect” and hence not taxable. Wrong! Jewellery is explicitly excluded from personal effects under Section 2(14)(ii). Its sale WILL attract capital gains tax. Same for archaeological collections, paintings, sculptures, and bullion.
3. When Does Capital Gain Arise? โ Transfer [Section 2(47)]
Capital Gain does not require cash. It arises on transfer of a capital asset. “Transfer” under Section 2(47) is defined very broadly:
| Mode of Transfer | Practical Example |
|---|---|
| Sale | Selling your flat or shares in the open market |
| Exchange | Swapping one plot for another โ still taxable! |
| Relinquishment of Rights | Giving up your rights in a property for compensation |
| Compulsory Acquisition | Government acquiring land for road/railway infrastructure |
| Conversion to Stock-in-Trade | Businessman converts capital asset into trading stock |
| Gift (in specific cases) | Gifting shares to a firm is taxable โ firm is not a “person” for exemption purposes |
โ What is NOT a Transfer (Section 47)? Gift to relatives, will/inheritance, family partition, transfer to a wholly-owned subsidiary, amalgamation schemes โ these are NOT treated as transfers and do not trigger capital gains immediately. However, when the recipient ultimately sells, capital gains do arise.
4. Short-Term vs Long-Term Capital Gains โ Period of Holding
The period for which you hold an asset determines whether gains are short-term (STCG) or long-term (LTCG) โ and consequently the rate of tax you pay. Longer holding = lower tax. It literally pays to be patient!
| Type of Asset | STCA if held โค | LTCA if held > | Relevant Section |
|---|---|---|---|
| Listed Equity Shares (BSE/NSE) | 12 months | > 12 months | Sec 2(42A) |
| Equity-Oriented Mutual Funds | 12 months | > 12 months | Sec 2(42A) |
| Debt MF (acquired after 1 Apr 2023) | Always STCG | No LTCG benefit | Finance Act 2023 |
| Unlisted Shares | 24 months | > 24 months | Sec 2(42A) |
| Immovable Property (Land / Building) | 24 months | > 24 months | Sec 2(42A) |
| Gold, Jewellery, Paintings, Other Assets | 24 months | > 24 months | Sec 2(42A) |
| Virtual Digital Assets (Crypto / NFT) | Always 30%* | No LTCG benefit | Sec 115BBH |
5. How to Compute Capital Gains โ Section 48
Computation under Section 48 is more than “sale price minus purchase price.” Here is the step-by-step method:
Step-by-Step Computation (Section 48)
| โถ Full Value of Consideration (actual sale price or stamp duty value โ whichever is higher) | = โน X |
| โท Less: Expenditure incurred wholly in connection with transfer (brokerage, legal charges, stamp duty on sale) | = (โน Y) |
| โธ Less: Cost of Acquisition (or Indexed Cost for LTCG where applicable) | = (โน Z1) |
| โน Less: Cost of Improvement (or Indexed Cost of Improvement for LTCG) | = (โน Z2) |
| โบ Capital Gain / (Capital Loss) | = โน CG |
Special Rules for Cost of Acquisition
| Situation | Cost of Acquisition |
|---|---|
| Bonus Shares (received free) | NIL โ holding period starts from date of allotment of bonus shares |
| Inherited Property | Previous owner’s actual cost. Holding period also taken from previous owner (Sec 49 & 2(42A)) |
| Gifted Property | Cost to the original donor. Holding period includes donor’s period (Sec 49) |
| Listed Equity โ Grandfathering (acquired before 1 Feb 2018) | Higher of: (a) Actual cost OR (b) FMV as on 31 Jan 2018 โ subject to cap at sale price [Sec 55(2)(ac)] |
| Assets acquired before 1 April 2001 | FMV as on 1 April 2001 (by registered valuer) may be adopted as cost of acquisition |
๐ก Grandfathering Explained Simply: If you bought shares before 1 February 2018 and their market value on 31 Jan 2018 was higher than your purchase price โ you get to use the higher FMV as your cost. This protects all gains accrued before 31 Jan 2018 from being taxed. Use the NSE/BSE historical price data for this.
