The updates to capital gains tax in the Income Tax Act, 2025, outline easier rules, a standard LTCG rate of 12.5%, fewer indexation benefits, and new ways to handle various assets.
Kashish Bhardwaj | Apr 13, 2026 |
Overview of New Capital Gains Tax Structure under Income Tax Act, 2025
A structural simplification has been made in the taxation of capital gains under the new Income Tax Act, 2025, which will be applicable for the financial year 2026-27. However, it should be noted that:-
Its main objective is to simplify the tax system, reduce complexity, and impose a uniform rate.
1. Equity Shares / Equity Mutual Funds / Business Trusts
| Particulars | Old Law | New Law | Conditions | Tax Rate |
| STCG (Short-Term Capital Gain) | Section 111A | Section 196 | STT must be paid | 20% |
| LTCG (Long-Term Capital Gain) | Section 112A | Section 198 | STT must be paid | 12.50% |
| LTCG Exemption | Rs 1,25,000 | Rs 1,25,000 | — | Tax-free up to the limit |
2. Immovable Property (Land / Building)
| Particulars | Old Law | New Law | Conditions | Tax Rate |
| STCG (Short-Term Capital Gain) | Slab rate | Slab rate | Holding period ≤ 24 months | Taxed as per the normal income slab |
| LTCG (General Rule) | Section 112 | Section 197 | Holding period > 24 months | 12.5% (without indexation) |
| Special Option | Section 112 | Section 197 | Property purchased before 23 July 2024 | 20% (with indexation) or 12.5% (without indexation) |
3. Equity and Debt Mutual Funds
| Fund Type | STCG (Short-Term Capital Gain) | LTCG (Long-Term Capital Gain) |
| Debt Funds | Taxed as per the income tax slab | 12.5% |
| Equity Funds | 20% | 12.5% (with exemption up to Rs 1.25 lakh) |
Note: In case of debt funds, market-linked debentures (MLDs) and unlisted bonds or debentures purchased after 01/04/2023, no matter how long you hold them, they will always be treated as short-term for tax purposes. Whatever profit you earn from such investments will be directly taxed as per your income tax slab. The purpose of the change from the old Income Tax Act, 1961, to the new Income Tax Act, 2025, is not to increase taxes more but to simplify the entire system. In this case, the rules have been simplified, dependence on indexation has been reduced, and LTCG has been kept at a uniform rate of 12.5% in most places. Nevertheless, it is important to pay attention in some cases, especially in the case of immovable property purchased before July 23, 2024, as the indexation option is still applicable there. Therefore, every person should do proper tax planning according to their situation so that the right decision can be made.
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