You bought ₹5 lakh of index fund units and sold after 18 months for ₹8 lakh. Capital gain = ₹3 lakh. After the ₹1.25 lakh annual exemption, taxable LTCG = ₹1.75 lakh. Tax at 12.5% = ₹21,875 + 4% cess = ₹22,750. Your effective tax rate on the total ₹3 lakh gain is just 7.58%. Compare this with FD tax treatment where interest is taxed at your full slab rate (up to 30%). Read our full guide on Capital Gains Tax India.
Capital gains tax applies when you sell a capital asset (equity shares, mutual funds, property, gold, bonds) at a profit in India. The tax rate depends on two factors: the type of asset and how long you held it. This calculator auto-classifies your gain as Long-Term (LTCG) or Short-Term (STCG) based on the asset type and holding period, then applies the correct tax rate as per the Finance Act FY 2025-26.
What makes this calculator unique is its integration with the inflation perspective — understanding that a portion of your capital "gain" is merely inflation, not real profit. Use our Inflation Calculator to see how much of your property appreciation was real growth versus inflation, or our CAGR Calculator to find the Real CAGR after tax and inflation on any investment.
| Asset Type | Holding Period (LTCG) | LTCG Rate | STCG Rate | Exemption |
|---|---|---|---|---|
| Listed Equity Shares | >12 months | 12.5% | 20% (flat) | ₹1.25L/yr LTCG exempt |
| Equity Mutual Funds | >12 months | 12.5% | 20% (flat) | ₹1.25L/yr LTCG exempt |
| Property / Land | >24 months | 12.5% (or 20% with indexation*) | Slab rate | Sec 54, 54EC, 54F |
| Debt Mutual Funds | >24 months | 12.5% | Slab rate | None |
| Gold / Jewellery | >24 months | 12.5% | Slab rate | None |
*Indexation benefit available only for property acquired before July 23, 2024 — choose lower of 20% with indexation or 12.5% without.
The Cost Inflation Index allows you to adjust the purchase price of property for inflation, reducing your taxable gain. This is directly connected to how CPI inflation erodes the real value of assets — the same concept our Purchasing Power Calculator demonstrates.
| FY | CII | FY | CII | FY | CII |
|---|---|---|---|---|---|
| 2001-02 | 100 | 2010-11 | 167 | 2019-20 | 289 |
| 2003-04 | 109 | 2012-13 | 200 | 2021-22 | 317 |
| 2005-06 | 117 | 2014-15 | 240 | 2023-24 | 348 |
| 2007-08 | 129 | 2016-17 | 264 | 2024-25 | 363 |
| 2009-10 | 148 | 2018-19 | 280 | 2025-26 | 363 |
Several legitimate strategies can reduce your capital gains tax burden significantly:
| Strategy | Applicable To | Benefit | Condition |
|---|---|---|---|
| ₹1.25L Annual Harvesting | Equity/Equity MF | ₹1.25L LTCG tax-free per year | Sell and rebuy to reset cost base |
| Section 54 | Property sale | Full LTCG exemption | Reinvest in residential property within 2-3 years |
| Section 54EC | Property/Land sale | Up to ₹50L exemption | Invest in NHAI/REC/PFC bonds within 6 months |
| Section 54F | Any non-house asset | Full exemption on net consideration | Invest entire sale proceeds in residential property |
| Tax-Loss Harvesting | All assets | Offset gains with losses | Book losses to reduce net taxable gain |
| Hold for Long-Term | All assets | Lower LTCG rates vs STCG slab rates | Cross the holding period threshold |
For detailed retirement and tax planning, use our Tax Savings Calculator (old vs new regime), NPS Calculator (80CCD tax benefit), and PPF Calculator (tax-free EEE instrument). To understand how inflation erodes your post-tax returns, read our guide on FD Real Returns After Inflation and use the Real Returns Calculator.
Here is the insight that connects capital gains to inflationcalculator.in's core mission: a significant portion of your "capital gain" is not real profit — it is merely inflation catching up. If your property appreciated 100% over 10 years but inflation was 80%, your real gain is only 20%. Yet without indexation, you would pay tax on the full 100% nominal gain. This is why the CII indexation benefit matters so much for property — it strips out the inflation component before calculating tax.
