Home›Glossary›Capital Gains Tax

Capital Gains Tax

Tax

Capital Gains Tax

Tax levied on the profit earned from selling a capital asset such as property, equity, or mutual funds. In India, the rate and method depend on how long the asset was held.

Definition

Capital Gains Tax (CGT) is a tax levied on the profit — the "capital gain" — earned when you sell a capital asset at a price higher than its cost of acquisition. In India, capital gains tax is governed by the Income Tax Act, 1961, and applies to assets including real estate, listed shares, mutual funds, gold, bonds, and more.

The tax rate and calculation method depend on the holding period — how long you owned the asset before selling — which determines whether the gain is classified as Short-Term Capital Gain (STCG) or Long-Term Capital Gain (LTCG).

Formula

Capital Gain = Sale Price − Cost of Acquisition − Improvement Costs − Transfer Expenses

Tax = Capital Gain × Applicable Rate

Use the Capital Gains Tax Calculator for the full computation including eligible deductions.

Key Things to Know

  • Section 54 exemption: LTCG on a residential property sale is exempt if reinvested in another residential property within specified timelines.
  • Section 54EC: LTCG up to ₹50 lakh can be reinvested in specified bonds (NHAI, REC) within 6 months to claim exemption.
  • No indexation on property post-2024: Budget 2024 removed the indexation benefit for immovable property sold after 23 July 2024. The trade-off is a lower flat rate of 12.5%.
  • TDS on property sale: Buyer must deduct 1% TDS (Section 194IA) on property sale value above ₹50 lakh.

Related Calculators

Capital Gains Tax Calculator →Calculate your US federal capital gains tax using 2025 IRS rates. Covers short and long-term gains for single, married, and head-of-household filers.
LTCG Tax Calculator →Calculate Long Term Capital Gains tax on equity and mutual funds for FY 2025-26. Includes 12.5% rate, ₹1.25 lakh exemption, surcharge, and cess.
STCG Tax Calculator →Calculate Short Term Capital Gains tax on equity and mutual funds for FY 2025-26. Includes the 20% STCG rate, surcharge, and 4% health & education cess.
Property Appreciation Calculator →Calculate how much your property will be worth in the future based on annual appreciation rate. Estimate total gain, CAGR, and future value for real estate in seconds.

Related Terms

LTCGLong Term Capital GainsSTCGShort Term Capital GainsIndexationCost Inflation Index AdjustmentROIReturn on Investment

Frequently Asked Questions

For immovable property (residential, commercial, land) held for more than 24 months, Long-Term Capital Gains (LTCG) tax is 12.5% on the actual gain without indexation benefit, following the Budget 2024 amendment. This applies from FY 2024-25 onwards. The exemption under Section 54 (reinvestment in another residential property) and Section 54EC (investment in specified bonds up to ₹50 lakh) remain available. Use the [Capital Gains Tax Calculator](/capital-gains-tax-calculator/) to compute your exact liability.
Long-Term Capital Gains (LTCG) arises when an asset is sold after the specified holding period — 24 months for immovable property, 12 months for listed equity and equity mutual funds. Short-Term Capital Gains (STCG) arises on sale before that period. STCG on property is taxed at your applicable income tax slab rate; STCG on listed equity is taxed at 20% (post-Budget 2024). LTCG rates are always lower than STCG to incentivise long-term holding.
Yes, under Section 54 of the Income Tax Act, if you sell a residential property and use the LTCG proceeds to purchase or construct another residential property within specified timelines (purchase within 1 year before or 2 years after sale; construction within 3 years), the LTCG is exempt. The exemption is proportional if you reinvest only part of the gains. The new property must not be sold within 3 years, or the exemption is reversed.
Post-Budget 2024, for property transactions, Capital Gain = Sale Price − Cost of Acquisition (actual purchase price, no inflation adjustment). LTCG Tax = Capital Gain × 12.5%. For example: property bought for ₹40 lakh, sold for ₹95 lakh after 8 years. Gain = ₹55 lakh. LTCG Tax = ₹55 lakh × 12.5% = ₹6.875 lakh. Net proceeds = ₹95 lakh − ₹6.875 lakh = ₹88.125 lakh.