Capital Gains Tax in India 2025: Rates, STCG, LTCG & Indexation

India’s capital gains tax system takes on a new form in 2025, streamlined, simplified, and more transparent. Whether you are cashing in on shares, mutual funds, real estate, or digital assets, the revised framework reshapes how short-term capital gains tax, long-term capital gain tax rate, and capital gains tax indexation apply. From revamped holding periods and exemption limits to strategic choices on taxation methods, with or without indexation, this updated landscape demands smart planning. In this article, we break down the latest rates, indexation rules, and practical steps to maximise your post-tax returns under the new regime.

What is Capital Gains Tax?

Capital Gains Tax in India is a levy on the profit you make when you sell or transfer a capital asset, a broad category that includes things like real estate, shares, bonds, jewelry, or even cryptocurrencies?. The key point is that tax is triggered only when the asset changes hands, not while you are simply holding or owning it?.

Under the Income Tax Act of 1961, such gains are treated as part of your income for the year in which the sale takes place. If you inherit the asset, it is not taxed at that point, but when you later decide to sell it, any profit is subject to capital gains tax?. Meanwhile, some items like stock-in-trade, personal household items, and agricultural land in rural India are not considered capital assets, and their sale does not attract this tax.

This tax framework helps create transparency. You are taxed when you benefit monetarily, and the assets covered ensure broad applicability across various types of investments and possessions.

These gains fall into two categories based on how long you have owned the asset:

1. If sold within 12 months for listed securities or 24 months for assets like real estate, it is treated as a short-term capital gain, taxed at higher rates per applicable slabs or flat rates?.
2. If held for longer, over 12 months for listed shares and over 24 months for other assets, it becomes a long-term capital gain, enjoying lower flat tax rates. This straightforward classification helps investors plan and optimise their taxes effectively.

Types of Capital Gain Tax & Holding Periods

The holding period of an asset determines whether your gain is treated as a short-term or long-term capital gain in India, which helps you invest smartly and plan.

• For listed equity shares and mutual funds, if you sell within 12 months of purchase, it is classified as a short-term capital gain (STCG). These gains are taxed at higher rates, often 20% for such assets. But once you hold them for more than 12 months, they qualify as long-term capital gains (LTCG), enjoying a lower flat rate around 12.5%.
• For all other assets like real estate, gold, unlisted securities, or collectibles, the timeline is 24 months. Selling these before two years, and the gains are treated as STCG, taxed per your income slab. Hold them for over 24 months, and they qualify for LTCG. This allows you to pay the lower LTCG rate.

These clear, updated rules, effective since July 23, 2024, bring consistency to the tax system?. Whether you are trading shares or selling old property, knowing these timelines helps you minimise tax and make better financial decisions.

Short Term Capital Gains Tax

When you sell an asset within a short period, the profit you make is treated as short-term capital gain. How it is taxed depends on the type of asset:

• For listed shares and equity mutual funds, STCG is taxed at a flat 20% under Section 111A of the Income Tax Act, applicable when Securities Transaction Tax (STT) has been paid.
• For other assets like real estate, gold, unlisted securities, etc., the gains are taxed based on your normal income tax slab from 5% to 30%, with no indexation benefit.

It is important to note the change since July 23, 2024. Previously, STCG on listed shares was taxed at 15%, but now it is revised to 20%. It aligns with the government’s aim to encourage longer-term investment.

In simple terms, if you sell listed equity investments within a year, a flat 20% tax applies. Other assets sold quickly will add to the gain to your annual income and attract tax based on your income bracket.

