Capital Gains: Sections 67 to 91, Income-tax Act 2025

Capital gains taxes profit on the transfer of a capital asset. The charge needs a capital asset, a transfer and a gain, and the rate depends on how long the asset was held. Sections 67 to 91 of the Income-tax Act, 2025 replace sections 45 to 55A of the 1961 Act, with the rates in a schedule. This note covers the concepts, the computation, the current rates and the main reinvestment exemptions.

1. The Building Blocks

Figure 1: From capital asset to taxable gain

• Capital asset. Property of any kind held by the assessee, whether or not connected with business, but excluding stock in trade, personal effects such as clothing and furniture (but not jewellery), and rural agricultural land (Topic 12)
• Transfer. Includes sale, exchange, relinquishment, extinguishment of rights, compulsory acquisition and certain arrangements giving possession under a contract of part performance.
• Charge, s.67. Profits or gains from the transfer of a capital asset in the tax year are chargeable under this head.
• Not transfers, s.70. Specified transactions, such as distribution on partition of an HUF, gifts and transfers under a will, are not treated as transfers.

2. Computation

• Section 72. Full value of consideration minus cost of acquisition, cost of improvement and expenditure wholly and exclusively in connection with the transfer.
• Deemed consideration. For land or buildings, the stamp duty value is taken as consideration where it exceeds the actual consideration beyond a tolerance; similar rules apply to unquoted shares (ss.78 to 80)
• Grandfathering. For listed equity acquired before 1 February 2018, cost is the higher of actual cost and the lower of the fair market value on 31 January 2018 and the sale price.
• Buyback, from 1 April 2026. The Finance Act, 2026 moved consideration on a buyback of shares from dividend income to capital gains, with higher effective rates for promoters; it also confined the exemption on Sovereign Gold Bonds to original subscribers holding to maturity.

3. Holding Periods and Rates

Figure 2: Holding periods and rates (since 23 July 2024)

Listed securities and units are long term if held for more than 12 months; other assets after 24 months. Short term gains on listed equity on which securities transaction tax is paid are taxed at 20 per cent; other short term gains at slab rates. Long term gains are taxed at 12.5 per cent without indexation, with the first Rs 1.25 lakh of long term gains on listed equity exempt each year. For land or buildings acquired before 23 July 2024, an individual or HUF may pay the lower of 12.5 per cent without indexation and 20 per cent with indexation. Gains on debt mutual funds bought from 1 April 2023 are always short term.

4. Reinvestment Exemptions

Figure 3: Sections 82 to 88 and the 1961 Act equivalents

• Residential house, s.82. Long term gain on a residential house invested in another residential house in India within the prescribed period is exempt to that extent; cost above Rs 10 crore is ignored.
• Bonds, s.85. Long term gain on land or building invested within six months in specified bonds is exempt, up to Rs 50 lakh, with a five year lock in.
• Any other asset, s.86. Where a long term asset other than a house is sold and the net consideration invested in a residential house, the exemption is proportionate.
• Capital gains accounts. Amounts not reinvested before the return due date must be deposited in the capital gains account scheme to preserve the exemption.

5. Frequently Asked Questions

Is jewellery a personal effect excluded from capital assets?

No. Jewellery, archaeological collections, drawings, paintings, sculptures and works of art are expressly excluded from personal effects, so they are capital assets and their transfer attracts capital gains.

What is the maximum investment in capital gains bonds for exemption?

Rs 50 lakh in a financial year, invested within six months of the transfer of land or building, with a five year lock in, under s.85 of the 2025 Act (old s.54EC).

Is indexation still available on long term capital gains?

Generally no, since 23 July 2024; long term gains are taxed at 12.5 per cent without indexation. The exception is land or buildings acquired before that date by an individual or HUF, who may pay the lower of 12.5 per cent without indexation and 20 per cent with indexation.

When do listed shares become long term capital assets?

When held for more than 12 months. Unlisted shares, land, buildings and other assets need a holding period of more than 24 months.

6. Related Topics

• Topic 12: Agricultural Income and Exempt Income. Rural agricultural land.
• Topic 17: Income from Other Sources. Gifts and deemed income.
• Topic 18: Clubbing, Set Off and Carry Forward. Capital losses.