What are the capital gains holding periods for FY 2025-26?

After the Finance Act 2024 realignment, there are now two holding periods. 12 months for listed equity shares, units of equity-oriented mutual funds, units of business trusts (REITs and InvITs), and other listed securities. 24 months for everything else, including unlisted shares, immovable property, gold, debt instruments (other than those covered by Section 50AA), and foreign equity. Budget 2026 left these holding periods unchanged.

What are the LTCG and STCG rates for FY 2025-26?

Under Section 111A, short-term capital gains on listed equity shares, units of equity-oriented mutual funds, and units of business trusts on which STT has been paid are taxed at 20 percent (up from 15 percent before 23 July 2024). Under Section 112A, long-term capital gains on the same instruments are taxed at 12.5 percent on amounts above ₹1.25 lakh per FY. Long-term gains on other capital assets are taxed at 12.5 percent under Section 112 without indexation, except for land or building acquired before 23 July 2024 where the taxpayer can elect for 20 percent with indexation.

Did Budget 2026 change capital gains tax?

Budget 2026 left the Finance Act 2024 capital gains architecture intact. The 12 and 24-month holding periods, the 20 percent STCG rate under Section 111A, the 12.5 percent LTCG rate under Section 112A and Section 112, and the ₹1.25 lakh exemption threshold all continue unchanged. The Budget did tweak Section 50AA to clarify the definition of specified mutual fund, narrowing the population of debt MFs that fall within the deemed-short-term treatment, but the core capital gains regime is unchanged.

What is Section 50AA and how does it affect debt mutual funds?

Section 50AA, inserted by the Finance Act 2023 and amended by the Finance Act 2024, deems all capital gains on units of a specified mutual fund and on market-linked debentures as short-term capital gains, taxable at the slab rate of the investor, regardless of the holding period. Specified mutual fund is defined as a fund that invests not more than 35 percent of its proceeds in equity shares of domestic companies (the post-Finance Act 2024 definition reduced from the earlier 35 percent threshold from a per-class lens to a portfolio lens). Pure debt funds, gold funds, and international fund-of-funds typically fall within Section 50AA.

Is indexation still available for property bought before 23 July 2024?

Yes, with a grandfathering option. For land or building acquired before 23 July 2024, the resident taxpayer can elect either (a) tax at 20 percent with cost indexation under the second proviso to Section 112(1), or (b) tax at 12.5 percent without indexation. The election is made at the time of computing the gain. The choice is property-by-property and FY-by-FY. For non-resident taxpayers, the 12.5 percent without indexation is the only rate. For property acquired on or after 23 July 2024, the 12.5 percent without indexation is the only rate for all taxpayers.

How does KAMRIT compute capital gains for an HNI portfolio?

KAMRIT runs HNI portfolio capital gains as part of the ITR engagement. The intake is the demat statement, mutual fund redemption statement, property sale documents, and any foreign equity transactions. KAMRIT runs a transaction-level reconciliation, classifies each transaction under the relevant section (111A, 112A, 112, 50AA), applies grandfathering where eligible, and produces a single computation memo with the gain by section and the tax payable. The memo ties back to AIS and TIS and supports the ITR Schedule CG. Fixed fee from ₹25,000 for HNI portfolios with 50-plus transactions per FY.

LTCG and STCG holding periods post Budget 2026: the 12 and 24-month realignment and what changed under Section 50AA

The Finance Act 2024 reset and what carried through into FY 2025-26

The Finance Act 2024, with effect from 23 July 2024, ran the most significant overhaul of the Indian capital gains tax regime in two decades. Three changes were structurally important. First, the holding period for short-term and long-term classification was unified across asset classes into two buckets: 12 months for listed securities, 24 months for everything else. Second, the STCG rate on listed equity (Section 111A) was raised from 15 percent to 20 percent. Third, the LTCG rate under Section 112 (for non-equity assets) and Section 112A (for equity assets above ₹1.25 lakh) was unified at 12.5 percent, with indexation removed for listed securities and tightly carved-out grandfathering left for resident sellers of pre-23-July-2024 property.