Long Term Capital Gain Tax Rate

When you sell an asset after holding it long enough, the profit you make is called long-term capital gain, and it enjoys a lower tax rate:

• The single flat rate of 12.5% applies across all asset classes, whether equity shares, mutual funds, property, or gold.
• If you are selling listed shares or equity mutual funds, the first Rs.1.25?lakh of gain per year is tax-free under Section?112A. Only the amount above this is taxed at 12.5%.
• Indexation benefits are discontinued for all assets purchased on or after July?23,?2024. This means you can no longer adjust the cost of purchase for inflation, simplifying calculations, but potentially raising taxes on older assets.
• If you own property purchased on or before July?23, 2024, you can choose between two long-term capital gains tax methods. Pay a flat 12.5% without indexation, or apply the 20% rate with indexation, whichever results in a lower tax. This option, available only to individuals and HUFs, ensures fair treatment for earlier investments.
• As per Budget 2025, no changes have been made, holding periods and rates continue as they are for FY?2025–26.

This uniform tax regime makes long-term investing clearer and more predictable. This helps you plan your finances better.

Capital Gains Tax Indexation

Capital gains tax indexation adjusts your property's purchase cost to account for inflation, reducing the taxable long-term capital gain. But as of 2024, this benefit was discontinued for most assets purchased after July 23, 2024, they are taxed flat without indexation.

If you own a property acquired before that cut-off, you have a flexible choice:

1. Pay 12.5% without indexation
2. Calculate gains with 20% tax and indexation

Whichever results in a lower tax bill.

This grandfather clause makes the tax system fair by recognising older investments and offering you the most beneficial method.

Snapshot Table: 2025 Rates

Here is a clear, easy-to-understand table summarizing 2025 capital gains tax rates in India, tailored for Indian readers:

How It Works:

• Listed shares or mutual funds sold after the holding period are taxed at 12.5%, but the first Rs.1.25?lakh of LTCG is exempt. Early sales or short-term sales are taxed at a flat 20% under Section?111A.
• Other assets like real estate, gold, and unlisted securities enjoy the same 12.5% LTCG rate. However, if the property was owned before 23 July 2024, taxpayers can opt for 20% with indexation, whichever gives a lower tax bill.
• If sold within the short-term period, gains are added to your income and taxed at slab rates. No indexation applies in this case.

Why This Matters for 2025

The 2025 capital gains tax update brings welcome clarity and simplicity. With a uniform rate of 12.5% for long-term gains, there are fewer slabs to monitor. This makes it easier to plan your investments without worrying about complex tiered rates.

The removal of indexation except for older properties simplifies calculations, but also means you need to pay close attention to what you own, as gains on older assets may face steeper taxes?. Finally, revised timelines, 12 months for listed securities and 24 months for other assets, give you clear guidance on when to sell and how to avoid unnecessary tax?.

By streamlining the rules and clarifying the holding periods, the 2025 tax structure empowers you to make smarter, more confident financial decisions.

How You Can Act Smart with Capital Gains

As you navigate capital gains tax in 2025, here is a practical roadmap to optimise your financial decisions:

• Determine if your profit is STCG or LTCG

Check when you sold the asset.? For listed shares and mutual funds, selling within 12 months triggers STCG; for other assets, the cut-off is 24 months.

• Apply the correct tax rate
  1. Short term capital gain on listed securities is taxed at a flat 20%.
  2. For other assets under STCG, the gains are added to your income and taxed per your slab.
  3. Long-term capital gains tax is uniformly taxed at 12.5%, except your first Rs.1.25?lakh of gains from listed equity is exempt.
• Verify the asset’s purchase date

If your property was acquired before July?23, 2024, you can choose between 12.5% without indexation or 20% with indexation. Go with whichever lowers your tax.

• Leverage the Rs.1.25?lakh LTCG exemption

Long-term gains from listed equity up to Rs.1.25?lakh per financial year are tax-free under Section 112A, so time your sales smartly.?

Conclusion

As we navigate India’s revamped capital gains tax landscape in 2025, a few key insights stand out. A unified long-term capital gain tax rate of 12.5% simplifies planning, with a Rs.1.25 lakh annual exemption safeguarding many investors. The removal of indexation post?July?2024, balanced by a grandfathering option for pre-2024 property purchase dates, adds fairness and clarity?. Moreover, revised holding periods of 12 months for listed securities, 24 months for other assets give you clear timing for optimal tax outcomes. By understanding these streamlined rules, you can confidently plan your asset sales and maximize your after-tax returns.