Key Takeaways
- Equity LTCG above Rs 1.25 lakh is taxed at a flat 12.5% (Section 112A). STCG on equity is now 20% where STT has been paid.
- For non-equity assets (land, building, gold, debt MFs, unlisted shares), LTCG is a uniform 12.5% and the holding period is 24 months.
- Land or building acquired before 23 July 2024 gives resident individuals and HUFs a choice: 12.5% without indexation or 20% with indexation, whichever is lower. Property purchased on or after 23 July 2024 gets only the 12.5% flat rate.
- Section 54, 54F, and 54EC exemptions still apply, but the maximum exemption under Sections 54 and 54F is capped at Rs 10 crore per taxpayer.
- Crypto and VDA gains are outside this framework. They are taxed at flat 30% under Section 115BBH with no loss set-off. See our Crypto / VDA tax guide.
ITR filing for AY 2026-27 (FY 2025-26) is the first full year that the Finance Act 2024 capital gains overhaul applies from start to finish. Equity taxes are higher than in AY 2024-25. Property taxes depend on when you bought. The indexation debate has real money riding on it. This guide walks through every asset class, the current rates, Schedule CG practical tips, and the exemptions that still matter.
The LTCG vs STCG Framework
An asset is long-term or short-term based on how long you held it before selling (Section 2(42A), as amended from 23 July 2024):
| Asset | Long-term if held for more than |
|---|---|
| Listed shares, listed securities, equity mutual fund units, units of business trusts | 12 months |
| Land, building, unlisted shares, gold, debt fund units bought before 1 April 2023, other assets | 24 months |
| Specified mutual funds and market-linked debentures covered by Section 50AA | Always short-term |
Short-term capital gains (STCG) = sale value minus cost of acquisition minus related expenses, where the asset was sold before the long-term threshold.
Long-term capital gains (LTCG) = sale value minus indexed or actual cost of acquisition (depending on asset and purchase date), where the asset was held beyond the long-term threshold.
Current Capital Gains Tax Rates
Tax Rate Chart
Capital Gains Tax Rates : AY 2026-27 (FY 2025-26)
Rates apply to transfers on or after 23 July 2024 unless noted
Equity LTCG : Section 112A (above Rs. 1.25L)
Listed equity, equity MFs, units of business trust. STT must be paid.
Equity STCG : Section 111A
Short-term equity gains where STT has been paid.
Non-Equity LTCG : Section 112 (gold, property, unlisted shares)
No indexation. Applies to property purchased on/after 23 July 2024.
Property LTCG : pre-23 July 2024 purchase (with indexation)
Individuals and HUFs may choose: 20% with indexation or 12.5% without : whichever is lower.
Crypto / VDA : Section 115BBH
Flat rate. No loss set-off against other income. No deductions except cost of acquisition.
Source: Finance Act 2024; Income Tax Act 2025; CBDT
Equity and Equity-Oriented Mutual Funds (STT Paid)
| Gain | Section | Rate for transfers on or after 23 July 2024 |
|---|---|---|
| Short-term (held 12 months or less) | 111A | 20% |
| Long-term (held more than 12 months) | 112A | 12.5% on gains above Rs 1.25 lakh a year |
Before 23 July 2024, LTCG on equity was 10% and STCG was 15%. The rate applicable depends on date of transfer, not date of purchase.
Investors in portfolio management services apply these same equity rates to each trade in the PMS account, with fee deduction and ITR 2 reporting questions on top, as explained in our PMS taxation guide for AY 2026-27.
Non-Equity Assets (Land, Building, Gold, Debt MFs, Unlisted Shares, etc.)
| Asset | STCG | LTCG |
|---|---|---|
| Land or building | Slab rate | 12.5% without indexation; resident individuals and HUFs with property acquired before 23 July 2024 may instead pay 20% with indexation |
| Gold, unlisted shares, other assets | Slab rate | 12.5% without indexation |
Debt mutual funds acquired on or after 01 April 2023 have no long-term benefit at all. All gains are short-term, added to slab income under Section 50AA.
