Capital Gains Tax Filing for AY 2026–27: LTCG, STCG, Mutual Funds & Real Estate

Listed equity and equity mutual funds now attract 20 per cent on short-term gains and 12.5 per cent on long-term gains above ₹1.25 lakh, while property gains are generally taxed at 12.5 per cent without indexation, with a special choice for assets bought before that date. Debt mutual funds are taxed differently again. Because brokers, registrars and the registrar of properties report these transactions to the Income Tax Department, gains that are missed or misclassified usually surface as mismatches. This guide explains how LTCG and STCG work, how mutual funds and real estate are taxed, which exemptions can reduce the tax, and how to report everything correctly in your return. It is written for investors, mutual fund holders, property sellers and salaried individuals who earned capital gains in FY 2025-26.

What Is Capital Gains Tax and How Are LTCG and STCG Classified for AY 2026–27?

Capital gains tax is the tax on profit from transferring a capital asset, and the gain is classified as short-term or long-term depending on how long you held the asset before selling it. The classification decides the tax rate, the exemptions available and the schedule in which the gain is reported.

For listed equity shares, units of equity-oriented mutual funds and certain other listed securities, an asset held for more than 12 months is long-term, and anything held for 12 months or less is short-term. For unlisted shares, immovable property such as land and buildings, and most other assets, the long-term threshold is more than 24 months. Gains on listed equity and equity mutual funds on which securities transaction tax has been paid are taxed under special rates: short-term gains at 20 per cent under section 111A, and long-term gains at 12.5 per cent under section 112A on the amount exceeding ₹1.25 lakh in a financial year. Long-term gains on most other assets, including property and unlisted shares, are taxed at 12.5 per cent under section 112, while short-term gains on such assets are added to your income and taxed at slab rates. These rates apply to transfers on or after 23 July 2024, so a single financial year such as FY 2025-26 will usually have one consistent set of rules, but gains from an earlier part of FY 2024-25 may differ.

Rates apply to transfers on or after 23 July 2024. Fund classification and eligibility for the property choice should be confirmed before filing.

Two practical points matter for AY 2026-27. First, special-rate gains are taxed separately from your regular income, and the basic exemption limit can be used against them only to the extent your other income leaves unused room for a resident individual. Second, the rebate under section 87A is generally not available against tax on special-rate gains such as those under sections 111A and 112A under the new regime, so a taxpayer with income below ₹12 lakh may still owe tax on capital gains. Confirm your position before filing.

How Are Mutual Fund Gains Taxed for AY 2026–27?

Mutual fund gains are taxed according to the type of fund: equity-oriented funds follow the same 20 per cent and 12.5 per cent structure as listed shares, while debt and similar funds are generally taxed at your slab rate regardless of the holding period.

An equity-oriented fund is one that invests at least 65 per cent of its assets in domestic equity shares, and its units held for more than 12 months produce long-term gains taxed at 12.5 per cent above the ₹1.25 lakh annual exemption. Units sold within 12 months produce short-term gains taxed at 20 per cent. Funds that invest mainly in debt and money market instruments, treated as specified mutual funds, are taxed at slab rates as short-term gains if acquired on or after 1 April 2023, and the definition was tightened with effect from 1 April 2025, so check how your fund is classified. Hybrid funds, gold and international funds, fund-of-funds and ETFs each have their own treatment depending on their equity or debt exposure, so use the capital gains statement from the registrar and do not assume.

For equity investments bought before 1 February 2018, grandfathering applies. The cost of acquisition is taken as the higher of the actual cost and the lower of fair market value on 31 January 2018 and the sale value. Systematic investment plans create many separate purchase lots, each with its own holding period and cost, and units are redeemed on a first-in, first-out basis, so each redemption must be matched to the right lot. Switches between schemes, even within the same fund house, are treated as a redemption and a fresh purchase, and the gain on the switch is taxable. Dividends are taxed separately as income from other sources.

How Is Capital Gains Tax Calculated on Real Estate for AY 2026–27?

Capital gains on real estate are calculated by deducting the cost of acquisition, cost of improvement and transfer expenses from the sale consideration, and the resulting long-term gain is generally taxed at 12.5 per cent without indexation for sales on or after 23 July 2024.

A resident individual or HUF who acquired land or a building before 23 July 2024 can choose between two methods for the long-term gain: 12.5 per cent without indexation, or 20 per cent with indexation of the cost, whichever is lower. This option is not available for all taxpayers, and it does not extend to other assets, so confirm eligibility. Property held for 24 months or less gives a short-term gain taxed at slab rates. Stamp duty valuation matters as well: where the sale price is below the stamp duty value beyond the permitted tolerance, the stamp duty value may be treated as the consideration for the seller, and a similar rule applies to the buyer.

Tax is also deducted on the transaction itself. A buyer of a resident seller's property worth ₹50 lakh or more deducts TDS at 1 per cent of the consideration under section 194-IA and files Form 26QB, and the seller can see the credit in Form 26AS. Where the seller is a non-resident, TDS is deducted at much higher rates on the gain under section 195. Remember that TDS is only an advance payment of tax. The actual tax on the gain is computed in the return and may be higher or lower than the amount deducted. For help with TDS compliance on property transactions, see our TDS return filing services.

How Do You File Capital Gains in Your ITR for AY 2026–27 Step by Step?

You file capital gains by collecting transaction statements, computing each gain separately, selecting the correct ITR form, filling the capital gains schedules, paying any balance tax and e-verifying the return. The steps below set out the sequence.

How Can You Legally Reduce Capital Gains Tax?

You can legally reduce capital gains tax by using exemptions for reinvestment, setting off capital losses, using the annual exemption on equity gains, and timing sales carefully. Each route has strict conditions that must be met in full.

Section 54 allows a long-term gain on a residential house to be exempted if the proceeds are used to buy or build another residential house within the prescribed period, with the cost of the new asset considered only up to ₹10 crore. Section 54F extends a similar benefit where the sold asset is not a house, provided the entire net consideration is reinvested and ownership conditions are met. Section 54EC lets you invest the long-term gain from land or buildings in specified bonds within six months, up to ₹50 lakh in a financial year, with a five-year lock-in. For listed equity, harvesting gains up to the ₹1.25 lakh exemption each year, booking losses to offset gains, and holding beyond 12 months can lower the tax. Investors with large portfolios or frequent property deals may also benefit from year-round planning under CFO services. Note that exemptions should never be claimed without documentation, and that the Capital Gains Account Scheme deposit must be made before the due date of filing the return.

How Has Capital Gains Taxation in India Changed Over the Years?

Capital gains taxation in India has moved from a simple structure in the mid-twentieth century to a layered system with different rules for equity, debt and property, and the changes of 2018 and 2024 are the most important turning points for today's investors.

Frequently Asked Questions About Capital Gains Tax Filing for AY 2026–27

Related Guides and Services

• CA Fees in Mumbai 2025: Complete Price Guide for Every Service: typical charges for ITR filing, tax audit, GST and more, so you can budget before you call a CA.
• TDS return filing: compliance for TDS on property sales and other payments.
• Business tax filing: returns for business and professional income, including ITR-3.
• CA for income tax audit: support where a tax audit applies.
• Bookkeeping: organised records for cost, improvement and transfer expenses.