“A property bought for โน10 lakh in 2000 and sold for โน80 lakh in 2026 โ without indexation, you pay tax on โน70 lakh. WITH indexation, your taxable cost jumps significantly. That difference is not a tax trick โ it’s your legal right!”
6. Indexation and Cost Inflation Index (CII)
Indexation adjusts the purchase cost of a long-term capital asset for inflation, using the Cost Inflation Index (CII) notified annually by the Government (CBDT). This reduces taxable gains significantly for assets held over many years.
Formula for Indexed Cost of Acquisition
Indexed Cost = Actual Cost ร (CII of Year of Sale รท CII of Year of Purchase)
Cost Inflation Index โ Selected Years (Base Year 2001-02 = 100)
| Financial Year | CII | Financial Year | CII |
|---|---|---|---|
| 2001-02 (Base Year) | 100 | 2018-19 | 280 |
| 2005-06 | 117 | 2020-21 | 301 |
| 2010-11 | 167 | 2022-23 | 331 |
| 2013-14 | 220 | 2023-24 | 348 |
| 2015-16 | 254 | 2024-25 | 363 |
| 2016-17 | 264 | 2025-26 (AY 2026-27) | 376 โ
[CBDT Notif. No.70/2025, 1 Jul 2025] |
โถ Indexation Example โ Mr. Sharma’s Land Sale
Bought land in FY 2013-14 for โน20,00,000 (CII = 220). Sold in FY 2025-26 (CII = 376, officially notified by CBDT). Sale price = โน45,00,000.
Indexed Cost = 20,00,000 ร (376 รท 220) = โน34,18,182 (approx. โน34.2 lakh)
Option A โ 12.5% without indexation: Tax on โน25,00,000 = โน3,12,500
Option B โ 20% with indexation: Tax on โน12,00,000 = โน2,40,000 โ Better here for this taxpayer!
7. The Section 50C Stamp Duty Value Trap โ What Most Taxpayers Miss!
Section 50C catches thousands of property sellers off guard. If you sell land or a building for a price lower than the stamp duty value (circle rate), the stamp duty value is deemed to be your sale consideration for computing capital gains โ even if you actually received less money!
๐จ Section 50C โ Practical Illustration: Mr. Anil’s Flat
Mr. Anil sells his flat for โน40 lakh (actual agreement value). The State Government’s circle rate for that locality = โน55 lakh.
| Particulars | Amount (โน) |
|---|---|
| Actual Sale Consideration | 40,00,000 |
| Stamp Duty Value (Circle Rate) โ Deemed Sale Price | 55,00,000 โ |
| Mr. Anil pays capital gains tax on (not 40L) | 55,00,000 ! |
He receives โน40 lakh but pays tax on โน55 lakh. That is a โน15 lakh phantom income taxed in his hands!
โ Safe Harbour & Relief Available:
1. If stamp duty value does NOT exceed 110% of actual consideration โ actual consideration is accepted (tolerance limit raised from 105% to 110% by Finance Act 2020).
2. You may approach the Valuation Officer under Section 50C(2) if you believe stamp duty value is higher than FMV.
Buyer Beware too! Under Section 56(2)(x), the buyer also faces tax โ the difference between stamp duty value and the price paid is treated as “Other Income” in the buyer’s hands if it exceeds โน50,000!
8. Capital Gains Tax Rates โ FY 2026-27 (After Finance (No.2) Act, 2024)
โ Major Amendment โ Finance (No. 2) Act, 2024 | Effective: 23 July 2024
The Finance (No. 2) Act, 2024 overhauled capital gains taxation. All transfers on or after 23 July 2024 are governed by the new rates. This is the most significant capital gains overhaul in recent years โ affecting equity investors and property sellers alike.
