Capital gains taxation has seen frequent rate and threshold changes in recent Finance Acts — so when the Income-tax Act, 2025 reorganised the entire capital gains framework into new clauses and sections, many investors worried this signalled another rate change. It doesn't. Here's how capital gains are restructured under the new Act, and what genuinely stays the same.
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 clause structure.
Under the new Act, the definition of capital gains is set out in Clause 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 Clauses 196 to 198. Reinvestment-based exemptions — the equivalents of the old Sections 54 (residential property), 54F (investment in new residential house from sale of any long-term asset), and similar provisions — are consolidated into Sections 85 to 88 of the new Act.
What Stays the Same
- Holding period thresholds — the distinction between short-term and long-term capital assets (e.g., 12 months for listed equity/equity mutual funds, 24 months for unlisted shares and immovable property, 36 months for other assets) continues unchanged.
- 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 — Sections 85-88 preserve the substance of the old Section 54/54F-style exemptions: reinvest capital gains into a residential house (or specified bonds, for Section 54EC-equivalent provisions) within the prescribed time limits to claim exemption.
- Indexation rules — where indexation benefit applies to long-term gains on non-equity assets acquired before the relevant cut-off, the computation mechanism is preserved.
What Genuinely Changed
The changes are primarily structural and presentational:
- Clause numbering — capital gains computation now follows Clauses 67 and 196-198 instead of Sections 45, 48, 111A, and 112A. Tax software and ITR forms will reference these new clause numbers for Tax Year 2026-27 onward.
- Consolidated 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 brought together under Sections 85-88, organised by the nature of reinvestment rather than by historical section letter.
- 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.
⚠ What this means for FY 2025-26 gains: Capital gains arising from sales made in FY 2025-26 (reported in ITR for AY 2026-27, due July 2026) are computed and reported under the Income-tax Act, 1961 framework — Sections 45, 54, 111A, 112A, etc. — exactly as before. The new clause numbers apply prospectively to gains arising in Tax Year 2026-27 onward.
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 85-88) are now consolidated rather than scattered across separate sections for different asset classes, 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.
Quick Reference: Old to New
| Old (1961 Act) | Covers | New (2025 Act) |
|---|
| Section 45 | Capital gains charge | Clause 67 |
| Section 111A | STCG on listed equity (20%) | Clause 196 (STCG-equity) |
| Section 112 | LTCG on non-equity assets | Clause 197 (LTCG non-equity) |
| Section 112A | LTCG on listed equity (12.5% above threshold) | Clause 198 (LTCG-equity) |
| Section 54 / 54F | Reinvestment in residential property | Sections 85-88 |
| Section 54EC | Reinvestment in specified bonds | Sections 85-88 |
Frequently Asked Questions
Did the Income-tax Act 2025 change capital gains tax rates? ▼
No. The Income-tax Act, 2025 reorganises capital gains provisions into new clauses (Clause 67 for the charging provision, Clauses 196-198 for STCG/LTCG classification on equity and non-equity assets, and Sections 85-88 for reinvestment exemptions), but does not itself change tax rates, holding periods, or exemption conditions. Any rate changes come through annual Finance Acts, independent of this restructuring.
For my FY 2025-26 capital gains, which section numbers should I use in my ITR? ▼
For gains arising in FY 2025-26 (reported in your AY 2026-27 return, due 31 July 2026), continue to use the Income-tax Act, 1961 section references — Section 45 for the charging provision, Sections 111A/112A for special rates on listed securities, and Sections 54/54F/54EC for reinvestment exemptions — exactly as in prior years. The new clause numbering under the 2025 Act applies to gains arising from 1 April 2026 onward (Tax Year 2026-27).
Are reinvestment exemptions like Section 54 and 54F still available? ▼
Yes. The substance of these exemptions — claiming exemption on long-term capital gains by reinvesting in a residential house within the prescribed time limits — continues under Sections 85-88 of the Income-tax Act, 2025. The conditions (purchase within 2 years / construction within 3 years, lock-in period, one-house restriction for larger gains, etc.) are reported to be carried forward without substantive change.