Capital Gains Tax Under the Income-tax Act 2025: What Changed, What Didn't

A Reorganisation, Not a Rewrite

Under the Income-tax Act, 1961, capital gains were governed primarily by Sections 45 to 55A — defining what constitutes a capital asset, transfer, the computation mechanism, exemptions (Sections 54, 54B, 54D, 54EC, 54F, 54G, etc.), and special rates for short-term and long-term gains (Sections 111A and 112A for listed securities). The Income-tax Act, 2025 carries forward the same conceptual framework but reorganises it into a cleaner section structure.

Under the new Act, the definition of capital gains is set out in Section 67, while the classification and computation of short-term capital gains on equity, long-term capital gains on non-equity assets, and long-term capital gains on equity are split across Sections 196 to 198. Reinvestment-based exemptions — the equivalents of the old Sections 54, 54B, 54D, 54EC, 54F, 54G and 54GA — are reorganised into the Sections 82-88 range of the new Act, with each old section mapping to a specific new section rather than a blanket many-to-few consolidation. For example, the Section 54-equivalent (residential-house reinvestment) is Section 82, and the Section 54B-equivalent (agricultural-land reinvestment) is Section 83. Always check the official section-by-section concordance for the exact mapping of the specific exemption you are relying on rather than assuming a single consolidated range.

What Stays the Same

• Holding period thresholds — the distinction between short-term and long-term capital assets continues unchanged by the 2025 Act's reorganisation itself: 12 months for listed equity/equity mutual funds, and 24 months for unlisted shares, immovable property and most other capital assets. The 24-month threshold for "any other asset" was set by the Finance (No. 2) Act, 2024 for transfers on or after 23 July 2024 (the earlier 36-month threshold applies only to transfers before that date) — this is a pre-existing Finance Act change the 2025 Act carries forward, not a new change of its own. Specified mutual funds, market-linked debentures and certain unlisted bonds are deemed short-term under Section 50AA irrespective of holding period.
• Tax rates — the currently applicable rates (20% STCG and 12.5% LTCG on listed equity above the exemption threshold, as revised in an earlier Finance Act; slab-rate STCG and 12.5%/20% LTCG with or without indexation for other assets depending on asset class and acquisition date) are not altered by the 2025 Act itself.
• Reinvestment exemptions — the Sections 82-88 range preserves the substance of the old Section 54/54F-style exemptions: reinvest capital gains into a residential house (or specified bonds, for the Section 54EC-equivalent provision) within the prescribed time limits to claim exemption. See the concordance table below for specific old-to-new section mappings.
• Indexation rules — general indexation was withdrawn for transfers on or after 23 July 2024. A narrow protective comparison (indexed 20% vs unindexed 12.5%, whichever is lower) survives only for resident individuals and resident HUFs selling land or building acquired before 23 July 2024 — it is not a general indexation option available across all non-equity assets. Where this comparison applies, the computation mechanism is preserved.

What Genuinely Changed

The changes are primarily structural and presentational:

• Section numbering — capital gains computation now follows Sections 67 and 196-198 of the enacted Income-tax Act, 2025 instead of Sections 45, 48, 111A, and 112A of the 1961 Act. Tax software and ITR forms will reference these new section numbers for Tax Year 2026-27 onward.
• Reorganised exemption sections — what used to be a scattered set of Sections 54, 54B, 54D, 54EC, 54F, 54G, and 54GA (each with slightly different conditions for different asset types) are given individual new section numbers in the Sections 82-88 range, organised sequentially by the nature of reinvestment rather than by historical section letter — not consolidated into one blanket range covering every exemption.
• Plain-language drafting — many of the provisos and explanations that had accumulated around capital gains sections over decades of amendments have been absorbed into the main text, reducing cross-referencing.

Practical Implications for Investors

If you're planning to sell equity, mutual funds, property, or other capital assets, your tax planning calculus — holding period for LTCG qualification, the LTCG exemption threshold for listed equity, and reinvestment exemption options — remains exactly what it was before the new Act. The reorganisation primarily affects how tax professionals, software, and the ITR forms cite the relevant provisions; it does not change the amount of tax you owe on a given gain.

One area worth monitoring: because reinvestment exemptions (Sections 82-88) now each have their own dedicated section rather than being scattered across differently-numbered sections with inconsistent numbering conventions, there's a possibility that future CBDT clarifications or Finance Act amendments could standardise certain conditions (like reinvestment time limits) across asset classes that previously had slightly different rules. As of the 2025 Act's effective date, no such substantive harmonisation has been announced — the conditions specific to each type of reinvestment (e.g., residential property purchase within 2 years / construction within 3 years for the Section 54-equivalent) continue to apply as before.

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