A. Listed Equity Shares & Equity-Oriented Mutual Funds
| Type | Old Rate (Before 23 Jul 2024) | New Rate (From 23 Jul 2024) | Section |
|---|---|---|---|
| STCG (STT paid) โ Section 111A | 15% | 20% | Section 111A |
| LTCG above โน1.25 lakh โ Section 112A | 10% | 12.5% | Section 112A |
| LTCG annual exemption (per taxpayer) | โน1 lakh | โน1.25 lakh โ | Sec 112A proviso |
๐ Sec 112A Illustration: LTCG from listed shares = โน5,00,000 | Less: Exemption = โน1,25,000 | Taxable LTCG = โน3,75,000 | Tax @ 12.5% = โน46,875 + 4% Cess = โน48,750. Note: Surcharge on Sec 111A and 112A is capped at 15%.
B. Land, Building, Gold & Other Non-Equity Assets
| Scenario | STCG Rate | LTCG Rate | Remarks |
|---|---|---|---|
| General (all assets, transfers on/after 23 Jul 2024) | Slab Rate | 12.5% (no indexation) | Section 112 as amended |
| Resident Individual/HUF: Land/Building acquired BEFORE 23 Jul 2024 (Optional choice) | Slab Rate | 20% WITH Indexation | โ Choose whichever option gives lower tax liability |
| Debt MF / Market-linked Debentures (acquired after 1 Apr 2023) | Slab Rate | Slab Rate only | Finance Act 2023 โ no LTCG benefit |
| VDA / Crypto (all cases) | 30% flat | Same 30% | Section 115BBH โ see Section 9 |
๐ Always Add Health & Education Cess @ 4%: Effective STCG rate on equity = 20% + 4% cess = 20.8%. LTCG on equity = 12.5% + 4% cess = 13%. VDA = 30% + 4% cess = 31.2%. (Before applicable surcharge.)
9. Virtual Digital Assets (VDA) โ Crypto & NFT Taxation [Section 115BBH]
Since 1 April 2022, India has a dedicated tax framework for Virtual Digital Assets (VDA) โ cryptocurrency (Bitcoin, Ethereum, etc.), NFTs, and other notified digital assets โ under Section 115BBH.
| Feature | Rule |
|---|---|
| Tax Rate | Flat 30% (regardless of holding period) |
| Deduction Allowed | Only cost of acquisition โ NO other deductions (not even mining expenses) |
| VDA Loss Set-Off | CANNOT be set off against any other income ๐ซ |
| VDA Loss Carry Forward | NOT allowed โ each VDA stands completely alone |
| TDS on VDA Transfer | 1% TDS under Section 194S (if consideration > โน50,000/โน10,000 per year) |
| Gift of VDA | Taxable in hands of recipient under Section 56(2)(x) |
10. Capital Loss โ Set-Off & Carry Forward Rules
Not every sale yields profit. When you incur a capital loss, you can use it to offset capital gains โ with strict rules. Understanding these enables “tax-loss harvesting” โ a completely legal strategy to reduce your tax bill.
| Type of Loss | Can be Set Off Against | Carry Forward |
|---|---|---|
| Short-Term Capital Loss (STCL) | STCG OR LTCG (both!) โ | 8 Assessment Years |
| Long-Term Capital Loss (LTCL) | LTCG ONLY (not STCG) โ | 8 Assessment Years |
| Capital Loss vs Salary / Business | NOT ALLOWED โ | Carry forward, but vs CG only |
| VDA (Crypto) Loss | NOTHING โ completely ring-fenced ๐ซ | NOT allowed at all |
๐ก File ITR on Time to Preserve Losses: To carry forward capital losses, you must file your ITR within the due date. Miss the deadline โ lose the carry forward forever, even if the loss is genuine and significant.
