The new Income Tax Act 2025 rewrites capital gains from scratch. New holding period definitions, revised LTCG rates, and the removal of indexation for most assets.
Capital gains under the Income Tax Act 2025 are unrecognisable from the 1961 Act. The Finance Act 2024 changes have been codified and extended, with significant structural changes effective from 1 April 2026.
The 2025 Act simplifies holding periods into two categories:
| Asset Type | Short-term | Long-term |
|---|---|---|
| Listed equity shares / equity MFs | Up to 12 months | More than 12 months |
| Unlisted shares | Up to 24 months | More than 24 months |
| Immovable property | Up to 24 months | More than 24 months |
| All other assets | Up to 36 months | More than 36 months |
The 36-month category is gone for most assets — debt funds, gold, and most other assets now use 24 months.
STCG on listed equity: 20% (up from 15%)
LTCG on listed equity: 12.5% with ₹1.25 lakh exemption (was 10% with ₹1 lakh exemption)
LTCG on all other assets: 12.5% without indexation
This last point is the most significant. Indexation benefit — which reduced effective tax on property and gold sales dramatically — is removed for assets sold after 23 July 2024.
Under the 1961 Act, a property bought in 2005 for ₹30 lakhs and sold in 2024 for ₹1.5 crore would have an indexed cost of approximately ₹1.1 crore — taxable gain of only ₹40 lakhs at 20% = ₹8 lakhs tax.
Under ITA 2025 at 12.5% without indexation: ₹1.2 crore gain × 12.5% = ₹15 lakhs tax.
The rate is lower but the base is much larger. Long-term property holders almost always pay more.
Exception: Properties purchased before 23 July 2024 where the seller opts for 20% with indexation (a transitional option). Your client needs to compute both and choose.
The 2025 Act formalises a specific computation sequence:
Good news: Sections 54 (residential house), 54F (other property into residential), and 54EC (bonds) are all retained in the 2025 Act with minor renumbering.
The ₹2 crore cap on Section 54 reinvestment and the 5-year lock-in on 54EC bonds remain unchanged.
Every property sale transaction now requires two computations — with and without indexation — to determine which is more beneficial for properties purchased before 23 July 2024.
Your compliance software may not have been updated for this yet. Manual verification is essential for FY 2025-26 returns.
The full ITA 2025 capital gains episode — with 12 worked examples covering equity, property, unlisted shares, and hybrid instruments — is Episode 4 of ITA 2025 Course on MentorClub.
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