The upcoming FY26 tax filing season, with its September 15, 2025, deadline for individuals, means it’s time to get a handle on capital gains tax. Many Indian taxpayers end up paying more than they need to, often due to the complexity of the rules. But with a clear understanding, you can legally minimize your dues.
Thank you for reading this post, don't forget to subscribe!Key Tax Rules to Remember for FY26
First off, the new tax regime is now the default. This regime offers a basic exemption of ₹4 lakh, which applies to your regular income first, then to any capital gains. There’s also a common misunderstanding about the ₹60,000 rebate under Section 87A for incomes up to ₹12 lakh. While this effectively makes income up to ₹12 lakh tax-free, it generally doesn’t apply to long-term gains from listed equities, equity-oriented mutual funds, and REITs.
Capital Gains Breakdown by Asset Class
Let’s dive into how different assets are taxed:
- Listed Equity Shares & Equity-Oriented Mutual Funds:
- Long-Term Capital Gains (LTCG): If you’ve held them for over 12 months, you’ll pay 12.5% tax on gains exceeding a ₹1.25 lakh exemption per financial year.
- Short-Term Capital Gains (STCG): Held for under 12 months? Expect a 20% short-term rate.
- Debt Mutual Funds:
- Purchased Before April 1, 2023: Gains from holdings over 24 months are taxed at 12.5%, but without indexation benefits. Shorter durations are taxed at your regular slab rates.
- Purchased On or After April 1, 2023: All gains, regardless of how long you’ve held them, are taxed at your applicable slab rates. There’s no indexation or long-term/short-term distinction here.
- Hybrid Mutual Funds:
- Under 35% Equity / Market-Linked Debentures: If bought before April 1, 2023, long-term holdings (generally over 24 months) are taxed at 12.5%. Newer purchases are taxed at slab rates across the board.
- 35% to 65% Equity: Only gains from holdings over 24 months attract the 12.5% rate. Otherwise, it’s your slab rates.
- Over 65% Equity (Equity-Oriented): These are taxed similarly to listed equity shares.
- Sovereign Gold Bonds (SGBs):
- These are your safest bet! If you hold them to maturity (8 years), the capital gains are fully tax-exempt.
- If you sell them earlier, the taxation generally mirrors equity rules, meaning short-term or long-term depending on the holding period and potentially taxed at 12.5% without indexation for long-term gains.
- Non-Convertible Debentures (NCDs):
- If held for over 12 months (for listed NCDs), long-term gains are taxed at 12.5% without indexation.
- If held for under 12 months (for listed NCDs), short-term gains are added to your income and taxed at your slab rates.
- Real Estate Holdings:
- If you’ve held property for over 24 months, it’s considered a long-term gain.
- For real estate bought before July 23, 2024, you have an optional 20% indexed rate. This lets you adjust your purchase price for inflation, which can significantly lower your taxable gain.
- There’s also an option to pay 12.5% tax without indexation, particularly for properties acquired on or after July 23, 2024, where the indexation benefit is no longer available.
- Cryptocurrencies and NFTs:
- These are outliers! They’re not traditional capital assets under Indian tax law. Gains are taxed at a flat 30%, regardless of how long you’ve held them. You can’t deduct any expenses (other than the acquisition cost) or set off losses. Plus, there’s a 1% TDS on crypto transactions above certain thresholds.
Don’t Overpay – Plan Ahead!
The intricacies of capital gains tax can be tricky, often leading taxpayers to pay more than necessary. To avoid this, it’s always smart to consult a tax professional. They can provide personalized advice to optimize your tax liability. And if you expect significant capital gains, remember to factor them into your advance tax payments.
Are you clear on how these rules might affect your investments this tax season?
