Capital gain taxation in India refers to the tax levied on profits earned from the sale of capital assets such as property, stocks, mutual funds, gold, and bonds. The gain is categorized as either Short-Term Capital Gain (STCG) or Long-Term Capital Gain (LTCG) based on the holding period of the asset. STCG is generally taxed at a flat rate or as per income slabs, while LTCG enjoys exemptions and concessional rates under Sections 112 and 112A. The taxation rules differ depending on asset type, holding period, and applicable exemptions. Accurate classification ensures proper tax computation and compliance with income tax laws.
1.Long-Term Capital Gain (LTCG):
Long-Term Capital Gain (LTCG) refers to profit from selling a capital asset held for more than 12 months (for listed equity, equity mutual funds) or 36 months (for other assets), and is taxed as per Section 112 or 112A, with certain exemptions.
For FY 2024–25 (Assessment Year 2025–26), the rules under Section 112A for Long-Term Capital Gains (LTCG) from listed equity shares, equity-oriented mutual funds, and business trust units are:
💰 Exemption Limit
- LTCG up to ₹ 1.25 lakh in the financial year are fully exempt
🧾 Tax Rate on Exempt Portion
- LTCG above ₹ 1.25 lakh is taxed at a flat rate of 12.5% (without indexation)
⏳ Rate Variation by Sale Date
- Gains realized before 23 July 2024 were earlier taxed at 10% (with similar ₹ 1.25L exemption).
- For sales on or after 23 July 2024, the rate increased to 12.5%
- Regardless of sale date, the exemption ₹1.25 lakh remains aggregate for FY 2024‑25
✅ Eligibility Conditions
To avail this treatment under Section 112A:
- Assets must be held as long-term capital assets:
- Equity shares, equity-oriented mutual funds, or business trust units
- Held > 12 months
- Securities Transaction Tax (STT) must have been paid on both purchase (where applicable) and sale
- Other deductions (Chapter VI-A) and rebates under Section 87A cannot be claimed against this LTCG
- Grandfathering provision applies: for assets held before 31 Jan 2018, the Fair Market Value on that date is used to compute gain
📌 Illustrative Example (FY 2024–25)
- Suppose total LTCG = ₹ 1.5 lakh
- ₹ 1.25 lakh → exempt
- ₹ 25,000 → taxed at 12.5% → tax liability ₹ 3,125 + applicable surcharge/cess
📄 Summary Table
| Exemption | Tax Rate on Excess | Conditions | |
|---|---|---|---|
| FY 2024–25 | ₹ 1.25 lakh | 12.5% (flat, no indexation) | Listed equity, >12 mth holding, STT paid |
| Sale before 23 Jul 2024 | ₹ 1.25 lakh | 10% | Same conditions apply |
📝 Key Takeaway
- Exemption: ₹ 1.25 lakh per FY.
- Tax: 12.5% on gains above exemption for FY 2024–25.
- Applies regardless of sale date within FY, but tax rate depends on whether gain was booked before or after July 23, 2024.
2.Short-Term Capital Gain (STCG):
Short-Term Capital Gain (STCG) is the profit from selling a capital asset held for 12 months or less (for listed equity/equity mutual funds) or 36 months or less (for other assets). It is taxed at 15% or slab rates, depending on the asset type.
For FY 2024‑25 (AY 2025‑26), the Short-Term Capital Gains (STCG) tax treatment in India depends on the asset type and sale date:
📈 STCG on Listed Equity, Equity Mutual Funds & Business Trusts (through STT)
- Sale between April 1 and July 22, 2024:
- Taxed at 15%, plus surcharge and cess
- Sale on or after July 23, 2024:
- Tax rate increased to 20% (flat), plus applicable surcharge and health & education cess
- No basic exemption is available under Section 111A.
💼 STCG on Other Assets (Real Estate, Unlisted Shares, Debt Mutual Funds, Gold, etc.)
- Always taxable as per the individual’s income tax slab rate for FY 2024‑25
- No special flat rate applies—gain is added to regular income and taxed accordingly.
📋 Summary Table
| Asset Type | Sale Date | Tax Rate |
|---|---|---|
| Equity shares, equity MFs, business trusts (with STT) | On/before 22 Jul 2024 | 15% |
| Same as above | On/after 23 Jul 2024 | 20% |
| All other assets | Any date | Individual slab rate |
📌 Key Highlights
- Sales on or after July 23, 2024 are taxed at 20% for equity/STT-assessed STCG, up from 15%
- Other asset STCG remains slab-based—regardless of holding period
- No exemption provisions for STCG—unlike LTCG’s ₹1.25 lakh exemption.
- Surcharges and 4% cess apply on all STCG as per tax slab/rate.
🧾 Example:
-
Trade equity shares on August 15, 2024, and earn ₹200,000 STCG → Tax = 20% of ₹200,000 = ₹40,000, plus surcharge & cess.