Capital Gains Tax in India — Overview | Savlana Init

Capital Gains · Overview

Capital Gains — One Charge. Many Regimes.

Holding period, asset class, residential status and date of transfer each change the rate. Since July 2024 they changed again. We compute the charge under the rules that actually apply.

Section 45 of the Income Tax Act, 1961 charges to tax any profit or gain arising from the transfer of a capital asset, and treats it as income of the year in which the transfer took place. Everything difficult about capital gains follows from three definitions. A capital asset under Section 2(14) is property of any kind held by an assessee, with specified exclusions such as stock-in-trade, personal effects and certain agricultural land. A transfer under Section 2(47) is far wider than a sale — it includes exchange, relinquishment, extinguishment of rights, compulsory acquisition and certain transactions in immovable property under Section 53A of the Transfer of Property Act. And the holding period decides whether the gain is short-term or long-term.

The Finance (No. 2) Act, 2024 restructured this materially for transfers made on or after 23 July 2024. The holding period categories were reduced to two: twelve months for listed securities, and twenty-four months for everything else, which brought unlisted shares and immovable property into a single longer category. Long-term gains on listed equity shares and equity-oriented fund units on which securities transaction tax has been paid are charged under Section 112A at twelve and a half per cent above an exemption of one lakh twenty-five thousand rupees, with the corresponding short-term rate under Section 111A raised to twenty per cent. Long-term gains on other assets are charged under Section 112 at twelve and a half per cent, and indexation was withdrawn.

One transitional relief matters. For land or building acquired before 23 July 2024, a resident individual or Hindu undivided family may pay the lower of twelve and a half per cent without indexation and twenty per cent with indexation — an option that does not extend to non-residents, companies or firms. Beyond the rates sit the set-off and carry-forward rules in Sections 70, 71 and 74, under which a long-term loss can be set off only against a long-term gain while a short-term loss is available against both, with an eight-year carry forward that is preserved only if the return is filed by the due date. We compute the charge, apply the correct regime and the correct date, and plan the exemptions before the transaction rather than after it.

Our Capital Gains Services

Capital Gain Computation

Head-to-tail computation for any asset class — property, listed and unlisted shares, mutual funds, bonds, gold and business assets — under the regime in force on the date of transfer.

Holding Period Determination

Classification as short-term or long-term under the revised twelve and twenty-four month categories, including inherited and gifted assets where the previous owner’s period counts.

Rate and Regime Selection

Application of Sections 111A, 112 and 112A, and of the transitional option on land and building for eligible resident taxpayers.

Exemption Planning

Structuring of reinvestment relief under Sections 54, 54B, 54EC, 54F and 54GB within the statutory windows and caps.

Set-Off and Carry Forward

Optimisation of loss set-off across heads and years, with returns filed on time so that the eight-year carry forward is not forfeited.

Advance Tax Management

Computation and payment of advance tax on gains in the correct instalment, so interest under Sections 234B and 234C does not accrue.

TDS on Transfers

Management of deduction at source under Sections 194-IA and 195, including lower deduction certificates where withholding exceeds the real liability.

Reporting and Scrutiny Support

Capital gains schedules in the return, reconciliation to the Annual Information Statement, and response to notices questioning computation or exemption.

Our Process

Asset and Transaction Review

We establish what was transferred, when, to whom and for how much, and whether the transaction is a transfer at all under Section 2(47).

Holding Period and Cost Base

The holding period is fixed, including any period of a previous owner, and the cost of acquisition and improvement is established with documentary support.

Regime and Rate Application

The applicable section and rate are selected by asset class and date of transfer, and the transitional option is tested where it is available.

Exemption and Relief Planning

Reinvestment reliefs are planned within their time limits, with Capital Gains Account Scheme deposits where the window will straddle the filing date.

Payment, Filing and Defence

Advance tax is paid, the return is filed with complete schedules, and the computation is documented so it can be defended on scrutiny.

Why It Matters

✓The correct regime applied for the date of the transfer, not the old one

✓Holding period fixed under the revised twelve and twenty-four month rule

✓Transitional indexation option tested where the taxpayer is eligible

✓Cost base built from documents rather than reconstructed under notice

✓Exemptions planned before the transaction, while they are still available

✓Losses set off and carried forward instead of quietly lost

✓Advance tax timed so Sections 234B and 234C do not bite

✓Computation documented well enough to survive scrutiny years later

Frequently Asked Questions

It is decided by how long the asset was held before transfer. For transfers on or after 23 July 2024 there are two categories: listed securities held for more than twelve months are long-term, and all other assets held for more than twenty-four months are long-term. Anything below the applicable threshold is short-term. The classification matters because rates, exemptions and reinvestment reliefs differ substantially between the two.

Long-term gains on listed equity shares and equity-oriented fund units with securities transaction tax paid are charged under Section 112A at twelve and a half per cent on the amount exceeding one lakh twenty-five thousand rupees. The corresponding short-term rate under Section 111A is twenty per cent. Long-term gains on other assets are charged under Section 112 at twelve and a half per cent without indexation, while other short-term gains are taxed at the applicable slab or corporate rate.

Indexation was withdrawn for transfers made on or after 23 July 2024. One transitional relief survives: for land or building acquired before that date, a resident individual or Hindu undivided family may compute tax at the lower of twelve and a half per cent without indexation and twenty per cent with indexation. The option is not available to non-residents, companies, firms or limited liability partnerships.

A long-term capital loss can be set off only against long-term capital gain. A short-term capital loss can be set off against either short-term or long-term gain. Capital losses cannot be set off against income under any other head. Unabsorbed losses are carried forward for eight assessment years, but only if the return for the loss year is filed within the due date under Section 139(1).

Capital gains often arise late in the year and cannot be estimated in advance, so the proviso to Section 234C relieves interest where the shortfall is attributable to capital gains, provided the tax is paid in the remaining instalments falling due after the gain arises, or by 31 March where no instalment remains. Ignoring this and paying only at the time of filing attracts interest under Section 234B.

The charging provisions are the same, but three differences matter. Non-residents are not eligible for the transitional indexation option on land and building. The first and second provisos to Section 48 give a foreign currency conversion benefit on shares and debentures of an Indian company acquired in foreign currency. And deduction at source under Section 195 applies on the sale consideration rather than the gain, which is why a Section 197 certificate is usually essential.

Sold an asset, or about to?

Send us the transaction details and the purchase records. We will compute the gain under the regime that applies to your date of transfer and plan the exemptions while they are still open.