Long-Term Capital Gains Tax Rates
The long term capital gain tax rate in India is now unified at a baseline of 12.5 percent across most capital assets. A frequent point of confusion on financial portals is assuming that one universal holding period applies to every investment, or that inflation indexation still applies across the board. Under the Income-tax Act 2025, which took effect on 1 April 2026, the tax rate you pay and the holding period required to qualify as long-term depend on the specific asset category.
Listed shares, real estate, physical gold, gold ETFs, and mutual funds each operate under distinct statutory provisions. This content serves as the master rate directory for long-term capital gains, outlining the statutory sections, holding boundaries, exemption thresholds, and loss set-off rules.
Dhanvantri Capital Services Private Limited, known as Dhanvantree, is an AMFI-registered mutual fund and Specialised Investment Fund distributor, ARN-194216, and a distributor of portfolio management services registered with APMI, APRN10201. We are not registered investment advisers. This page explains statutory direct tax rates and provisions. It recommends no specific investment asset and sets no course of action. The choice is yours.
Master tax rate table across all capital assets
Direct tax legislation establishes distinct holding thresholds and computational mechanisms for different categories of property and investments. The master comparison table below details the holding periods, statutory rates, and applicable sections under the Income-tax Act 2025 alongside historical references under the repealed Income-tax Act 1961 for Financial Year 2026-27:
| Asset Category | Holding Period for Long-Term Status | Long-Term Capital Gain Tax Rate | Statutory Section (2025 Act vs 1961 Act) | Key Conditions and Thresholds |
|---|---|---|---|---|
| Listed Equity Shares | More than 12 months | 12.5% | Section 198 (formerly 112A) | First ₹1,25,000 of aggregate gains per year is tax-free; STT required on buy and sell. |
| Equity Mutual Funds (≥65% domestic equity) | More than 12 months | 12.5% | Section 198 (formerly 112A) | Shares the ₹1,25,000 annual exemption with listed shares; STT required on transfer. |
| Real Estate (Acquired on or after 23 July 2024) | More than 24 months | 12.5% | Section 197 (formerly 112) | No indexation benefit; calculated on net sale proceeds minus actual purchase/improvement cost. |
| Real Estate (Acquired before 23 July 2024) | More than 24 months | Lower of 12.5% or 20% | Section 197(3) (transitional rule) | Resident individuals/HUFs compute tax at 12.5% without indexation and 20% with indexation; tax is capped at the lower figure. |
| Physical Gold & Jewellery | More than 24 months | 12.5% | Section 197 (formerly 112) | No indexation benefit; holding period reduced from historical 36 months to 24 months. |
| Listed Gold ETFs | More than 12 months | 12.5% | Section 197 (formerly 112) | Classified as listed securities traded on recognized Indian stock exchanges. |
| Unlisted Equity Shares | More than 24 months | 12.5% | Section 197 (formerly 112) | No indexation benefit; does not receive the ₹1,25,000 exemption threshold. |
| Specified Debt Mutual Funds (Bought ≥ 1 April 2023) | Not applicable | Slab rates (No LTCG) | Section 76 (formerly 50AA) | Deemed short-term capital gains regardless of holding period; added to regular taxable income. |
| Debt Mutual Funds (Bought before 1 April 2023) | More than 24 months | 12.5% | Section 197 (formerly 112) | Grandfathered units; taxed at 12.5% without indexation. |
A mandatory Health and Education Cess of 4 percent applies to the base tax calculated across all asset classes. Surcharge applies additionally based on the taxpayer’s total taxable income and legal status.
To see how individual tax brackets operate on income outside capital gains, read our blog on income tax rules.
Listed shares and equity mutual funds: Section 198 rules
Equity investments traded on recognized stock exchanges receive a specialized long-term capital gains framework under Section 198 of the Income-tax Act 2025. This provision corresponds to erstwhile Section 112A of the 1961 Act, applying a 12.5 percent tax rate on net long-term capital gains exceeding an aggregate annual threshold of one lakh twenty-five thousand rupees.
When you sell listed equity shares or units of an equity-oriented mutual fund held for more than 12 months, your tax is calculated using three statutory rules:
The ₹1,25,000 Annual Exemption: You do not pay tax on the first ₹1,25,000 of net long-term capital gains earned during a financial year. This is a combined threshold. It covers all qualifying equity sales and equity fund redemptions made between 1 April and 31 March.
The 12.5 Percent Base Rate: Any long-term equity gain above the ₹1,25,000 threshold is taxed at a flat rate of 12.5 percent.
No Inflation Indexation: Listed equity instruments do not receive indexation benefits. You calculate the gain directly by subtracting your acquisition cost and allowable transfer expenses from your sale consideration.
Securities Transaction Tax (STT) Requirements
To qualify for the concessional 12.5 percent rate under Section 198, the transaction must satisfy statutory STT conditions:
For Listed Shares: Securities Transaction Tax must have been paid at the time of purchase and at the time of sale (subject to Central Government notifications exempting acquisitions like IPO allotments, bonus shares, or court-approved corporate mergers).