11. Exemptions on Capital Gains โ Sections 54, 54F, 54EC & More
This is where smart tax planning happens. The law provides several exemptions on Long-Term Capital Gains (LTCG) โ primarily when you reinvest the gains in specified assets. The government essentially rewards you for reinvesting in housing or infrastructure.
๐ Section 54 โ Sale of Residential House Property
| Condition | Detail |
|---|---|
| Asset Sold | Long-term residential house property in India |
| New Investment | Purchase OR construction of new residential house in India |
| Purchase โ Before Sale | Within 1 year before date of transfer |
| Purchase โ After Sale | Within 2 years from date of transfer |
| Construction | Within 3 years from date of transfer |
| Lock-in Period | New house must NOT be sold within 3 years โ else exemption is reversed |
โ Two Houses Option (One-Time Lifetime): If LTCG does not exceed โน2 crore, a taxpayer may exercise a one-time lifetime option to invest in TWO residential houses instead of one. This cannot be exercised again in future years.
๐ Section 54F โ Sale of Any Long-Term Asset (Other than Residential House)
| Condition | Detail |
|---|---|
| Asset Sold | ANY long-term capital asset EXCEPT residential house (shares, gold, MF, etc.) |
| Key Difference | Entire NET SALE CONSIDERATION must be invested (not just the gain) |
| Ownership Condition | Must NOT own more than ONE residential house (other than new one) on date of transfer |
| Pro-rata Exemption | If only part of consideration invested โ proportionate exemption only. Invest full amount for full exemption. |
| โ โน10 Crore Cap (Finance Act 2023, w.e.f. AY 2024-25) | Maximum exemption under Section 54F is capped at โน10 crore. Net consideration exceeding โน10 crore is ignored for exemption computation [as per official Income Tax Dept. guidance]. |
๐ต Section 54EC โ Investment in Specified Bonds (NHAI / REC)
| Particulars | Details |
|---|---|
| Applicable Asset | LTCG from land or building ONLY (not gold, not shares) |
| Eligible Bonds (as at June 2026) | REC (Rural Electrification Corporation), PFC (Power Finance Corporation), IRFC (Indian Railway Finance Corporation), HUDCO (Housing & Urban Development Corporation โ bonds issued on/after 1 Apr 2025, notified vide CBDT Notification No. 31/2025 dated 7 Apr 2025). โ NHAI discontinued 54EC bonds from 3 September 2022. |
| Maximum Investment | โน50 lakh per financial year per taxpayer โ hard cap |
| Time Limit to Invest | Within 6 months from date of transfer โ no extensions! |
| Lock-in Period | 5 years โ cannot sell, pledge, or use as security during lock-in |
All Capital Gains Exemptions โ Quick Reference Table
| Section | Asset Sold | New Investment Required | Time Limit |
|---|---|---|---|
| 54 New Act: Sec 82 |
Residential House | New Residential House (India) | Buy: 2 yrs / Build: 3 yrs |
| 54F New Act: Sec 86 |
Any Asset (not house) | Residential House โ full consideration | Buy: 2 yrs / Build: 3 yrs |
| 54EC | Land or Building | REC / PFC / IRFC / HUDCO bonds (max โน50L) โ NHAI discontinued Sep 2022 | 6 months from transfer |
| 54B | Agricultural Land (used 2 yrs by taxpayer) | New Agricultural Land | 2 years from transfer |
| 54D | Industrial L&B (compulsory acquisition) | New Industrial Land & Building | 3 years |
| 54GB | Residential House / Plot | Equity shares of eligible startup (Sec 80-IAC) | Before due date of ITR filing |
๐ช Capital Gains Account Scheme (CGAS) โ Your Safety Net
Sold property but haven’t reinvested before filing your ITR? No problem! Deposit the unutilized capital gain amount in CGAS with a designated bank before the ITR due date. You can still claim exemption temporarily.
