PILLAR GUIDE VERIFIED

The Investor & Capital Gains Tax Guide.

If you invest in mutual funds, stocks, real estate, crypto, or even just keep money in an FD, this guide covers how your profits are taxed. These rules apply regardless of whether you are salaried or a freelancer. FY 2026-27.

The 23 July 2024 Cutoff

The Union Budget 2024 (effective 23 July 2024) changed capital gains rates fundamentally. If you bought assets before and sold after this date, you may face a split-rate calculation within the same financial year.

BEFORE 23 JUL 2024

Old rates apply

→

23 JUL 2024

Budget cutoff

→

AFTER 23 JUL 2024

New rates apply

Intra-FY split rule: If you bought equity before 23 Jul 2024 and sold after, the pre-cutoff portion uses old rates and the post-cutoff portion uses new rates. The tax software (or your CA) must calculate this split.

KEY RATE CHANGES

STCG on equity: 15% → 20%. LTCG on equity: 10% → 12.5% (exemption ₹1L → ₹1.25L). Real estate LTCG: 20% indexation → 12.5% no indexation (new) or 20% with indexation (old, taxpayer's choice for pre-23-Jul acquisitions).

Holding Period Reference Table

Whether your gain is short-term or long-term depends on the asset and how long you held it. This determines your tax rate.

Asset	STCG	LTCG
Listed equity / equity MF (STT-paid)	≤ 12 months	> 12 months
Real estate (post 23 Jul 2024)	≤ 12 months	> 12 months
Unlisted shares / real estate (pre 23 Jul 2024)	≤ 24 months	> 24 months
Gold / silver (post 23 Jul 2024)	≤ 12 months	> 12 months
Specified MF (≤35% equity)	Always slab rate	N/A (Sec 50AA)
VDA / crypto	Always 30% flat	N/A (Sec 115BBH)

Equity & Equity Mutual Funds

Equity gains are taxed at flat rates — no slab-based calculation. But there are two critical conditions.

STCG 111A

20%

Sold within 12 months. STT must be paid on sale transaction.

LTCG 112A

12.5%

Held >12 months. First ₹1.25L exempt per year. STT required.

STT requirement: Both 111A and 112A exemptions require that STT (Securities Transaction Tax) was paid on the sale transaction. If STT was not paid (e.g., off-market transfers), gains are taxed at slab rates.

Type	Rate	Surcharge Cap
STCG 111A	20%	15%
LTCG 112A	12.5%	10%

₹1.25L EXEMPTION

The first ₹1.25L of LTCG from equity is completely tax-free each financial year. Plan your redemptions to stay within this limit if possible.

Real Estate LTCG: The Choice

Real estate capital gains have the most complex tax treatment — especially if you acquired property before 23 July 2024.

Acquisition	Option A	Option B	Choice
Pre 23 Jul 2024	12.5% (no indexation)	20% (with indexation)	Taxpayer chooses lower
On/after 23 Jul 2024	12.5% only — no indexation		No choice

Indexation (Option B): Your purchase price is adjusted for inflation using the Cost Inflation Index (CII). This reduces your taxable gain. The CII table is updated annually by the government.

WHICH OPTION WINS?

If you held property for many years with high indexation benefit, Option B (20% with indexation) often results in lower tax. For recent purchases, Option A (12.5%) is usually better. A CA can calculate both for you.

Debt Mutual Funds & Specified Funds

From 1 April 2023, debt mutual funds lost their indexation benefit. Now they are taxed at slab rates — making them no different from FDs for tax purposes.

Fund Type	Tax Treatment
Post-Apr 2023 debt MF (≤35% equity)	Always slab rate (Sec 50AA)
Pre-2023 debt MF holdings	Grandfathered — old LTCG rates apply
Equity-oriented hybrid (>65% equity)	Treated as equity MF — 20% STCG / 12.5% LTCG

SECTION 50AA

"Specified mutual funds" include any fund with ≤35% equity allocation. This covers all debt funds, gold ETFs, and international funds. Taxed at your slab rate — no indexation, no LTCG benefit.

Crypto & VDA: The Harshest Tax

Virtual Digital Assets (crypto, NFTs, tokens) face the harshest tax in the Income Tax Act. There is almost no relief.

FLAT RATE

30%

✗ No set-off against other income

✗ No carry-forward of losses

✗ No indexation benefit

✗ No transaction fee deduction

✓ Cost of acquisition allowed

✗ Even VDA losses can't offset VDA gains

TDS on crypto: 1% TDS under Section 194S on every sale transaction. Threshold: ₹50,000 (specified persons: ₹10,000).

