What this covers — and what it does not
The distinction matters, so it is stated plainly rather than buried in a footer.
| Covered | Not covered |
|---|---|
| Capital gains computation across equity, mutual funds, bonds, property, gold and foreign holdings | Which security to buy, sell or hold — no recommendations of any kind |
| Holding-period and residency determination; cost of acquisition including grandfathering and corporate actions | Managing, holding or operating your portfolio, demat account or funds |
| Loss set-off and carry-forward; advance tax; exemption and reinvestment planning | Distribution of mutual funds, insurance or any financial product |
| AIS/TIS reconciliation, Schedule CG, Schedule 112A, Schedule FA and the return | Return forecasts, performance projections or assurance of any outcome |
Portfolio management and investment advisory are separately licensed activities under SEBI regulation. Neither is offered here. The work is chartered accountancy — the computation, the disclosure and the filing.
Rates and holding periods — tax year 2026-27
Section references below are to the Income-tax Act, 2025, with the old 1961 numbering alongside. Gains realised in FY 2025-26 (AY 2026-27) are still computed and returned under the 1961 Act — the year decides the Act, not the filing date.
| Asset | Long-term after | Short-term | Long-term |
|---|---|---|---|
| Listed equity & equity mutual funds (STT paid) | 12 months | 20% — s.196 (ex-111A) | 12.5% above ₹1,25,000 a year — s.198 (ex-112A) |
| Unlisted shares, including foreign stock | 24 months | Slab rate | 12.5% without indexation — s.197 (ex-112) |
| Immovable property | 24 months | Slab rate | 12.5%, or 20% with indexation if acquired before 23 July 2024 (option) |
| Debt mutual funds bought on or after 1 April 2023 — s.76 (ex-50AA) | Never | Always short-term at slab rate, however long you hold | |
| Gold, physical or fund | 12 months if listed, else 24 | Slab rate | 12.5% |
Indexation survives in one significant pocket only: a resident individual or HUF may opt to compute at 20% with indexation on land or building acquired before 23 July 2024. Because it is an option it does not default to the better answer — both computations have to be run and the lower tax adopted. The cost inflation index for tax year 2026-27 is 384.
Where the cost figure goes wrong
Sale value is rarely in dispute. Cost of acquisition — s.72 (ex-48) — is where the money is won or lost:
- Grandfathering. For listed equity acquired before 1 February 2018, cost is the higher of your actual cost and the lower of the 31 January 2018 fair market value and the sale consideration. Broker statements frequently ignore this and overstate the gain.
- Bonus and rights. Bonus shares carry nil cost; rights shares carry the amount paid. Averaging them into a single cost per share is wrong and usually understates tax on one lot while overstating it on another.
- Splits, mergers and demergers. Cost has to be apportioned and the original acquisition date carried forward — s.73 (ex-49). A demerger that resets the date in your broker statement can turn a long-term gain into a short-term one on paper.
- Inherited and gifted holdings. You step into the previous owner’s cost and holding period. Inheritance is not itself a transfer; the tax event is your later sale.
- Property. Stamp-duty value can be substituted for consideration under s.78 (ex-50C) where the agreement value is lower, subject to the 110% tolerance band.
Assets with rules of their own
Three catch people out most often, and all three are recent changes:
- Debt mutual funds. Units of a specified mutual fund acquired on or after 1 April 2023 are deemed short-term under s.76 (ex-50AA) and taxed at slab rates no matter how long they are held. There is no long-term treatment and no indexation to reach.
- Buyback. From 1 April 2026, buyback returns to capital-gains treatment under s.69, away from the deemed-dividend approach that applied before it — with an additional tax on promoter shareholders. Which side of 1 April 2026 a buyback falls on changes the outcome materially, so it is worth establishing before tendering, not after.
- Sovereign Gold Bonds. The maturity exemption is now confined to original subscribers who hold to maturity. A bond picked up on the secondary market no longer carries the same result.
Losses — the part most often left on the table
- A short-term capital loss can be set off against both short-term and long-term gains.
- A long-term capital loss can be set off only against long-term gains.
- Unabsorbed losses carry forward eight years — but only if the return is filed by the due date. A late return forfeits the carry-forward permanently.
- Capital losses cannot be set off against salary, and a loss that was never reported in the year it arose cannot be resurrected later.
Booking an available loss before 31 March to absorb a realised gain is a legitimate and routine exercise. Indian law has no statutory wash-sale rule, but the transactions still have to be real — sale and immediate repurchase done purely on paper, at scale, invites scrutiny. What is offered here is the computation of the position and the effect on your liability, not a view on the merits of the holding.
Advance tax, and why gains break the instalments
Capital gains cannot be estimated in advance, so the instalment schedule would otherwise penalise a gain nobody could have forecast. Section 425 (ex-234C) relieves the interest where the gain arises after an instalment date and the tax on it is paid in the remaining instalments — or by 31 March where the gain arises after 15 March. The relief is conditional and it is not automatic in the computation, so a large gain realised late in the year needs the dates checked. Interest under s.424 (ex-234B) is separate and runs on shortfall in the aggregate.
AIS reconciliation — where the notices come from
Depositories, registrars, brokers and fund houses report your transactions independently of your return. Your AIS therefore already carries a version of your portfolio activity, and any gap between that and your Schedule CG is visible to the department before a human looks at it. The frequent causes are benign but still generate a notice: off-market transfers, corporate actions, redemptions the taxpayer forgot, and holdings across multiple brokers reported separately. Reconciling the AIS to the computation — and filing feedback where the AIS is itself wrong — is part of the work, not an afterthought. Where a notice has already been issued, see tax notices and assessments.
Exemptions and reinvestment
The rollover exemptions now sit at ss.82–89 (the old 54-series), with conditions unchanged:
- s.82 (ex-54) — residential house into residential house.
- s.86 (ex-54F) — any long-term asset into a residential house, subject to the restriction on owning other houses.
- s.85 (ex-54EC) — specified bonds, capped at ₹50 lakh, within six months, with a five-year lock-in.
Where the reinvestment will not be completed before the return due date, the amount has to be parked in the Capital Gains Account Scheme by that date to preserve the exemption. Missing that deposit is the single most common way a genuine reinvestment plan loses its exemption.
NRI portfolios
For a non-resident the tax is largely collected at source before the money moves. TDS applies to the gain at the point of sale, and it is deducted at the full rate unless a lower or nil deduction certificate under s.395 (ex-197) is obtained in advance — which is the practical difference between waiting on a refund for a year and not over-deducting in the first place. Repatriation then needs Form 15CA/15CB. Residential status for the year has to be settled first, because it changes both the rate and the scope of what is taxable. See NRI taxation.
Which return, and what to send
Capital gains alone means ITR-2. Add F&O or intraday activity and it becomes ITR-3, because that is business income and sits under different rules entirely. Foreign shares, RSUs or ESOPs bring Schedule FA with them — a disclosure obligation that applies whether or not you sold anything, and one with its own penalty regime.
What is needed to start:
- Broker tax P&L and capital gains statements for the year, from every broker
- Mutual fund capital gains statement (the CAMS/KFintech consolidated statement covers most folios)
- Purchase documents for anything acquired before 1 February 2018, and for inherited or gifted holdings, the previous owner’s cost and date
- Sale and purchase deeds for property, with dates
- Last year’s return, for losses brought forward
The computation is prepared and explained before anything is filed — including the losses available, the exemption position and the advance tax consequence, so there are no surprises after the return goes in.