โ Warning: If the deposited amount is NOT utilized within the prescribed period (2 or 3 years, as applicable), the unspent amount becomes taxable in the year of lapse. CGAS is a facility, not a loophole โ plan your reinvestment seriously.
“The government does not object to you making profits. It just wants its fair share. But it also rewards patience โ hold longer, pay less tax. Even nature agrees!”
12. NRI (Non-Resident Indian) Capital Gains & TDS
If you are an NRI and sell property or assets in India, the buyer is responsible for deducting TDS (Tax Deducted at Source) before paying you. Many NRI property deals face complications because buyers are unaware of this obligation.
| Situation | TDS Rate | Section |
|---|---|---|
| LTCG on immovable property (NRI) | 12.5% + surcharge + cess | Section 195 / 112 |
| STCG on any asset (NRI) | As per applicable slab | Section 195 |
| Listed equity/MF โ STCG (NRI) | 20% | Sec 111A / 196D |
| Listed equity/MF โ LTCG above โน1.25L (NRI) | 12.5% | Sec 112A / 196D |
๐ก NRI Tax Tip โ Apply for Lower TDS Certificate: If TDS seems excessive (gains are smaller after deductions/exemptions), the NRI can apply for a Lower Deduction Certificate under Section 197 before completing the sale transaction. This prevents cash flow problems.
Also: NRIs can claim Section 54 / 54EC exemptions too. And DTAA (Double Taxation Avoidance Agreement) provisions between India and the NRI’s country of residence may reduce tax further โ check the applicable DTAA.
13. Case Studies โ Real-Life Capital Gains Planning
Case Study 1 โ House Sale & Full Reinvestment (Section 54)
Facts: Mrs. Priya sells her Mumbai house (held since 2010) in Feb 2026 for โน1.20 Cr. Indexed cost = โน70 lakh. She buys a new Pune flat for โน60 lakh within 18 months (within 2-year window).
| Particulars | Amount (โน) |
|---|---|
| LTCG (โน1.20Cr โ โน70L) | 50,00,000 |
| Less: Exemption u/s 54 (new house โน60L > LTCG โน50L โ full exemption) | (50,00,000) |
| Taxable LTCG | NIL ๐ |
Result: Zero tax! Remember: Mrs. Priya must NOT sell the Pune flat within 3 years โ else the entire โน50L exemption is reversed.
Case Study 2 โ With vs Without Indexation (Land Acquired Before 23 Jul 2024)
Facts: Mr. Arun (Resident Individual) bought land in FY 2013-14 for โน20 lakh (CII = 220). Sells in Jan 2026 for โน80 lakh (CII approx. 363). As a resident individual with land acquired before 23 Jul 2024, he can choose his option.
| Particulars | Option A: 12.5% (No Indexation) | Option B: 20% (With Indexation) |
|---|---|---|
| Sale Consideration | 80,00,000 | 80,00,000 |
| Less: Cost (actual / indexed) | (20,00,000) | (33,00,000) |
| Taxable LTCG | 60,00,000 | 47,00,000 |
| Tax Rate | 12.5% | 20% |
| Tax Liability (before cess) | โน7,50,000 โ | โน9,40,000 |
| Verdict | Option A wins here โ saves โน1,90,000! Always compute both options. | |
Case Study 3 โ Equity LTCG Tax-Loss Harvesting
Facts: Mr. Rohit has LTCG of โน4 lakh from Company A shares (held 18 months). He also has LTCL of โน1.5 lakh from Company B shares (held 15 months). He sells both in the same FY.
| Particulars | Amount (โน) |
|---|---|
| LTCG from Company A | 4,00,000 |
| Less: LTCL from Company B (set-off) | (1,50,000) |
| Net LTCG | 2,50,000 |
| Less: Annual Exemption (Sec 112A) | (1,25,000) |
| Taxable LTCG | 1,25,000 |
Tax @ 12.5% = โน15,625 (+ 4% cess = โน16,250). Without loss harvesting: tax on โน2.75L = โน34,375 + cess. Saving: โน18,750 through smart planning!
