Overview of New Capital Gains Tax Structure under Income Tax Act, 2025

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:-

•  Tax rates have remained mostly the same.
•  Sections and rules have been reorganised.
•  The major change is that a flat rate of 12.5% has been imposed on long-term capital gains (LTCG), without indexation (barring a few limited exceptions).

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.