Capital gains tax decoded: What every taxpayer must know before FY26 filing season

Indian taxpayers shelled out ₹9,751 crore in capital gains tax in FY23, much of it avoidable, says Taxbuddy.com founder Sujit Bangar, who blames complexity—and is offering a clear guide for FY26.

“People end up paying much more than they need to,” Bangar wrote in a LinkedIn post, outlining ten key rules that can help taxpayers legally minimize their dues under the new tax regime.

At the top of his list is the ₹4 lakh basic exemption under the new tax regime, which applies first to regular income and then to capital gains. He also highlights a common misunderstanding about rebates: while some capital gains qualify, long-term gains from listed equities, mutual funds, and REITs do not, even for total incomes below ₹12 lakh.

He breaks down asset classes with precision. For listed equity shares and equity-oriented mutual funds, holding them for over 12 months qualifies as long-term, taxed at 12.5% after a ₹1.25 lakh exemption. Under 12 months? Expect a 20% short-term rate.

Debt mutual funds have seen significant changes. If bought before April 1, 2023, gains after 24 months are taxed at 12.5%—but with no indexation. Shorter durations attract slab rates. For those purchased after that date, all gains are taxed at slab rates, regardless of holding period.

Hybrid mutual funds under 35% equity and market-linked debentures follow similar rules. A 12.5% tax applies for long-term holdings made before April 1, 2023; newer purchases are taxed at slab rates across the board.

For hybrid funds with 35% to 65% equity, only post-24 month gains attract the 12.5% rate; otherwise, it’s slab rates.

Sovereign Gold Bonds remain the safest bet—fully tax-exempt if held to maturity. If sold earlier, taxation mirrors equity rules.

Non-convertible debentures and real estate holdings follow duration-based rules, with an optional 20% indexed rate for real estate bought before July 23, 2024.

Cryptocurrencies and NFTs remain outliers: taxed at a flat 30% regardless of holding period, and not even classified as capital assets under Indian tax law.