Gift of crypto: Receiving crypto worth > ₹50K from a non-relative is taxable under Section 56(2)(x) at slab rates.

SCHEDULE VDA

If you traded crypto during the year, you must file Schedule VDA in your ITR. This is a separate schedule listing every transaction. Non-filing can trigger a notice.

Share Buybacks

From 1 October 2024, buyback proceeds are taxed as deemed dividend in the shareholder's hands at slab rates. The cost of acquisition becomes a capital loss.

BEFORE 1 OCT 2024

Buyback proceeds were tax-free (DDT paid by company). Cost = nil.

AFTER 1 OCT 2024

Buyback proceeds taxed as dividend at slab rates. Cost of shares → capital loss (carry forward 8 years).

Dividend Income

Dividend income is taxed at your slab rates. DDT (Dividend Distribution Tax) was abolished from AY 2020-21 — companies no longer pay tax on dividends, but you do.

Source	Tax Rate	TDS
Dividend from Indian companies	Slab rates	10% above ₹10K per company (194)
Dividend from foreign companies	Slab rates	No TDS

BUDGET 2025 CHANGE

TDS threshold on dividends raised from ₹5,000 to ₹10,000 per company per year. This means fewer small TDS deductions.

Interest Income

Interest from FDs, RDs, savings accounts, and bonds is taxed at your slab rates. TDS applies above certain thresholds.

Source	TDS 194A	Deduction
Savings account	No TDS	80TTA: ₹10K (non-senior, old only)
FD / RD	₹50K (₹1L senior)	80TTA: ₹10K / 80TTB: ₹50K (senior)
Bonds / debentures	₹5K threshold	None

80TTA vs 80TTB

80TTA: ₹10K deduction on savings interest. Non-seniors only. Old regime only. 80TTB: ₹50K deduction on all interest (FD, RD, savings). Senior citizens (60+) only. Old regime only. Cannot claim both.

Set-Off Rules: The Complete Matrix

When you have losses, you can offset them against gains from other sources — but only in specific combinations. This is where most investors lose money they didn't have to.

Loss Type	Can Offset Against	Carry Forward	New Regime
LTCG loss	LTCG only	8 years	Same
STCG loss	STCG + LTCG	8 years	Same
Business loss	Any except salary	8 years	Same
House property loss	Any head (capped ₹2L)	8 years	HP only (ring-fenced)
VDA / crypto loss	NONE	NONE	Dead money

VDA LOSSES ARE DEAD MONEY

Crypto losses cannot be set off against any other income — not even other crypto gains. They cannot be carried forward. If you lost ₹5L in crypto, that loss is permanently wasted for tax purposes.

FILE ITR ON TIME

Carry-forward of losses is only available if you file your ITR by the due date (31 July for non-audit). Late filers lose the carry-forward benefit entirely.

Reinvestment Exemptions

If you reinvest your capital gains into specified assets, you can claim exemption from tax on those gains. Each section has specific rules.

Section	Asset Sold	Reinvest In	Lock-in	New Regime
54	Residential house	Residential house	3 years	Likely disallowed [TO VERIFY]
54B	Agricultural land	Agricultural land	3 years	Likely disallowed [TO VERIFY]
54D	Industrial land (compulsory acquisition)	Similar industrial land	3 years	Likely disallowed [TO VERIFY]
54EC	Any LTCG asset	NHAI/REC/IRFC/PFC bonds	5 years	Likely disallowed [TO VERIFY]
54F	Any non-house LTCG asset	Residential house	3 years	Likely disallowed [TO VERIFY]
54GB	Residential property	Eligible startup equity (DPIIT)	5 years	Likely disallowed [TO VERIFY]

NEW REGIME WARNING

Sections 54-54GB reinvestment exemptions are likely disallowed under the new regime. Conservative default: assume they don't apply unless you confirm with a CA. This is a major reason to stay in the old regime if you plan to sell property and reinvest.

Tax Loss Harvesting Strategy

Tax loss harvesting means deliberately selling losing investments before 31 March to create capital losses that offset your gains.

DO THIS

✓ Sell losing equity before 31 March
✓ Use ₹1.25L LTCG exemption annually
✓ STCG losses offset both STCG + LTCG
✓ Rebuy after 1 day (no wash sale rule in India)

DON'T DO THIS

✗ Harvest VDA losses (dead money — no benefit)
✗ Forget to file ITR by due date (lose carry-forward)
✗ Harvest losses in the last week of March (timing risk)

NO WASH SALE RULE

India has no wash sale rule. You can sell a losing stock on 31 March and rebuy it on 1 April. The loss is still valid for tax purposes. This is a key difference from the US.