For equity investments, there is no indexation benefit. This means your 12.5% LTCG tax is levied on the full nominal gain including the inflation component. On a ₹10 lakh gain where ₹6 lakh was inflation and only ₹4 lakh was real profit, you still pay 12.5% on ₹10 lakh. The effective tax rate on your real profit is over 30%. Use our CAGR Calculator to see your Real CAGR after both tax and inflation. For more on how inflation impacts every aspect of your financial life, read How to Beat Inflation in India.
For FY 2025-26, Long-Term Capital Gains (LTCG) on listed equity shares and equity mutual funds are taxed at 12.5% on gains exceeding ₹1.25 lakh per financial year. LTCG on property, gold, debt funds, and other assets is taxed at 12.5% without indexation. For property acquired before July 23, 2024, you can choose between 20% with indexation or 12.5% without — whichever is lower. Short-Term Capital Gains (STCG) on listed equity is taxed at a flat 20%. STCG on property and other assets is taxed at your income tax slab rate.
The classification depends on the holding period. For listed equity shares and equity mutual funds, holding for more than 12 months qualifies as long-term. For property and land, the threshold is 24 months. For gold, debt mutual funds, bonds, and unlisted shares, it is also 24 months. Assets sold before these thresholds generate Short-Term Capital Gains (STCG), which are generally taxed at higher rates. LTCG benefits from lower flat rates and exemptions like the ₹1.25 lakh annual exemption on equity.
The Cost Inflation Index (CII) is published annually by the Income Tax Department to adjust the purchase price of assets for inflation. Indexation increases your cost of acquisition, thereby reducing the taxable capital gain. The formula is: Indexed Cost = Original Cost x (CII of Sale Year / CII of Purchase Year). For FY 2025-26, CII is 363. Indexation is available only for property and land acquired before July 23, 2024, where you can choose between 20% tax with indexation or 12.5% without indexation — whichever results in lower tax.
For property held more than 24 months (LTCG): If acquired before July 23, 2024, you can calculate tax using either Method 1 (20% with indexation using CII) or Method 2 (12.5% without indexation) and pay whichever is lower. If acquired after July 23, 2024, only 12.5% without indexation applies. For property held less than 24 months (STCG), the gain is added to your total income and taxed at your applicable slab rate. You can claim exemptions under Section 54 (reinvestment in residential property), 54EC (investment in specified bonds up to ₹50 lakh), or 54F.
For FY 2025-26, long-term capital gains up to ₹1.25 lakh per financial year from listed equity shares and equity-oriented mutual funds are completely tax-free. Only gains exceeding this threshold are taxed at 12.5%. This exemption applies per individual per financial year across all equity transactions combined. Strategic tax planning involves harvesting gains up to ₹1.25 lakh each year by selling and repurchasing, thereby resetting your cost base while paying zero tax.
For equity shares and mutual fund units purchased before January 31, 2018, the cost of acquisition is deemed to be the higher of the actual purchase price or the Fair Market Value (FMV) as on January 31, 2018. This ensures that all gains accumulated up to January 31, 2018 are grandfathered (exempt from tax). Only gains from February 1, 2018 onwards are taxable. This calculator asks for the FMV date to apply this rule automatically when applicable.
Three key exemptions can reduce or eliminate capital gains tax on property: Section 54 allows exemption if you reinvest the capital gain in a new residential property within 2 years of sale (or 3 years for construction). Section 54EC allows exemption up to ₹50 lakh if you invest in specified bonds (NHAI, REC, PFC) within 6 months of sale, with a 5-year lock-in. Section 54F allows exemption if you invest the entire net sale consideration (not just the gain) in a new residential property. Each has specific conditions and timelines.
Inflation directly impacts capital gains through two mechanisms. First, the Cost Inflation Index (CII) allows you to index the purchase price of property to inflation, reducing your taxable gain. Second, inflation erodes the real value of your post-tax gains — a 12.5% tax on nominal gains is effectively higher in real terms because part of your gain is simply inflation, not real profit. For example, if your property appreciated 100% over 10 years but inflation was 80%, your real gain is only 20% — yet you pay tax on the full 100% nominal gain (or indexed amount). This makes indexation and exemptions critical for tax efficiency.
Disclaimer: Capital gains tax rates are as per the Finance Act FY 2025-26 (AY 2026-27). Surcharge (for income above ₹50 lakh) is not included in calculations. This tool is for educational purposes only — consult a Chartered Accountant or tax professional for your specific tax situation.