โ Capital Gains Tax Planning Checklist โ Before You Sell!
| โข | Calculate holding period carefully โ even 1 day difference can change STCG to LTCG, saving you significant tax |
| โข | For eligible land/building (acquired before 23 Jul 2024): compare 12.5% without indexation vs 20% with indexation โ compute both |
| โข | Check Section 50C โ compare agreed sale price vs stamp duty value before signing any sale deed |
| โข | Identify applicable exemptions โ Sec 54, 54F, 54EC, 54B before executing the transaction |
| โข | Utilise โน1.25 lakh annual exemption for listed equity LTCG every year โ don’t let it lapse unused |
| โข | Consider tax-loss harvesting โ offset gains with losses in the same financial year (permitted under law) |
| โข | Preserve all original purchase documents โ sale deed, agreement, receipts, improvement invoices (irreplaceable evidence) |
| โข | Deposit in CGAS if reinvestment can’t happen before ITR due date โ don’t miss the window |
| โข | File ITR on time to preserve capital loss carry forward rights โ a missed deadline loses this permanently |
| โข | NRIs: Apply for lower TDS certificate under Sec 197 before completing the sale to avoid cash flow problems |
| โข | Check your AIS (Annual Information Statement) โ the Income Tax Department already has data on your transactions via stock exchanges, property registrar, and banks |
โ Common Mistakes That Cost Taxpayers Dearly
| Mistake | Why It Hurts & What to Do |
|---|---|
| Ignoring Section 50C | Selling below circle rate = tax on the higher stamp duty value. Both seller AND buyer face consequences. Check circle rates before pricing. |
| Missing 6-month window for Section 54EC | After 6 months from sale, the Section 54EC exemption is permanently lost โ no extensions, no discretion. Buy bonds immediately after sale. |
| Selling new house within 3 years (Sec 54) | The entire Section 54 exemption is reversed and becomes taxable in the year of sale of the new house. Plan your housing timeline carefully. |
| Assuming inherited property is tax-free on sale | Inheritance itself is not taxable. But SELLING inherited property IS โ using predecessor’s cost (FMV as on 1 April 2001 if acquired before) and their holding period. |
| Not filing ITR on time (loss carry forward lost) | Legitimate capital losses worth lakhs in future tax savings are permanently lost if you miss the ITR due date. File on time โ always. |
| Bonus shares cost treated incorrectly | Cost of bonus shares is NIL per law. Don’t try to assign a cost. Also, holding period starts from allotment date โ not original share purchase date. |
| Crypto losses expected to offset equity gains | VDA losses are completely ring-fenced under Sec 115BBH โ they cannot offset equity or any other income. Each crypto transaction is standalone. |
14. Reporting Capital Gains in ITR
Every capital gains transaction must be disclosed in your ITR. The IT Department receives data from stock exchanges, registrars, and banks through the AIS (Annual Information Statement) โ they already know. Accurate reporting is not optional.
| Taxpayer Profile | Correct ITR Form | Key Schedules |
|---|---|---|
| Individual โ Capital Gains only (no business income) | ITR-2 | Schedule CG, Schedule 112A |
| Individual โ Business Income + Capital Gains | ITR-3 | Schedule CG + Schedule BP |
| HUF (Hindu Undivided Family) | ITR-2 / ITR-3 | Schedule CG |
| Companies / LLP | ITR-6 / ITR-5 | Schedule CG as part of P&L |
๐ AIS Alert: Access your AIS at incometax.gov.in > Login > Annual Information Statement. Cross-check it BEFORE filing ITR. Unexplained mismatches between AIS and your ITR can trigger scrutiny notices.