Specialised Sections (Unchanged in FY 2025-26)
| Provision | Treatment |
|---|---|
| Section 115BBH (crypto and other VDAs) | 30% flat, only cost of acquisition deductible, losses cannot be set off |
| Section 50AA (specified mutual funds, market-linked debentures) | Always short-term, taxed at slab rate |
| Section 55(2)(ac) grandfathering | Equity bought before 1 February 2018 uses the higher of actual cost and fair market value on 31 January 2018 (capped at sale price) |
The Property Indexation Choice: Worked Example
You bought a flat in Hyderabad in April 2015 for Rs 40 lakh (including stamp duty). You sell it on 15 January 2026 for Rs 1.10 crore.
Option A, 12.5% flat without indexation:
- LTCG = Rs 1,10,00,000 minus Rs 40,00,000 = Rs 70,00,000
- Tax = 12.5% × Rs 70,00,000 = Rs 8,75,000
Option B, 20% with indexation:
- Cost Inflation Index (CII): FY 2015-16 = 254, FY 2025-26 = 376 (CBDT Notification No. 70/2025)
- Indexed cost = Rs 40,00,000 × 376 / 254 = Rs 59,21,260
- LTCG = Rs 1,10,00,000 minus Rs 59,21,260 = Rs 50,78,740
- Tax = 20% × Rs 50,78,740 = Rs 10,15,748
Option A is cheaper by Rs 1,40,748 for this property. For an older property with a very low cost base and high appreciation, Option B (with indexation) is often better. Always compute both before deciding.
This choice is available only for land and building held by resident individuals or HUFs and acquired before 23 July 2024. Non-residents, companies, LLPs and firms cannot use the 20% + indexation route.
Section 54, 54F, and 54EC Exemptions
The three major LTCG exemptions remain available for AY 2026-27, subject to one big change: the maximum exemption under Sections 54 and 54F is now capped at Rs 10 crore per taxpayer (inserted by Finance Act 2023, effective AY 2024-25).
Section 54: Residential Property to Residential Property
Who qualifies: Individuals or HUFs selling a residential house held as a long-term asset.
What is exempt: LTCG reinvested in another residential house in India. If the LTCG is up to Rs 2 crore, the taxpayer can invest in two residential houses (one-time option, once in a lifetime). Above Rs 2 crore, only one house qualifies.
Time limits:
- Purchase: within 1 year before or 2 years after the sale
- Construction: within 3 years after the sale
Cap: Maximum exemption Rs 10 crore.
Capital Gains Account Scheme (CGAS): If the gains are not used by the ITR filing due date, deposit them in a specified bank account (Capital Gains Account Scheme) to preserve the exemption.
Section 54F: Any Long-Term Asset to Residential Property
Who qualifies: Individuals or HUFs selling any long-term capital asset (other than a residential house) where the taxpayer owns not more than one residential house on the date of transfer.
What is exempt: Proportionate exemption when net sale consideration (not just gains) is reinvested in a residential house in India.
Formula: Exempt LTCG = LTCG × (amount invested / net sale consideration)
Time limits: Same as Section 54 (1 year before or 2 years after for purchase, 3 years for construction).
Cap: Maximum exemption Rs 10 crore.
Section 54EC: Capital Gains Bonds
Who qualifies: Any taxpayer (individual, HUF, company, LLP, firm) selling long-term land or building.
What is exempt: LTCG invested in specified bonds (NHAI, REC, PFC, IRFC) within 6 months of sale.
Cap: Rs 50 lakh per taxpayer, both in a financial year and across the year of transfer and the next financial year combined.
Bond lock-in: 5 years from date of investment. Transfer, conversion into money, or taking a loan against the bonds within 5 years reverses the exemption and taxes the amount as LTCG in that year.
How to File Capital Gains in ITR 2 and ITR 3
Capital gains are reported in Schedule CG of the ITR form.
Schedule CG structure (ITR 2 and ITR 3 for AY 2026-27):
- Part A, Short-term capital gains, asset type by asset type
- Part B, Long-term capital gains, asset type by asset type, with the exemption claimed under Sections 54, 54B, 54EC, 54F and others shown against the relevant asset
- A table for set-off of current year capital losses
- A table of the quarter in which each gain arose, used for Section 234C interest
- Crypto and other VDA gains go in the separate Schedule VDA
Practical tips:
- Download the capital gains statement from each broker, AMC or registrar (CAMS, KFintech) as soon as the financial year closes.
