Tax on long-term capital gains
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 197(1) of Income Tax Act 2025
(1) Where the total income of an assessee includes any income arising from the transfer of a long-term capital asset which is chargeable under the head “Capital gains”, the tax payable by the assessee on the total income, subject to sub-sections (2) and (3), shall be the aggregate of—
(a) income-tax payable on the total income as reduced by such long-term capital gains, had the total income, as so reduced, been his total income; and
(b) income-tax calculated on such long-term capital gains at the rate of 12.5%.
Section 197(2) of Income Tax Act 2025
(2) In the case of an individual or a Hindu undivided family, being a resident, where the total income as reduced by long-term capital gains computed under sub-section (1) is below the maximum amount which is not chargeable to income-tax, then,—
(a) such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax; and
(b) the tax on the balance of such long-term capital gains shall be computed at the rate as referred in sub-section (1).
Section 197(3) of Income Tax Act 2025
(3) In the case of an individual or a Hindu undivided family, being a resident, in the case of transfer of a long-term capital asset, being land or building, or both, which is acquired before the 23rd July, 2024, the excess income-tax computed as per the following formula shall be ignored:––
E = A – B
where––
E = excess income-tax to be ignored;
A = income-tax computed under clause (b) of sub-section (1);
B = income-tax computed under clause (b) of sub-section (1) taking the rate as 20% and the capital gains is computed by taking the cost of acquisition as indexed cost of acquisition and the cost of improvement as indexed cost of improvement.
Section 197(4) of Income Tax Act 2025
(4) Where the gross total income of an assessee includes any income arising from the transfer of a long-term capital asset, the gross total income shall be reduced by such income and the deduction under Chapter VIII shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.
Section 197(5) of Income Tax Act 2025
(5) In this section,—
(a) “securities” shall have the same meaning as assigned to it in section 2(h) of the Securities Contracts (Regulation) Act, 1956;
(b) “listed securities” means the securities which are listed on any recognised stock exchange in India;
(c) “unlisted securities” means securities other than listed securities;
(d) “indexed cost of acquisition” and “indexed cost of improvement” shall have the meanings respectively assigned to them in section 72.