For Equity Mutual Funds: STT must be paid at the time of redemption or transfer through the fund house or exchange.
If you transfer listed shares off-market without paying STT, the gain cannot be processed under Section 198. It falls under standard capital gains provisions under Section 197 at 12.5 percent without the benefit of the ₹1,25,000 exemption threshold.
For detailed holding examples and intraday distinctions, visit our blogs on long-term capital gain tax on shares and long-term capital gain tax on mutual funds.
Real estate taxation: the Section 197(3) transitional rule
Real estate sales involve distinct holding periods and transitional provisions under the direct tax framework. Immovable property, including residential apartments, commercial buildings, and land, requires a holding period of more than twenty-four months to be classified as a long-term capital asset under direct tax statutes.
Following direct tax amendments, the treatment of long-term property transactions depends on when the property was acquired:
Properties Acquired On or After 23 July 2024
If you acquired a land or building asset on or after 23 July 2024 and held it for more than 24 months, the tax rate is a flat 12.5 percent on the net capital gain. Inflation indexation is not available for these properties.
Properties Acquired Before 23 July 2024: The Section 197(3) Comparison
For properties acquired before 23 July 2024 and transferred after that date, Parliament enacted a transitional grandfathering provision under Section 197(3) of the Income-tax Act 2025.
Many financial blogs incorrectly claim that the seller can simply choose whichever tax rate they prefer. In statutory terms, it is not an open subjective choice. Section 197(3) specifies a computational rule:
The tax is computed under the current schedule: 12.5 percent on the gain calculated without indexation.
The tax is also computed under the historical schedule: 20 percent on the gain calculated using the Cost Inflation Index.
For an eligible resident individual or Hindu Undivided Family (HUF), the tax payable is capped at the lower of the two calculations. Any excess tax that would arise under the 12.5 percent calculation over the 20 percent indexed calculation is ignored.
This mechanism ensures that long-term property owners who bought real estate decades ago are not penalized by the removal of indexation if their property’s price appreciation lagged general inflation.
For historical inflation multipliers, including the Cost Inflation Index figure of 384 for FY 2026-27, consult our detailed table on the cost inflation index. To review worked property calculations, visit our blog on capital gains tax on property.
Capital gains on gold: physical bullion, ETFs and bonds
Gold investments are subject to differing holding periods and tax treatments based on whether the metal is held physically or through paper and exchange-traded instruments. Classifying gold holdings accurately ensures compliance with revised direct tax thresholds and avoids incorrect reporting on annual income tax returns.
Taxpayers frequently ask about the capital gains tax on gold because the rules changed significantly in recent budgets:
1. Physical Gold Bullion and Jewellery
Physical gold, including coins, bars, and jewellery, requires a holding period of more than 24 months to qualify as a long-term capital asset. The historical requirement of 36 months was reduced to align with other non-financial assets.
Tax Rate: 12.5 percent on net capital gains.
Indexation: Not available. The gain is the sale price minus the original purchase invoice value and making charges.
Short-Term Rule: If sold within 24 months of purchase, profits are short-term capital gains, added to your gross total income, and taxed at your regular income tax slab rate.
2. Listed Gold Exchange Traded Funds (ETFs)
Units of Gold ETFs traded on recognized stock exchanges like the NSE and BSE are classified as listed securities:
Holding Period: More than 12 months to qualify as long-term.
Tax Rate: 12.5 percent without indexation under Section 197.
Key Distinction: Gold ETFs achieve long-term status a full year earlier than physical gold (12 months versus 24 months), offering higher liquidity and lower transaction friction for portfolio allocators.
3. Sovereign Gold Bonds (SGBs)
Sovereign Gold Bonds issued by the Reserve Bank of India carry a specialized statutory tax exemption under direct tax legislation:
Redemption on Maturity: Capital gains arising to an individual upon redemption of SGBs at the end of their 8-year tenure are completely exempt from tax.
Premature Secondary Market Sale: If you sell SGBs on a stock exchange before maturity, the transaction is treated as a normal capital asset transfer. If held for more than 12 months, the profit is taxed as long-term capital gains at 12.5 percent.
Specified debt mutual funds: why they get no LTCG benefit
Mutual funds that invest primarily in fixed-income instruments operate under a separate statutory framework that eliminates long-term capital gains treatment for newly acquired units. Under Section 76 of the Income-tax Act 2025, which corresponds to erstwhile Section 50AA of the 1961 Act, capital gains on specified debt funds are deemed to be short-term.
A specified mutual fund is defined as a fund that invests 35 percent or less of its total proceeds in equity shares of domestic companies. This category includes:
Liquid funds and overnight funds
Corporate bond funds and banking and PSU debt funds
Target maturity bond funds and gilt funds
Conservative hybrid funds
The 1 April 2023 Dividing Line
Units Acquired On or After 1 April 2023: Under Section 76, any capital gain arising from the redemption or transfer of these units is deemed to be a short-term capital gain, regardless of how many years you hold the investment. The profit is added to your total income and taxed at your applicable personal income tax slab rate.