- Equity sale transactions reported by brokers and registrars appear in AIS and feed the ITR pre-fill. Verify every entry against your broker's Profit and Loss statement before submitting.
- Property sale triggers a 1% TDS deduction under Section 194-IA if the sale consideration or stamp duty value is Rs 50 lakh or more. The deduction appears in your 26AS. Do not forget to claim it.
- Intraday equity profits and F&O gains are business income, not capital gains. They go in Schedule BP, not Schedule CG.
Common Mistakes Taxpayers Make
1. Using the 20% + indexation route on property bought on or after July 23, 2024. The choice is not available for such purchases. Only the 12.5% flat rate applies. Attempting to claim indexation triggers a notice under Section 143(1)(a).
2. Missing the Section 112A Rs 1.25 lakh exemption. Equity LTCG below Rs 1.25 lakh in a financial year is fully exempt. Claim the exemption in Schedule CG; do not skip it.
3. Treating debt MF gains as LTCG. Debt mutual funds acquired on or after 01 April 2023 have no long-term classification. All gains are short-term and added to slab income under Section 50AA.
4. Forgetting the 6-month window for Section 54EC bonds. Investment must be within 6 months of transfer, not financial year-end. Missing the window forfeits the exemption entirely.
5. Not opening a Capital Gains Account Scheme (CGAS) deposit. If you plan to use Section 54 or 54F but cannot complete the reinvestment by the ITR due date under Section 139(1) (July 31 for most individuals), park the gains in CGAS. Without CGAS, the exemption is lost even if you reinvest later within the 2 or 3 year window.
6. Ignoring advance tax on large capital gains. Tax on a capital gain must be paid in the advance tax instalments falling after the sale, or by March 31 if the sale is after March 15. A sizeable property sale in December with no advance tax paid by March 15 triggers interest under Sections 234B and 234C.
7. Deducting STT or double-counting brokerage. Brokerage is deductible as a transfer expense (or part of cost on purchase), but only once. STT is not deductible under Section 48. Cross-check against your broker's contract note.
Quick Reference Card (FY 2025-26, AY 2026-27)
| Item | Rule |
|---|---|
| Equity STCG (111A) | 20% |
| Equity LTCG (112A) | 12.5% above Rs 1.25 lakh |
| Other LTCG (112) | 12.5% without indexation; 20% with indexation option for pre-23 July 2024 land or building (resident individual or HUF) |
| Holding period | 12 months listed securities, 24 months others |
| Section 54 and 54F cap | Rs 10 crore |
| Section 54EC cap | Rs 50 lakh, invest within 6 months |
| VDA (115BBH) | 30% |
| Section 87A rebate | Not available against tax on 111A, 112 or 112A gains |
Let Tax Garden Handle Your Capital Gains Return
Capital gains get complicated fast when a single ITR involves equity, mutual funds, one property, a handful of Section 54EC bonds, and a TDS credit on property sale. Tax Garden pulls your broker + AMC statements, reports every asset class, files Schedule CG and Schedule VDA, and reports the exemptions backed by your investment proofs. See our ITR plans or talk to our team.
Frequently Asked Questions
Does the Section 87A rebate apply to capital gains in AY 2026-27?
Not to STCG on listed equity under Section 111A or LTCG under Section 112A. Under the new regime, the rebate of up to Rs 60,000 for income up to Rs 12 lakh is not available against tax on these special-rate gains, so such tax is payable even if total income is below Rs 12 lakh. Other income in the same return can still benefit from the rebate.
Can I deduct STT paid on shares while computing capital gains?
No. Securities Transaction Tax is not deductible as an expense under Section 48 when computing capital gains. Paying STT is simply a condition for the concessional rates under Sections 111A and 112A. Brokerage, exchange charges and stamp duty on the contract note can be treated as part of the cost of acquisition or transfer expenses, but STT itself cannot.
Is the choice of 12.5% or 20% with indexation available to NRIs selling property?
No. The option to pay 20% with indexation instead of 12.5% without indexation is available only to resident individuals and HUFs for land or building acquired before 23 July 2024 and sold on or after that date. Non-residents, companies, firms and LLPs pay 12.5% without indexation on long-term gains from such property, subject to any relief under a tax treaty.
Can I set off a short-term capital loss against salary income?
