Capital Gains, Rates and Computation

A note on the law: section numbers here are from the Income tax Act, 1961, the operative law for the current filing cycle. The Income tax Act, 2025 renumbers these from Tax Year 2026-27 returns onward: Section 45 (charging section) becomes Section 67, Section 48 (computation) becomes Section 72, Section 111A (STT-paid equity STCG) becomes Section 196, Section 112 (general/unlisted LTCG) becomes Section 197, Section 112A (equity LTCG) becomes Section 198, and the capital asset definition in Section 2(14) becomes Section 2(22).

This page covers rates and computation across asset classes generally. For property sale specifics, reinvestment exemptions under Sections 54/54EC/54F, and set-off and carry-forward detail in more depth, see the Capital Gains & Remittances cluster, which covers that ground for both residents and NRIs.

The rates that actually apply now

Asset	Short term rate	Long term rate
Listed shares, equity mutual funds	20% flat	12.5% flat, first 1.25 lakh/year exempt
Property (bought on/after 23 July 2024)	Slab rate	12.5% flat, no indexation
Property (bought on/before 22 July 2024)	Slab rate	Lower of 12.5% without indexation or 20% with indexation, your choice
Debt mutual funds (bought after 1 April 2023)	Slab rate	No long term concept, always slab rate

Indexation is mostly gone. For most assets bought after the cutoff dates above, no inflation adjustment applies, you pay 12.5% on the actual gain. The one holdout, property bought before 23 July 2024 keeps a choice between the old indexed 20% and the new flat 12.5%, whichever costs less.

What you can actually deduct beyond the purchase price: the cost of any genuine improvement made to the asset over the years, and the expenses directly tied to the transfer itself, brokerage, registration charges, legal fees. Both reduce your taxable gain, and people frequently forget to claim them.

Inherited or gifted property carries the previous owner’s history with it. If you inherited or received a property as a gift, your cost of acquisition is what it cost the previous owner, or, if further back, whoever first acquired it for value, and their holding period counts toward yours too. This often means an inherited property you have held for only a year still qualifies for long term treatment, because the original owner’s years count.

Bonus shares have a deemed cost of zero. Since your original shares already carry the full purchase cost, bonus shares allotted on top of them are treated as acquired at nil cost, the entire sale proceeds from bonus shares become your gain.

Old holdings get a one time grandfathering benefit. If you bought listed shares or equity funds before 31 January 2018, you can use the fair market value as on that date as your cost of acquisition if it is higher than what you actually paid, softening the tax impact of years of appreciation that predates the current LTCG regime.

Set off and carry forward: losses offset gains in the same year, unused long term losses carry forward for eight years against future long term gains only.

Surcharge caps: where they apply, and where they quietly don’t

This is a genuinely underexplained corner of the rate structure. Some capital gains carry a surcharge ceiling that stops it climbing to the top old-regime band, others don’t, and the difference depends entirely on which specific provision the gain falls under, not on the asset type in any obvious way.

Gain type	Surcharge treatment
LTCG on listed equity/equity funds (Section 112A)	Capped at 15%, never reaching the 25% or 37% top bands
General/unlisted LTCG (Section 112)	Capped at 15%
STT-paid equity STCG (Section 111A)	Capped at 15%
STCG not eligible for STT-paid treatment (for example, unlisted shares held short-term)	No cap, ordinary slab surcharge applies, reaching 37% at the top old-regime band
Market Linked Debentures (MLDs)	No cap, deemed short-term regardless of actual holding period, full slab surcharge
Specified mutual funds acquired after 1 April 2023	No cap, deemed short-term regardless of actual holding period, full slab surcharge
Unlisted bonds/debentures transferred after 23 July 2024	No cap, deemed short-term regardless of actual holding period, full slab surcharge

The pattern worth internalising: gains that get the STT-paid preferential rate treatment (111A/196, 112A/198) or the general LTCG provision (112/197) all carry the 15% surcharge ceiling. Everything deliberately pushed into deemed-short-term status, MLDs, the post-2023 specified mutual fund category, and post-July-2024 unlisted bonds and debentures, gets no such protection, the surcharge climbs the full old-regime ladder up to 37% at the top, even though the gain itself is taxed at slab rate rather than a flat capital gains rate. For someone in the top surcharge bracket, this can add a meaningfully higher effective rate on exactly the instruments many assume are lower-risk, fixed-income-adjacent holdings, worth flagging specifically to anyone holding MLDs or these mutual fund categories in size.

Gold and unlisted shares

Asset	LTCG holding period	LTCG rate	STCG rate
Gold (physical/digital), gold mutual funds	24 months	12.5%, no indexation	Slab rate
Gold/silver ETFs (listed)	12 months	12.5%, no indexation	Slab rate
Unlisted shares	24 months	12.5%, no indexation	Slab rate (not the 20% rate listed shares get, since no STT is paid)

The 1.25 lakh rupee annual LTCG exemption does not extend here. That exemption applies only to listed equity and equity mutual funds under Section 112A. Gains on gold, gold ETFs, and unlisted shares get no such allowance, however small, an easy assumption to get wrong.

Sovereign Gold Bonds are no longer automatically exempt

Since Budget 2026, the capital gains exemption on redemption is restricted to original RBI-issue subscribers who hold the bond continuously to final, 8-year maturity. Buying an SGB in the secondary market, or redeeming early after 1 April 2026, now makes the gain taxable, regardless of how long you have held it. Plenty of investors still assume SGBs are blanket tax-free on redemption, that assumption no longer holds for anyone who did not subscribe at the original RBI issue. Full gold and SGB detail is in Capital Gains on Gold.

ESOPs and RSUs involve two separate tax events

These are easy to conflate into one event, but the law treats them separately. At exercise, for ESOPs, or vesting, for RSUs, the gap between fair market value and whatever you paid is taxed as a salary perquisite, not a capital gain. At eventual sale, the capital gain is sale price minus that same fair market value, the amount already taxed once as perquisite, and the holding period for determining short or long term runs from the exercise or vesting date, not the original grant date. Full detail on the perquisite side, and the startup TDS deferral scheme, is covered in ESOP and RSU Taxation.

Which rate table above applies at sale depends on whether the shares actually trade on an Indian stock exchange. Foreign-listed shares and private company shares both follow the unlisted treatment, regardless of how liquid or well known the company is. For foreign shares specifically, the double-taxation and reporting angle is covered in Foreign RSUs: Taxation, Reporting, and Foreign Tax Credit.