Capital gains tax applies to profits earned when selling capital assets like stocks, property, gold, and jewellery for more than their purchase price. According to reports from The Economic Times, the tax is levied only on the profit amount, not the total sale value, and excludes personal-use items, rural agricultural land, and raw materials. The holding period determines whether gains are classified as short-term (less than 12 months for shares, less than 24 months for property) or long-term (minimum 12 months for shares, 24 months for property).
Budget 2024 introduced a significant change to capital gains taxation from July 23, 2024. As reported by The Economic Times, the government established a uniform long-term capital gains tax rate of 12.5% across all asset classes, replacing the previous varying rates. Previously, long-term gains on listed shares and equity mutual funds were taxed at 10% on amounts exceeding ₹1 lakh, while property and other assets attracted 20% with indexation benefits. The new uniform rate applies to most assets, though some exceptions exist for properties acquired before July 23, 2024.
Budget 2024 removed the indexation benefit for most assets, which previously allowed investors to adjust asset purchase prices for inflation using the Cost Inflation Index. According to The Economic Times, for land and buildings sold after July 23, 2024, the tax rate is 12.5% without indexation. However, a partial exception exists for property acquired before July 23, 2024, where sellers can choose between paying 12.5% without indexation or 20% with indexation, whichever results in lower tax liability.
Finance Minister Nirmala Sitharaman indicated the government is open to stakeholder views on reducing capital gains tax on stock market investments to attract foreign portfolio investors. Speaking on Monday, Sitharaman said the government is always ready to listen to people and take their inputs on reducing such taxes. This comes as FPIs have been net sellers of securities worth a record ₹1.8 trillion in FY26, the highest in 34 years and up from ₹1.3 trillion in FY25. The government imposes a short-term capital gains tax of 20% on equity shares and equity mutual funds, and a 12.5% long-term capital gains tax on annual gains of over ₹125,000 on such investments sold after 12 months.
Foreign portfolio investors have registered significant outflows from Indian markets, with FPIs being net sellers of securities worth ₹1.8 trillion in FY26. According to Reserve Bank of India data, FPIs have registered net outflows of over $10 billion (approximately ₹95,200 crore) in FY27 so far, including sales of $8.3 billion in April 2026 and $1.8 billion as of May 20. The highest outflows were seen in March 2026 at around ₹1.18 trillion, driven by higher capital gains taxes, a weaker rupee, and shifting global allocations.