No. Capital losses can be set off only against capital gains. A short-term capital loss can be set off against both short-term and long-term gains, while a long-term capital loss can be set off only against long-term gains. Unabsorbed capital losses can be carried forward for 8 assessment years, but only if the return for the loss year is filed by the original due date.
Which ITR form should I use to report capital gains for AY 2026-27?
Use ITR-2 if you have capital gains and no business or professional income, and ITR-3 if you also have business income such as F&O trading. ITR-1 and ITR-4 can be used when the only capital gain is LTCG under Section 112A of up to Rs 1.25 lakh, with no brought-forward or carried-forward capital loss. Other capital gains need Schedule CG in ITR-2 or ITR-3.
Work with the Trusted Tax & Compliance Services in Kondapur, Hyderabad - Tax Garden for expert GST filing, ITR, TDS, ROC, and startup compliance support.
Frequently Asked Questions: Tax Services in Kondapur & Hyderabad
What makes Tax Garden a preferred GST consultant in Kondapur?
Tax Garden is ISO 9001:2015 certified and backs every engagement with Kavach, our ₹50,000 error-protection cover. Our flat-fee, no-surprise pricing and dedicated account manager make us a compliance partner for startups and SMEs in Kondapur's HITEC City corridor.
Why is Tax Garden a trusted tax compliance partner in Hyderabad?
Trust comes from three pillars at Tax Garden. First, transparency: you know the exact fee before you sign up, and it never changes mid-year. Second, certified expertise: our compliance team is qualified, and the firm holds ISO 9001:2015 certification. Third, accountability: Kavach, our unique error-protection plan, covers up to ₹50,000 in service charges for any clerical mistake made by our team.
Is there a reliable tax consultant near me in Kondapur?
Yes. Tax Garden's office is in Kondapur itself (CWS One Building, Hanuman Nagar). You can book an in-person consultation or get everything done fully online via WhatsApp and our client portal. We serve walk-in clients by appointment and remote clients across all of Hyderabad and Telangana.
I want a friendly CA who explains things clearly. Is that Tax Garden?
Absolutely. Every client gets a dedicated account manager reachable on WhatsApp, plain-language explanations of what is filed and why, and proactive reminders before every deadline. No jargon, no surprises, just friendly, expert compliance support from Kondapur.
Where is Tax Garden located in Hyderabad?
Tax Garden is located at 4th Floor, South Block, CWS One Building, Hanuman Nagar, Kondapur, Hyderabad, Telangana 500084. We serve clients across Kondapur, HITEC City, Gachibowli, Madhapur, Jubilee Hills, Banjara Hills, and all of Hyderabad.
Can I get GST filing and registration services in Kondapur?
Yes. Tax Garden offers end-to-end GST services from our Kondapur office: GST registration, GSTR-1, GSTR-3B, GSTR-9 annual returns, ITC reconciliation, e-invoicing setup, and GST notice handling for businesses of all sizes in Kondapur and Hyderabad.
Do you file ITR for salaried employees and businesses in Hyderabad?
Yes. Our Kondapur team files ITR for salaried employees, freelancers, consultants, business owners, LLPs, and companies across Hyderabad. We cover ITR-1 through ITR-6 with complete Chapter VI-A deduction reconciliation, AIS reconciliation, and proactive deadline management.
Which areas in Hyderabad does Tax Garden serve?
Tax Garden's Kondapur office serves clients across Hyderabad including HITEC City, Gachibowli, Madhapur, Jubilee Hills, Banjara Hills, Begumpet, Secunderabad, Ameerpet, Kukatpally, Uppal, LB Nagar, and all of Telangana. Most services are available fully online.
What compliance services does Tax Garden offer for startups in Kondapur?
Tax Garden is a compliance partner for startups in Kondapur and Hyderabad's HITEC City corridor. We handle company incorporation, GST registration, TDS filings, payroll, ROC annual filings, director KYC, and annual ITR filing, all under one flat-fee plan.
How does Tax Garden's compliance model compare to traditional hourly accounting services in Hyderabad?
Tax Garden works on flat-fee monthly plans with a dedicated account manager, monthly compliance updates, and WhatsApp communication. Every entry flagged by our AI-assisted workflow is reviewed by our compliance team before filing, and Kavach covers up to ₹50,000 in service charges for clerical or data errors made by our team.
