LTCG 12.5%, the capital-gains regime that rewrote everything.

Three structural changes to India's capital-gains framework, effective 23 July 2024 for transfers on or after that date:

1. LTCG rate unified at 12.5% across asset classes (listed equity previously 10%; unlisted and property previously 20% with indexation). All assets now at 12.5% without indexation.
2. Indexation benefit removed for new transfers. Pre-23-July-2024 transfers retain the 20%-with-indexation option as grandfathering.
3. STCG on listed equity raised from 15% to 20%.

Separately, the buyback tax regime was reinstated at the shareholder level effective 1 October 2024 — buyback distributions are now taxed as dividend income in the shareholder's hands at slab rates (previously the company paid buyback-distribution tax).

For retail and HNI investors in listed Indian equity (NSE / BSE direct or via equity mutual funds):

• LTCG rate: 10% → 12.5% on gains above INR 1.25 lakh per year (up from INR 1 lakh exemption).
• STCG rate: 15% → 20%.
• STT must still be paid at redemption to qualify for the preferential rate.

Worked example — LTCG on listed equity sale of INR 50 lakh gain in FY 2025-26:

• Taxable gain: INR 50,00,000 - INR 1,25,000 exemption = INR 48,75,000
• LTCG tax at 12.5%: INR 6,09,375
• Plus surcharge + 4% cess based on total income

For a high-net-worth seller the 2.5-percentage-point increase on a INR 1 crore gain is INR 2.5 lakh more tax than pre-July-2024.

For unlisted equity, immovable property, debentures, bonds and similar long-held assets, Finance Act 2024 removed indexation. The transition rules:

• Transfers on or after 23 July 2024: LTCG at 12.5% without indexation. No choice.
• Assets acquired before 23 July 2024 and sold after: taxpayer can choose between (a) 12.5% without indexation or (b) 20% with indexation — whichever is lower. Choice is on a per-transaction basis.

Worked example — sale of ancestral property acquired 2015 for INR 50 lakh, sold October 2026 for INR 1.8 crore (COA indexed cost INR 70 lakh using CII):

• Option A (20% with indexation): Indexed cost INR 70 lakh. Gain INR 1.8cr - INR 70 lakh = INR 1.10 crore. Tax at 20% = INR 22 lakh.
• Option B (12.5% without indexation): Nominal cost INR 50 lakh. Gain INR 1.8cr - INR 50 lakh = INR 1.30 crore. Tax at 12.5% = INR 16.25 lakh.
• Lower tax: Option B.

For post-23-July-2024 asset acquisitions, only Option B applies — no choice.

Rule of thumb: for very old assets (10+ years, high indexation), 20% with indexation sometimes wins. For medium-held assets (3-10 years), 12.5% without indexation almost always wins. Model each transaction.

Debt mutual funds purchased on or after 1 April 2023 lost the LTCG preferential rate entirely. All gains, regardless of holding period, are taxed at the investor's slab rate.

Debt MF units acquired before 1 April 2023 remain under the earlier regime (20% with indexation after 3-year holding) until sold. This grandfathering survives Finance Act 2024.

Practical effect: investors with pre-April-2023 debt MF holdings have a one-time planning window. If you expect to hold the units long term and have significant indexation benefit, holding to the current regime is often better than switching strategies.

• Flipping Indian startup to Delaware C-Corp: share-swap triggers Indian capital gains for each shareholder. Post-July-2024, LTCG at 12.5% without indexation on the FMV uplift. For Indian cost-of-acquisition founders, the delta from 20%-with-indexation to 12.5%-without is small on short holding; larger on long holding.
• Reverse flip (Delaware parent to Indian parent): same taxable event per shareholder. Shareholders exchanging Delaware stock for Indian stock trigger capital gains on the FMV uplift from their Delaware cost basis. For founders with low original Delaware cost, almost all of the current FMV is gain — 12.5% rate helps vs the earlier 20%.
• Acquisition exit on Indian shares: founders selling in M&A pay LTCG at 12.5% on gain over cost basis. For a founder exiting at INR 100 crore with INR 1 lakh founder cost basis, tax at 12.5% is INR 12.5 crore (vs INR 20 crore under pre-July-2024 20%-with-indexation if indexation was minimal). Material savings.
• Buyback by Indian company: post-October-2024, buyback distribution is taxed at the shareholder level as dividend income at slab rate. For high-income shareholders (slab rate ~43% including surcharge), buyback is now punitive compared to pre-October-2024 regime (where company paid 23.3% buyback tax and shareholder received post-tax). Think twice before using buyback as exit mechanism; direct secondary sale often better.

If you are a listed-equity investor: no action required; higher rates are the new normal. Rebalance timing of realisations where possible to use the INR 1.25 lakh annual LTCG exemption.

If you own ancestral or long-held property: model both 20%-with-indexation and 12.5%-without-indexation before selling. Pre-July-2024 acquisitions still have the choice. Section 54 / 54F / 54EC reinvestment options are unchanged and can further reduce tax.

If you are an Indian startup founder planning a flip: flip early, at low FMV. The 12.5% rate is already low; low FMV x 12.5% x founder cap table is nearly trivial. Delaying costs geometrically more.

If you are a US-returning NRI with foreign assets: the Indian 12.5% regime is favourable for post-RNOR capital gains on foreign asset sales. Combined with FTC under India-US DTAA Article 25, net Indian tax after US tax is often zero.

If you are planning to exit via buyback: re-model vs secondary sale. Buyback is now shareholder-taxable at slab rate; secondary sale is LTCG at 12.5%. For high-income shareholders, secondary sale wins by 25+ percentage points.

Last updated: 2026-10-07.