Units Acquired On or Before 31 March 2023: These units remain grandfathered. If held for more than 24 months, profits are classified as long-term capital gains and taxed at 12.5 percent without indexation under Section 197.
This distinction makes it essential for investors to separate their pre-April 2023 mutual fund folios from fresh subscriptions made under current tax rules.
Legitimate ways to reduce or exempt long-term capital gains tax
Taxpayers frequently search online for how to avoid capital gains tax when selling real estate, businesses, or large equity holdings. In Indian direct tax law, tax evasion through concealed consideration is illegal, but Parliament provides legitimate statutory reinvestment exemptions under Sections 82, 85, and 86 of the Income-tax Act 2025.
If you generate substantial long-term capital gains, you can reduce or eliminate your tax liability through these statutory avenues:
Reinvesting Property Gains in a Residential House (Section 82): Formerly Section 54. If you sell a residential house held for more than 24 months, you can exempt your capital gains by purchasing another residential house in India within two years (or constructing one within three years). The cost of the new house eligible for exemption is subject to a statutory ceiling of ₹10 crore.
Subscribing to Infrastructure Bonds (Section 85): Formerly Section 54EC. If you sell land or buildings, you can exempt your gains by investing up to ₹50 lakh in notified long-term bonds (such as NHAI or REC) within six months of the sale date. These bonds carry a mandatory five-year lock-in.
Reinvesting Other Assets into a House (Section 86): Formerly Section 54F. If you sell long-term assets other than a residential house (such as unlisted shares, commercial land, or physical gold), you can exempt your gains by reinvesting the entire net sale consideration into a residential house, provided you own no more than one house on the sale date.
If you have not finalized a property purchase before your annual income tax return filing due date, you must deposit the unutilised funds into an authorized bank under the Capital Gains Accounts Scheme 1988 to safeguard your exemption claim.
For complete rules, timelines, and worked calculations, read our comprehensive blog on capital gains exemptions.
Capital loss set-off and carry-forward rules
Capital gains tax liabilities can be legally mitigated by offsetting realized capital losses against capital gains earned within the same financial year. Direct tax statutes establish specific rules governing which losses can absorb long-term capital gains, preventing taxpayers from adjusting investment losses against regular employment or business earnings.
Under direct tax law, capital loss adjustments follow a clear hierarchy:
1. Current-Year Loss Set-Off
Short-Term Capital Loss (STCL): A short-term capital loss can be set off against both short-term capital gains and long-term capital gains. For example, if you have ₹50,000 of short-term losses from stock trading, you can use that loss to reduce your long-term capital gains from real estate or gold.
Long-Term Capital Loss (LTCL): A long-term capital loss can only be set off against long-term capital gains. You cannot adjust a long-term capital loss against short-term capital gains.
No Inter-Head Set-Off: Capital losses cannot be deducted from salaries, house property rent, or business income.
2. Eight-Year Carry-Forward under Section 111
If your total capital losses exceed your capital gains in a financial year, the unabsorbed loss does not lapse:
Under Section 111 of the Income-tax Act 2025, unabsorbed capital losses can be carried forward for up to 8 tax years immediately following the year the loss occurred.
In future assessment years, carried-forward short-term losses can offset future STCG or LTCG, while carried-forward long-term losses can only offset future LTCG.
Mandatory Return Deadline: To carry forward your losses, you must file your income tax return on or before the statutory due date under Section 263(1) of the Act (formerly Section 139(1)). Filing a late return forfeits the right to carry forward capital losses for that year.
To see complete loss set-off schedules and reporting steps, explore our structural hub on capital gains on shares.
Common Questions
The standard long term capital gain tax rate is 12.5 percent across most capital assets, including real estate, gold, unlisted shares, and listed equities. Listed shares and equity mutual funds receive an aggregate annual tax-free exemption threshold of ₹1,25,000 under Section 198. A 4 percent cess applies additionally.
Under Section 198 (formerly Section 112A), net long-term capital gains from listed equity shares and equity-oriented mutual funds are tax-free up to an aggregate limit of ₹1,25,000 per financial year. Only the portion of gains exceeding ₹1,25,000 is taxed at 12.5 percent.
Physical gold, including gold coins, bullion, and jewellery, requires a holding period of more than 24 months to qualify as a long-term capital asset. Long-term gains on physical gold are taxed at 12.5 percent without indexation under Section 197.
Indexation is not available for real estate acquired on or after 23 July 2024. However, under Section 197(3), for properties acquired before 23 July 2024 and sold by an eligible resident individual or HUF, the tax payable is capped at the lower of 12.5 percent without indexation or 20 percent with indexation.
No. Direct tax statutes prohibit setting off capital losses against any other head of income, including salary, business profits, or house property income. Long-term capital losses can only be set off against long-term capital gains.
Disclaimer: The views expressed here are of the author and do not reflect those of Dhanvantree. Mutual funds are subject to market risks, please read the scheme documents carefully before investing.