Understanding Statutory Capital Gains Tax in India
Profits arising from the sale of a capital asset are taxed under the head Capital Gains. The statutory tax rate depends directly on the holding period (the duration between acquisition and sale) and the classification of the asset:
- Listed Equities & Equity Mutual Funds: Holding up to 12 months is classified as Short-Term (STCG) and taxed at 20% under Section 111A. Holding beyond 12 months is classified as Long-Term (LTCG) and taxed at 12.5% under Section 112A after a statutory tax-free threshold of ₹1,25,000 per financial year.
- Immovable Property (Real Estate): Holding up to 24 months is Short-Term (taxed at regular income tax slabs). Holding beyond 24 months is Long-Term, taxed at 12.5% without indexation.
- Specified Mutual Funds / Debt Funds: Taxed as short-term capital gains at applicable personal slab rates regardless of holding duration.
Frequently Asked Questions
Can unexhausted basic exemption limit be set off against capital gains?
Yes. For a resident individual or HUF, if your other total taxable income is below the basic exemption threshold (₹3 Lakh under New Regime or ₹2.5 Lakh under Old Regime), the unexhausted shortfall can be adjusted against LTCG (Section 112A) and STCG (Section 111A) to reduce tax liability.
What is Section 54 and Section 54EC exemption for property gains?
If you realize long-term capital gains on residential property, you can claim 100% tax exemption under Section 54 by reinvesting the capital gain into another residential house, or under Section 54EC by investing up to ₹50 Lakh in specified NHAI/REC capital gain bonds within 6 months.
Are capital losses allowed to be carried forward?
Yes. Both short-term and long-term capital losses can be carried forward for up to 8 subsequent assessment years, provided the income tax return (ITR) is filed on or before the statutory due date under Section 139(1).