Dec 17, 2025
Whenever you sell an asset like property, mutual funds, or shares, the profit is known as a capital gain.
Understanding how capital gains tax works — and the available exemptions — helps you plan your investments efficiently.
Types of Capital Gains
Type | Holding Period | Example | Tax Rate |
|---|---|---|---|
Short-Term Capital Gain (STCG) | < 12 months (for listed shares) | Stocks, mutual funds | 15% |
Long-Term Capital Gain (LTCG) | ≥ 12 months (for listed shares) | Stocks, equity MFs | 10% (above ₹1 lakh) |
For Property / Land | < 24 months (STCG), ≥ 24 months (LTCG) | Real estate | As per slab / 20% (indexed) |
Calculation of Capital Gains
Capital Gain = Sale Price – (Purchase Cost + Improvement Cost + Transfer Expenses)
For LTCG, apply indexation benefit using the Cost Inflation Index (CII) to adjust for inflation.
Exemptions Under Capital Gains
Section | Condition | Benefit |
|---|---|---|
54 | Sale of residential property → reinvest in another within 2 years | Exemption on entire LTCG |
54EC | Invest in NHAI/REC bonds within 6 months | Up to ₹50 lakh exemption |
54F | Sale of non-residential asset → buy a house | Full exemption if reinvested |
Capital Gains on Mutual Funds
Equity funds:
STCG (≤1 year): 15%
LTCG (>1 year): 10% above ₹1 lakh
Debt funds (after 2023 change): Taxed as per slab rate (no indexation).
Filing Tips
✅ Report gains under “Capital Gains” schedule in ITR-2 or ITR-3.
✅ Keep broker statements and property documents.
✅ Don’t miss exemption timelines — they’re strictly enforced.
Conclusion
Capital gains tax planning can significantly affect your investment returns.
With correct reinvestment and timely filing, you can minimize tax and stay compliant.
Continue reading:
→ Advance Tax Explained
→ Top Deductions Under Section 80C to 80U
→ Complete Guide to Filing Income Tax Returns (ITR)
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