๐ Relevant Sections at a Glance
| Section | Subject |
|---|---|
| 2(14) | Definition of Capital Asset |
| 2(42A) / 2(29AA) | Short-Term / Long-Term Capital Asset |
| 2(47) | Definition of Transfer |
| 45 | Charging Section โ Capital Gains |
| 47 | Transactions NOT treated as Transfer |
| 48 | Mode of Computation of Capital Gains |
| 49 | Cost of Asset โ Previous Owner (Gift / Inheritance) |
| 50C | Stamp Duty Value as Full Consideration for Land/Building |
| 54 / 54B / 54D New Act: Sec 82/83/84 |
Exemptions โ Residential House / Agricultural Land / Industrial L&B. Max exemption under Sec 54: โน10 crore (Finance Act 2023, w.e.f. AY 2024-25). |
| 54EC | Exemption via NHAI/REC Bond Investment |
| 54F New Act: Sec 86 |
Exemption โ Full Consideration Invested in New Residential House. Max exemption: โน10 crore (Finance Act 2023, w.e.f. AY 2024-25). |
| 54GB | Exemption โ Investment in Eligible Startup (Sec 80-IAC) |
| 55(2)(ac) | Grandfathering โ FMV as on 31 January 2018 for listed equity |
| 111A | STCG on Listed Equity @ 20% (w.e.f. 23 July 2024) |
| 112 | LTCG Tax Rate โ General Non-Equity Assets @ 12.5% |
| 112A | LTCG on Listed Equity @ 12.5% (above โน1.25L exemption) |
| 115BBH | VDA / Crypto / NFT โ Flat 30% Tax, no set-off, no carry forward |
โ Frequently Asked Questions (FAQs)
๐ Authorised Government References
| Resource | URL |
|---|---|
| Income Tax Portal | www.incometax.gov.in |
| CBDT (Central Board of Direct Taxes) Circulars | incometaxindia.gov.in โ Circulars & Notifications |
| Finance Ministry Notifications | www.finmin.nic.in |
| AIS โ Annual Information Statement | Income Tax Portal > Login > Services > AIS |
| SEBI (Securities Exchange Board of India) | www.sebi.gov.in |
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Final Thoughts
Capital Gains Tax โ Planning is Everything
Capital gains taxation in India has been transformed by the Finance (No. 2) Act, 2024 โ revised STCG rate of 20% on equity, new LTCG rate of 12.5%, and the optional indexation benefit for eligible land and buildings. The Income Tax Act, 2025 (effective 1 April 2026) continues this framework in a recodified format. Whether you are a first-time investor, a seasoned property holder, an NRI, or a startup founder โ understanding and planning capital gains is your financial right and responsibility.
“Tax planning on capital gains should begin BEFORE selling an asset โ not after receiving the sale proceeds. One phone call to your tax advisor before signing the sale deed can save you lakhs in taxes.”
Plan smart. Invest wise. Pay what is due โ and not a rupee more.
A Tax professional with over a decade of hands-on experience in Taxation and Finance. I love taxation and Tax & Finance Hub is our humble attempt to make you fall in love with the same as well by simplifying complex GST, income tax, and finance topics for businesses and individuals across India cutting through the legal jargon so you can focus on what matters: running your business.
Disclaimer: This article is for educational and informational purposes only. It is based on the provisions of the Income-tax Act, 1961 and the Income Tax Act, 2025, as applicable for FY 2026-27, and as amended up to July2026, including CBDT Notification No. 70/2025 (CII for FY 2025-26), CBDT Notification No. 31/2025 (HUDCO bonds under Section 54EC), and Finance Act 2023 provisions (Section 54/54F cap of โน10 crore). Tax laws are subject to frequent amendments, judicial interpretations, CBDT circulars, and government notifications. The information herein should not be construed as professional tax or legal advice. Readers are strongly advised to consult a qualified tax professional before making any financial or investment decisions. taxandfinancehub.com does not accept any liability for decisions taken solely based on the content of this article.
