Capital Gain Tax in India – A Complete Overview

Q: What is a capital gain under the Income Tax Act?

Profit from transfer of a capital asset — excess of consideration over cost of acquisition, cost of improvement, and transfer expenses — taxable under Section 45 of the Income Tax Act.

Q: What is the difference between Short Term and Long Term Capital Gains?

Based on holding period: listed equity/MF — 12 months threshold; immovable property and unlisted shares — 24 months; debt MF and other assets — 24 months. STCG taxed at higher rates than LTCG.

Q: What are the current capital gain tax rates in India?

Post-Finance Act 2024: STCG on equity at 20% (Section 111A); LTCG on equity above Rs 1.25 lakh at 12.5% (Section 112A); LTCG on property at 12.5% without indexation or 20% with indexation (pre-July 23 2024 properties); LTCG on other assets at 12.5%.

Q: Can capital losses be set off against capital gains?

STCL can set off against STCG and LTCG. LTCL can set off against LTCG only. Unabsorbed losses carry forward 8 years. Return must be filed on time to carry forward losses.

Q: Which ITR form should I use to report capital gains?

ITR-2 (no business income) or ITR-3 (with business income). ITR-1 cannot be used. Complete Schedule CG and Schedule 112A disclosures are mandatory.

Understand Short Term and Long Term Capital Gains, Tax Rates, and Compliance Under the Income Tax Act

Capital gain is the profit earned on the sale or transfer of a capital asset — such as property, shares, mutual funds, gold, or any other asset that qualifies as a capital asset under Section 2(14) of the Income Tax Act, 1961. Capital gains are classified into Short Term Capital Gains (STCG) and Long Term Capital Gains (LTCG) depending on the holding period of the asset. The tax rate on capital gains varies significantly depending on the type of asset, the holding period, and whether Securities Transaction Tax (STT) was paid on the transaction.

Understanding capital gains correctly is essential for accurate income tax return filing — capital gain income is reported in ITR-2 (for individuals without business income) or ITR-3 (for individuals with business income). Our advisory covers computation, exemptions, and property sale tax planning — ensuring your capital gains are correctly computed and all available exemptions are claimed.

Our Capital Gain Advisory Services

Capital Gain Classification

Identifying whether your gain is short term or long term based on the asset type, holding period, and applicable provisions of the Income Tax Act.

Tax Rate Advisory

Advising on the correct tax rate — Section 111A (STCG on equity at 20%), Section 112A (LTCG on equity above Rs 1.25 lakh at 12.5%), or Section 112 (LTCG on other assets at 12.5% without indexation or 20% with indexation).

Capital Gain Computation

Accurate computation of capital gain — full value of consideration, cost of acquisition, cost of improvement, indexed cost, and deductible transfer expenses.

Exemption Planning

Advising on applicable exemptions under Sections 54, 54B, 54EC, 54F, and 54GB to reduce or eliminate capital gain tax liability through lawful reinvestment.

Capital Loss Set-off and Carry Forward

Advising on set-off of capital losses against capital gains in the current year and carry-forward of unabsorbed losses to future years — subject to applicable conditions.

ITR Filing for Capital Gains

Preparation and filing of ITR-2 or ITR-3 with complete capital gain disclosures — including Schedule CG, LTCG details, and supporting computation in the required format.

Our Approach

Identifying the type of capital asset and computing the holding period
Determining whether the gain is short term or long term
Computing the full value of consideration and deductible costs
Assessing applicability of indexation benefit and relevant tax rate
Evaluating available exemptions and planning optimal reinvestment
Preparing the capital gain computation and filing the ITR accurately

Benefits of Our Advisory

Accurate tax computation prevents over-payment or under-payment of capital gain tax
Professional exemption planning reduces tax liability significantly through lawful reinvestment options
Timely and correct ITR filing avoids income tax notices and penalty proceedings
Capital loss set-off and carry-forward advisory reduces overall tax burden
Clear documentation supports future assessments and protects against scrutiny
End-to-end advisory from sale planning through return filing — single point of contact

Why Choose Us?

Experienced chartered accountants with specialist capital gain tax knowledge
Comprehensive advisory covering all asset types — property, shares, MF, gold, and others
Proactive exemption identification — we find savings others miss
Accurate, professionally prepared capital gain computations
Reliable ITR filing with complete disclosure of all capital gain transactions

Frequently Asked Questions

What is a capital gain under the Income Tax Act?

A capital gain is the profit arising from the transfer of a capital asset — any property held by a person other than stock-in-trade, personal effects, agricultural land in rural areas, and certain other specified exclusions under Section 2(14). The gain is computed as the excess of the full value of consideration received over the cost of acquisition, cost of improvement, and transfer expenses. Capital gains are taxed as a separate head of income under Section 45 of the Income Tax Act.

What is the difference between Short Term and Long Term Capital Gains?

Capital gains are classified as Short Term or Long Term based on the holding period. For listed shares and equity mutual funds, the threshold is 12 months — gains on assets held for 12 months or less are STCG; above 12 months are LTCG. For immovable property and unlisted shares, the threshold is 24 months. For debt mutual funds, gold, and most other assets, the threshold is 24 months. STCG is generally taxed at higher rates than LTCG.

What are the current capital gain tax rates in India?

Following the Finance Act 2024: STCG on STT-paid listed equity shares and equity MF units — 20% (Section 111A). LTCG on STT-paid listed equity shares and equity MF units above Rs 1.25 lakh — 12.5% without indexation (Section 112A). LTCG on immovable property — 12.5% without indexation or 20% with indexation (for properties acquired before 23 July 2024, under the transitional provisions). LTCG on other assets — 12.5% without indexation. STCG on other assets — added to income and taxed at slab rates.

Can capital losses be set off against capital gains?

Yes. Short term capital losses can be set off against both short term and long term capital gains. Long term capital losses can only be set off against long term capital gains. Unabsorbed capital losses can be carried forward for 8 assessment years and set off in future years against capital gains of the respective type. Capital losses cannot be set off against income under any other head. Return must be filed within the due date to be eligible to carry forward losses.

Which ITR form should I use to report capital gains?

Individuals with capital gain income use: ITR-2 — if there is no business or professional income; or ITR-3 — if there is business or professional income in addition to capital gains. ITR-1 cannot be used if capital gains are taxable. The return requires disclosure in Schedule CG (Short Term Capital Gains) and Schedule 112A / 115AD (Long Term Capital Gains on listed equities). Accurate Schedule CG data is critical to avoid notices under Section 143(1).

Get Expert Capital Gain Tax Advisory

Accurate computation, exemption planning, and ITR filing for all your capital gain transactions.