Capital gains planning

What this covers

Computing and planning the tax on the transfer of a capital asset — property, listed and unlisted shares, mutual funds, and business assets. That means establishing cost and holding period, applying the right rate, and identifying whether an exemption is available and whether its conditions can actually be met on your timeline.

Statutory basis

The capital gains provisions of the Income-tax Act, 2025. Gain arises on transfer of a capital asset, computed as consideration less cost of acquisition and cost of improvement and expenditure on the transfer. Holding period determines whether the gain is short-term or long-term, and different rules apply to listed securities. Exemptions are available on reinvestment in a residential house and in specified bonds, on conditions. For immovable property, where the consideration is below the stamp duty value, the stamp duty value is substituted beyond a tolerance band. For transfers up to 31 March 2026 the corresponding provisions were sections 45 to 55 of the 1961 Act, with sections 54, 54F and 54EC on reinvestment and section 50C on stamp duty value.

Who it applies to

Anyone transferring a capital asset, resident or non-resident. Non-residents need particular care: tax is often to be deducted from the sale consideration itself rather than paid later, and getting the deduction reduced requires an application before completion, not after. Note also that transfer is wider than sale — it can include exchange, relinquishment, and certain transactions in immovable property completed without a conveyance.

What we do

1. 1Establish cost of acquisition properly, including inherited or gifted assets where the previous owner's cost and holding period carry over, and assets held long enough for a substituted cost to apply.
2. 2Fix the holding period and therefore the character of the gain, on the rules applicable to that class of asset for that year.
3. 3Compute the gain, applying the stamp duty value rule for immovable property and the specific computation rules for listed securities and mutual funds.
4. 4Identify the exemptions available, and test the conditions against your actual timeline — the reinvestment windows are strict and the deposit account route exists precisely because they are.
5. 5Plan the tax deduction position before completion where a non-resident is selling, since the alternative is a large refund claim a year later.
6. 6Report the transaction in the return with the working behind it, because a capital gains entry that does not reconcile to the broker or registrar data attracts a query.

What you receive

Gain computation

The computation asset by asset, with cost, holding period and character established.

Exemption plan

The exemptions available, the conditions, and the dates by which each step must happen.

Withholding position

For a non-resident seller, the deduction position and any application to reduce it.

Reporting

The disclosure in the return, reconciled to the statements the department receives.

Documents and information required

Sale deed or contract note and the purchase document · records of improvement expenditure · brokerage and transfer cost evidence · stamp duty valuation for immovable property · probate, will or gift deed where the asset was inherited or gifted · broker statements for securities · bank statements showing the consideration received · details of reinvestment where an exemption is claimed.

Key dates

The tax is payable through advance tax in the quarter in which the gain arises, not at the end of the year — a large gain in the first quarter that is paid in March carries interest. Reinvestment exemptions run on their own periods from the date of transfer, and the deposit account has to be used before the return is due where the reinvestment has not happened by then. The rates and holding periods for several classes of asset were amended in 2024, so we confirm the position for the year of transfer.