Capital Gains Under Income‑tax Act, 2025 for Tax Period 2026‑27

The incoming Income‑tax Act, 2025 reorganises the entire law but leaves the fundamentals of capital gains taxation largely intact for tax period 2026‑27. What actually changes in practice arises mainly from Finance (No. 2) Act, 2024 and Finance Act, 2026, especially the shift to a near‑uniform 12.5% long‑term capital gains rate.

This guide walks through how capital gains will work in 2026‑27, how rates are applied, what happens to indexation, and which planning techniques remain available to an assessee.

1. Meaning of “Capital Gain” Under the New Framework

Capital gain continues to represent the surplus you realise when you transfer a capital asset for a value higher than your total acquisition cost (including incidental costs such as brokerage, stamp duty, registration fee, etc.).

Capital assets under the Income‑tax Act, 2025 remain broadly the same as under the 1961 law and include, among others:

  • Land and buildings (residential, commercial, industrial)
  • Flats, apartments, plots and other immovable property
  • Listed equity shares and units of equity‑oriented mutual funds and ETFs
  • Unlisted shares, debentures, bonds and units such as AIF units
  • Gold, jewellery, gold ETFs and other precious metals
  • Units of REITs, InVITs and similar market products

If the sale value or transfer consideration is lower than your overall cost, the shortfall is a capital loss. The mechanism for setting off and carrying forward such losses is preserved, although section numbers are renumbered in the 2025 law.

Note: The conceptual base—what is a capital asset, when a transfer occurs, and how profit or loss is computed—remains aligned with the old Income‑tax Act 1961. The new Act mainly repackages and clarifies the text without altering the core principles for 2026‑27.

2. Short‑Term vs Long‑Term Capital Assets – Holding Period Rules

The distinction between short‑term and long‑term capital assets continues to depend on how long the assessee holds the asset before transfer. Finance (No. 2) Act, 2024 standardised several holding periods and linked them to the 12.5% long‑term rate.

Broadly for tax period 2026‑27, the holding periods are as follows (subject to specific asset‑wise rules that should always be cross‑verified):

2.1 Listed Equity Shares, Equity‑oriented Mutual Funds, Listed Business Trust Units

  • Short‑term: Held 12 months or less
  • Long‑term: Held for more than 12 months
    (subject to STT conditions, as under the earlier regime)

2.2 Immovable Property (Land, Building, Flat, etc.)

  • Short‑term: Held 24 months or less
  • Long‑term: Held for more than 24 months

2.3 Other Listed Financial Assets

This includes assets such as:

  • Listed debt mutual funds
  • Listed gold ETFs
  • Listed AIF units
  • Listed REITs and InVITs

Finance (No. 2) Act, 2024 moved many of these listed units to a 12‑month holding period for long‑term classification, where they are listed on a recognised stock exchange in India and meet prescribed conditions.

2.4 Unlisted Shares and Other Unlisted Capital Assets

  • Generally treated as long‑term if held for more than 24 months, and in some specified categories 36 months
  • For long‑term gains, where eligible, the 12.5% rate applies as the standard norm

Important: The Income‑tax Act, 2025 mainly renumbers these provisions and makes the language more accessible. The real policy changes for 2026‑27—revised holding periods, unified rate, indexation restrictions—stem from the 2024 and 2026 Finance Acts, not from the codification itself.

3. Capital Gains Tax Rates in Tax Period 2026‑27

For 2026‑27, the effective rates stem from Finance (No. 2) Act, 2024 and are carried forward into the new Act’s structure.

3.1 Short‑Term Capital Gains (STCG)

  1. STCG on STT‑paid listed equity, equity mutual funds, business trust units
    (corresponding to earlier Section 111A):

    • Rate: Increased from 15% to 20%

  2. STCG on all other assets (where no special concessional section applies):

    • Taxed at normal slab rates applicable to the assessee
      (as under the earlier regime)

3.2 Long‑Term Capital Gains (LTCG)

  1. LTCG on listed equity, equity‑oriented mutual funds, business trust units
    (corresponding to earlier Section 112A):

    • Rate: Increased from 10% to 12.5%
    • Exemption threshold for residents: Enhanced from ₹1,00,000 to ₹1,25,000 per tax period

  2. LTCG on all other capital assets
    (corresponding to earlier Section 112):

    • Uniform rate: 12.5%, without indexation, as the default regime

  3. Special transitional treatment for immovable property (land/building)
    For specified properties acquired before certain cut‑off dates, the law still permits a comparison between:

    • 20% with indexation, and
    • 12.5% without indexation
      and allows the assessee to choose the option that results in lower tax liability.

While the capital gains chapter appears under new clause numbers (for example, around 196–203) and reinvestment‑based exemptions appear around 85–88, the effective rates and basic logic for 2026‑27 remain those described above.

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