What is the STCG tax rate on equity in FY 2025-26?

Short-term capital gains on listed equity shares and equity mutual funds (STT paid) are taxed at 20% under Section 111A, effective July 23, 2024. The rate was raised from 15%.

How much LTCG on equity is exempt per year?

Up to ₹1,25,000 of LTCG from listed equity/equity MFs under Section 112A is exempt per financial year. Gains above this are taxed at 12.5%.

Taxation · Capital Gains

Capital Gains Tax in India 2025: STCG, LTCG and Indexation Rules Explained

Q: Is indexation still available on property sold in FY 2025-26?

Indexation was removed for most assets post July 23, 2024. However, for residential property bought before that date, resident individuals/HUFs can choose: 12.5% without indexation OR 20% with indexation using CII. CII for FY 2025-26 is 376 (CBDT Notification No. 70/2025).

Finin2min Tax Desk·June 2026· Finance (No. 2) Act, 2024 · CBDT Notification No. 70/2025 VERIFIED DATA

The Finance (No. 2) Act, 2024, effective July 23, 2024, is the most significant capital gains reform in a decade. It raised STCG on equity to 20%, unified LTCG at 12.5% across most asset classes, removed indexation for new purchases, and raised the annual LTCG exemption on equity to ₹1.25 lakh. Budget 2025 made no further changes — these rules apply fully to FY 2025-26 (AY 2026-27).

The July 23, 2024 Pivot: What Changed

Before July 23, 2024, India's capital gains framework had multiple inconsistent rates: equity STCG at 15%, equity LTCG at 10% above ₹1 lakh, property LTCG at 20% with indexation, and separate treatments for gold, debt funds, and unlisted shares. The Finance (No. 2) Act, 2024 unified this significantly — at the cost of higher rates on some assets and the removal of inflation protection through indexation.

Every capital gains calculation for FY 2025-26 must identify whether the asset was sold before or on/after July 23, 2024. Sales before this date follow the pre-amendment rates. For most taxpayers filing AY 2026-27 returns, all relevant transactions will fall under the new framework.

⚠ Pivot Date: July 23, 2024 is the effective date for all new capital gains provisions. Revised ITR forms require reporting pre- and post-July 23 gains separately. Failure to split correctly may trigger a tax notice.

Holding Period: What Qualifies as Long-Term?

Asset Class	LTCG Holding Period	STCG Holding Period
Listed equity shares, equity mutual funds, business trust units (STT paid)	More than 12 months	12 months or less
Immovable property (land, buildings)	More than 24 months	24 months or less
Unlisted shares	More than 24 months	24 months or less
Gold, bonds, unlisted debt instruments	More than 24 months	24 months or less
Debt mutual funds (equity < 35%)	No LTCG benefit — always slab rate	Always slab rate

Capital Gains Tax Rates: FY 2025-26 Complete Table

Asset Type	Holding	Section	Tax Rate	Key Note
Listed equity, equity MFs (STT paid)	STCG ≤12 months	111A	20%	Flat rate; slab does not apply
Listed equity, equity MFs (STT paid)	LTCG >12 months	112A	12.5%	First ₹1,25,000/year exempt
Property, gold, unlisted shares, bonds	LTCG >24 months	112	12.5% (no indexation)	Pre-July 2024 property: 20% with indexation option available
Property, gold, unlisted shares	STCG ≤24 months	General	Slab rate	Added to total income
Debt mutual funds (equity < 35%)	Any period	Proviso Sec 112	Slab rate	No LTCG benefit; Finance Act 2023

Surcharge note: For LTCG under Sections 111A and 112A, the maximum surcharge is capped at 15% even for incomes above ₹5 crore. For Section 112 (property/gold LTCG), normal surcharge rates up to 37% apply. Health and Education Cess of 4% applies on all capital gains tax.

Indexation: What Survives, What Doesn't

Indexation adjusts a property's purchase cost upward using the Cost Inflation Index (CII), reducing the computed capital gain. The Finance (No. 2) Act, 2024 removed this benefit for most assets transferred on or after July 23, 2024 — with one critical grandfathering exception for immovable property.

Grandfathering clause for immovable property: Resident individuals and HUFs selling land or buildings acquired before July 23, 2024 may choose whichever is lower between:

Option A: 12.5% LTCG tax calculated without indexation (on actual purchase price)
Option B: 20% LTCG tax calculated with indexation using the applicable CII ratio

This option does not apply to companies, LLPs, or non-resident individuals selling property in India. For new purchases (on/after July 23, 2024), only Option A (12.5% without indexation) is available.

Cost Inflation Index (CII) — Selected Values

CBDT notified CII = 376 for FY 2025-26 via Notification No. 70/2025 (July 1, 2025). Base year: FY 2001-02 = 100.

Purchase Year	CII	Indexed Cost Multiplier to FY 2025-26	Option B Likely Beneficial?
FY 2001-02	100	3.76×	✅ Very likely
FY 2005-06	117	3.21×	✅ Likely
FY 2010-11	167	2.25×	✅ Often yes
FY 2015-16	254	1.48×	⚖ Depends on gain size — compute both
FY 2020-21	301	1.25×	❌ Option A often lower
FY 2024-25	363	1.04×	❌ Option A clearly lower

The earlier the purchase year, the higher the indexed cost multiplier, and the more likely Option B (20% with indexation) produces lower tax. Always compute both options — use our Capital Gains Calculator for instant comparison.