Budget 2026, presented on 1 February 2026, made no changes to this regime. The carve-out under Section 50AA for specified mutual funds was clarified (narrowing the population captured by the deeming provision), but the rates and holding periods carried through. For FY 2025-26 returns being filed in May to October 2026, the Finance Act 2024 framework is the operative law.

The two holding periods

The current holding periods are tied to whether the asset is a listed security and equity-oriented or not.

12-month holding period: Listed equity shares, units of equity-oriented mutual funds (greater than 65 percent invested in domestic equity), units of business trusts (REITs and InvITs), zero coupon bonds, and other listed securities. A holding of 12 months and one day or more is long-term; 12 months or less is short-term.

24-month holding period: Everything else. Unlisted equity shares, immovable property (land, building, residential or commercial), gold and gold ETFs (gold ETFs were brought into the 24-month bucket by the Finance Act 2024), foreign equity, debt mutual funds not covered by Section 50AA, and any other capital asset not explicitly listed in the 12-month bucket.

The simplification is significant. Under the pre-2024 regime, there were 6 different holding periods across asset classes (36 months for unlisted equity, 36 for debt MF, 24 for gold, 24 for property, 12 for listed equity). The 2-bucket approach has removed substantial complexity for both individual taxpayers and intermediaries reporting through the SFT.

The Section 111A and 112A rates

Section 111A (STCG on equity-oriented assets). Where the transaction is on a recognised stock exchange (or units of equity-oriented MF redeemed at NAV), STT has been paid (for shares, F&O, and listed funds; for off-market and MF NAV transactions, STT is deemed paid for 111A purposes), and the holding is under 12 months, the gain is taxed at 20 percent. The 20 percent rate replaced the earlier 15 percent rate with effect from 23 July 2024. For transactions before 23 July 2024 in FY 2024-25, the 15 percent rate continued.

Section 112A (LTCG on equity-oriented assets). Where the transaction is on a recognised stock exchange (or units of equity-oriented MF redeemed at NAV), STT has been paid, and the holding is over 12 months, the gain above ₹1.25 lakh per FY is taxed at 12.5 percent. The ₹1.25 lakh exemption is per taxpayer, not per asset, and is consumed before any taxable LTCG accrues. The 12.5 percent rate replaced the earlier 10 percent rate with effect from 23 July 2024.

Section 112 (LTCG on other assets). Where the gain does not fall under Section 112A (most commonly, sale of unlisted shares, immovable property, gold, foreign equity), the rate is 12.5 percent without indexation. The Finance Act 2024 removed indexation under Section 112 for transfers on or after 23 July 2024, with the limited grandfathering option for resident sellers of pre-23-July-2024 property.

STCG on other assets. STCG on assets not covered by Section 111A (unlisted shares, property held under 24 months, gold held under 24 months) is taxed at the taxpayer's slab rate. For an HNI in the highest slab, this can be 34.32 percent including surcharge and cess.

The Section 50AA debt fund deemed-short-term rule

Section 50AA was inserted by the Finance Act 2023 and amended by the Finance Act 2024 to plug the perceived arbitrage where debt mutual fund LTCG was being taxed at a concessional rate compared to fixed deposit interest.

The provision deems gains on units of a "specified mutual fund" and on market-linked debentures as short-term capital gains, regardless of the actual holding period. The deemed-STCG is taxed at the taxpayer's slab rate.

A "specified mutual fund" was defined originally as one that does not invest more than 35 percent of its proceeds in equity shares of domestic companies. The Finance Act 2024 amended the definition to apply the 35 percent test at the portfolio level, not at any individual class level. This effectively brought all-debt funds and most fund-of-funds (which invest in other MF units, not directly in equity) into the deemed-STCG net.

Budget 2026 made a further clarification, that funds that invest predominantly in domestic equity but hold a small debt allocation for liquidity management remain outside Section 50AA, by adjusting the threshold computation to exclude liquid debt instruments held for less than 90 days. This is a narrow tweak that benefits a small subset of hybrid equity funds.

The practical impact for FY 2025-26: an investor in a pure debt fund (gilt fund, corporate bond fund, liquid fund) who redeems units pays tax at the slab rate on the gain. There is no concessional LTCG rate. This is a material shift from the pre-2023 regime where debt LTCG was 20 percent with indexation.

