Capital gains are profits from selling a capital asset — shares, mutual funds, property, gold — taxed separately from your regular income. Gains are short-term or long-term based on holding period: broadly 12 months for listed securities and 24 months for most other assets. Long-term gains on listed equity are taxed at 12.5% above a ₹1.25 lakh annual exemption.
The regime simplified from July 2024 and carried into the 2025 Act: long-term capital gains across asset classes are broadly taxed at 12.5% without indexation, while short-term gains on listed equity and equity funds attract 20%. Short-term gains on other assets — property held under 24 months, gold, unlisted shares — are added to your income and taxed at slab rates. The ₹1.25 lakh exemption applies only to long-term gains on listed equity and equity mutual funds.
For an MSME owner the compliance points are concrete: capital gains push you out of ITR-4 into ITR-2 or ITR-3 in most cases, they are invisible to presumptive taxation (taxed separately on top of your section 58 profit), and they must be fed into your advance tax instalments for the quarters after the sale. Property sellers should also remember the buyer deducts TDS on the sale consideration, which you claim back through 26AS.
The reporting trap is the AIS: every demat sale, mutual fund redemption and property registration is reported to the department, so unreported gains are the single most mechanical notice trigger. Fund switches between schemes count as redemptions even though no cash reached your bank. Reconcile broker and RTA capital gains statements against the AIS before filing, not after the notice.
More Income tax terms
Reviewed to the law in force in FY 2026-27. General information, not advice — confirm the position for your facts before acting.