Worked Example 1: Property Sale (FY 2025-26)

Riya purchased a flat in FY 2015-16 for ₹40,00,000 and sold it in FY 2025-26 for ₹90,00,000. Property was acquired before July 23, 2024, so she can choose between both options.

	Option A: 12.5% without indexation	Option B: 20% with indexation
Sale price	₹90,00,000	₹90,00,000
Cost / Indexed cost	₹40,00,000	₹40,00,000 × (376÷254) = ₹59,21,260
Capital gain	₹50,00,000	₹30,78,740
Tax rate	12.5%	20%
Tax (before cess)	₹6,25,000	₹6,15,748
Tax (with 4% cess)	₹6,50,000	₹6,40,378
Better option?	—	✅ Option B saves ~₹9,622

For property purchased in FY 2010-11 or earlier, the indexed multiplier exceeds 2.25× and Option B savings are substantially larger. Always run the numbers before filing.

Worked Example 2: Equity LTCG (Section 112A)

Arjun invested ₹5,00,000 in a Nifty 50 index fund on June 1, 2023 and sold on October 15, 2025 for ₹8,20,000. Held more than 12 months — qualifies as LTCG under Section 112A. No indexation option available for equity.

Total gain: ₹3,20,000
Annual Section 112A exemption: ₹1,25,000
Taxable LTCG: ₹1,95,000
Tax at 12.5%: ₹24,375
Health & Education Cess at 4%: ₹975
Total tax payable: ₹25,350

Planning tip: The ₹1.25 lakh exemption resets on April 1 each year. Splitting the redemption across two financial years could have saved Arjun approximately ₹16,250 — by applying two ₹1.25 lakh windows instead of one.

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Reinvestment Exemptions: Sections 54, 54F, and 54EC

LTCG on property can be reduced or deferred through qualified reinvestment. These exemptions apply to LTCG only and are available regardless of which income tax regime (old or new) you use — they govern the transaction, not the regime choice.

Section	Asset Sold	Reinvestment Required	Cap	Deadline
54	Residential property	Purchase or construct another residential property in India	₹10 crore (Budget 2023 cap)	Purchase: 1 yr before / 2 yrs after. Construction: 3 yrs after sale
54F	Any LTCG asset except residential property	Full net sale proceeds invested in one residential property	₹10 crore cap on gains; full sale consideration must be invested	Same as Section 54
54EC	Any long-term capital asset	NHAI / RECL / REC / other specified bonds	₹50,00,000 per year	Within 6 months of sale date

Set-Off and Carry-Forward of Capital Losses

STCG losses can be set off against both STCG and LTCG of the same year.
LTCG losses can only be set off against LTCG — not against STCG or ordinary income.
Unabsorbed capital losses can be carried forward for 8 assessment years, provided the ITR is filed on or before the due date (July 31, 2026 for individuals).
Filing a belated return forfeits the right to carry forward capital losses.

Special Treatment: Sovereign Gold Bonds vs Physical Gold

Gold Instrument	Holding for LTCG	LTCG Rate	Key Benefit
Physical gold / Gold ETF / Gold FoF	>24 months	12.5% (no indexation, post-July 2024)	—
Sovereign Gold Bond — held to maturity	N/A	Fully exempt	Capital gain at RBI redemption is entirely tax-free
SGB — sold on stock exchange (LTCG)	>12 months	12.5%	Listed instrument; equity holding period applies

SGB maturity proceeds are completely exempt from capital gains tax — making them the most tax-efficient gold holding. Note that the RBI has not issued new SGB tranches since January 2024. Existing SGB holders continue to benefit from the maturity exemption.

Frequently Asked Questions

What is the STCG tax rate on equity shares in FY 2025-26? ▼

Short-term capital gains on listed equity shares and equity mutual funds (where STT is paid) are taxed at 20% under Section 111A, effective from July 23, 2024. This was raised from the earlier 15% and applies as a flat rate — your income slab does not reduce or increase this rate.

Is indexation still available on property sold in FY 2025-26? ▼

Indexation is available only for property acquired before July 23, 2024. For such properties, resident individuals and HUFs can choose between 12.5% without indexation or 20% with indexation using the CII. The CII for FY 2025-26 is 376 (CBDT Notification No. 70/2025). For property purchased on or after July 23, 2024, only 12.5% without indexation applies.

How much LTCG on equity is tax-free per year? ▼

₹1,25,000 of LTCG from listed equity shares and equity-oriented mutual funds (Section 112A) is exempt per financial year. This threshold was raised from ₹1 lakh by the Finance (No. 2) Act, 2024. Only gains above ₹1.25 lakh are taxed at 12.5%. This exemption cannot be carried forward if unused.

Can I claim Section 87A rebate on capital gains under the new tax regime? ▼

Section 87A rebate does not apply to LTCG taxed under Section 112A (equity LTCG) even if your total income is below ₹12 lakh under the new regime. The rebate can apply to STCG under Section 111A and LTCG under Section 112 (property, gold), subject to your total income falling within the applicable rebate threshold.

Are debt mutual funds taxed differently from equity mutual funds? ▼

Yes. Debt mutual funds (with less than 35% equity allocation) are taxed at your applicable income slab rate on all gains, regardless of how long you hold them — there is no LTCG benefit. This change was made by the Finance Act 2023. Equity mutual funds (65%+ equity) continue to benefit from STCG at 20% and LTCG at 12.5%.