Capital gains arise when you sell a capital asset — shares, mutual funds, property, or other investments — for more than what you paid for it. How this gain is taxed depends heavily on two things: the type of asset and how long you held it before selling, which determines whether the gain is classified as short-term (STCG) or long-term (LTCG).
For equity shares and equity mutual funds, a holding period of more than 12 months qualifies for long-term treatment, taxed at 12.5% above an exemption of ₹1.25 lakh per year; short-term gains (12 months or less) are taxed at 20%. For property and other capital assets, the long-term threshold is 24 months, taxed at 12.5% flat — though property purchased before 23 July 2024 may still opt for the older 20% rate with indexation benefit, whichever works out lower for the taxpayer.
Indexation adjusts your purchase cost for inflation using the Cost Inflation Index (CII) notified by the government each year, which can meaningfully reduce your taxable gain on property held for a long time. This calculator walks through these rules based on the asset type and dates you provide, to give you an estimate of tax payable.
STCG (Short-Term Capital Gains) applies to assets held for a shorter period (12 months for equity, 24 months for property), while LTCG (Long-Term Capital Gains) applies beyond that — LTCG generally enjoys lower tax rates and exemption thresholds.
Certain exemptions exist — for example, Section 54 allows exemption on long-term capital gains from selling a house property if you reinvest in another residential property, subject to conditions.
Indexation adjusts your asset's purchase cost for inflation using the Cost Inflation Index, reducing your taxable gain. For property bought before 23 July 2024, you can choose between 12.5% without indexation or 20% with indexation, whichever is more beneficial.
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