The property grandfathering window

Land or building (or both) acquired before 23 July 2024 enjoys a one-time grandfathering option for resident taxpayers. At the time of computing the gain on sale, the resident can elect:

Option A: 20 percent on the indexed gain, computed with cost indexation under the second proviso to Section 112(1) using the Cost Inflation Index (CII) notified by the CBDT.

Option B: 12.5 percent on the unindexed gain (sale consideration less unindexed cost of acquisition and improvement).

The election is made property-by-property. For a property with a long holding period and low cost relative to sale price, Option A (20 percent with indexation) typically results in lower tax. For a property with a shorter holding period and a higher cost, Option B (12.5 percent without indexation) is better.

The grandfathering is only for resident taxpayers. Non-resident sellers of pre-23-July-2024 property pay 12.5 percent without indexation, no election.

Property acquired on or after 23 July 2024 has no election. The 12.5 percent rate without indexation applies for everyone.

Cost step-up: 31 January 2018 grandfathering for listed equity

The Section 112A grandfathering for listed equity continues from the Finance Act 2018. Equity shares and units of equity-oriented MFs acquired before 1 February 2018 take their fair market value as on 31 January 2018 as the deemed cost (subject to actual cost being not lower). This was the political compromise that introduced LTCG on listed equity in 2018, and it carries through into 2026.

For an investor holding pre-31-January-2018 equity, the cost step-up to the 31 January 2018 price effectively wipes out gains accumulated up to that date. The remaining gain (from 31 January 2018 to sale date) is taxed at 12.5 percent above the ₹1.25 lakh exemption.

Surcharge and cess on capital gains

The surcharge on capital gains has been capped at 15 percent for Section 111A and Section 112A gains since the Finance Act 2018. Higher slab surcharges (25 percent and 37 percent at the highest income bands) do not apply to Section 111A and 112A gains.

For Section 112 gains (non-equity LTCG), the surcharge follows the income slab. An HNI in the highest slab pays 37 percent surcharge on the 12.5 percent base rate, taking the effective LTCG rate to 17.94 percent including cess of 4 percent.

The surcharge differential between Section 111A / 112A (capped at 15 percent) and Section 112 (uncapped) is one of the planning levers in HNI portfolio construction. A high-net-worth investor is materially better off holding listed equity than unlisted equity from a capital gains tax perspective.

What this means for FY 2025-26 ITR filing

For ITR filing in May to October 2026 covering FY 2025-26 transactions, the operational positions are:

Equity sales after 23 July 2024. All gains taxed at 20 percent (STCG) or 12.5 percent (LTCG above ₹1.25 lakh exemption). No grandfathering needed for transactions in FY 2025-26.

Property sales. Election for 20 percent with indexation versus 12.5 percent without, where the property was acquired before 23 July 2024 and the seller is resident. Computation memo should compare both methods and elect the lower.

Debt mutual fund redemptions. Slab-rate tax under Section 50AA. Cost indexation is not available even for redemption of units held over 3 years.

Gold and gold ETF redemptions. 24-month holding period applies. LTCG at 12.5 percent without indexation.

Foreign equity sales (RSU sales, foreign brokerage). 24-month holding period. LTCG at 12.5 percent without indexation. DTAA relief available under Form 67 where applicable.

How KAMRIT positions capital gains computation

KAMRIT runs capital gains computation as part of the ITR engagement for HNIs and as a standalone deliverable for executives with RSU or property transactions. The output is a section-by-section computation memo with the gain by source, the tax under each section, the surcharge band, and the grandfathering elections made. The memo supports Schedule CG of the ITR and creates the audit trail if a 143(1) is later issued.

Comparable platform tools include ClearTax Capital Gains Calculator and Quicko Capital Gains, both of which are good for self-service on single-broker portfolios. The KAMRIT positioning is on multi-asset HNI portfolios (equity plus property plus debt MF plus foreign equity) where the section-level classification and the grandfathering election are the value-add.

If your FY 2025-26 has equity sales, a property transaction, RSU exercises, or debt mutual fund redemptions, talk to KAMRIT before you file. A senior associate from the direct tax desk runs the computation, applies the section-wise rates, and ties the ITR Schedule CG back to AIS. Send a brief to the Income Tax Return Filing page or start a conversation with a senior partner.