Quick Summary
Capital gains arise when you sell a capital asset like property, stocks, or mutual funds at a higher price than its purchase cost. In 2025, understanding how to calculate capital gains tax in India has become essential for every taxpayer and investor to stay compliant with the latest Income Tax Act updates.
Whether you’re a long-term investor or recently sold an asset, knowing the capital gains tax slab rates in India, the capital gains tax formula, and applicable exemptions under Sections 54, 54F, and 54EC can help you legally reduce taxes and make smarter investment decisions.
This guide simplifies every step from identifying asset type to applying the right tax rate so you can confidently calculate and optimize your capital gains tax for FY 2025-26.
Capital gains taxes are the taxes you pay on the profit made from selling an asset, such as stocks, real estate, mutual funds, or other investments. When you sell an asset for more than what you originally paid for it, the difference is called a capital gain, and it is considered taxable income. In India, capital gains are classified into short-term and long-term, depending on how long you hold the asset. Each type is taxed at different rates. Understanding capital gains tax is important for planning investments wisely and avoiding unexpected tax liabilities.
Below are the 3 steps to calculate capital gains tax:
Before you calculate capital gains tax, you’ll need to gather some essential information. Here’s what you need:
The cost basis is the original purchase price of the asset, which the cost of improvements may adjust. To calculate the cost basis, add the purchase price and the cost of improvements:
Cost Basis = Purchase Price + Cost of Improvements
Now that you have the necessary information and the cost basis, you can calculate capital gains tax and apply the applicable tax rates. Follow these steps:
Formula = Capital Gains Tax = Capital Gain x Applicable Tax Rate
Let’s explore the two main types of capital gains tax and their corresponding tax rates:
Short-term capital gains tax is imposed on the proceeds generated from the sale of assets classified as short-term capital assets. Typically, short-term assets are those held for one year or less. The tax rate for short-term capital gains is around 15% and may be subject to a surcharge rate. It is important to note that the short-term capital gains tax calculation follows specific rules, which we will discuss further. It is very easy to calculate capital gains tax in India.
Long-term capital gain tax applies when you sell assets after holding them for a specific period. For gains made from the sale of stocks and equity mutual funds, the long-term capital gains (LTCG) tax rate is 10%. However, for increases in real estate, debt funds, and other assets, the tax rate is 20%, along with the advantage of indexation.
Indexation allows you to adjust the purchase price of an asset based on inflation, reducing the taxable gain. On the other hand, the short-term capital gains tax applies to assets sold before the defined holding periods, typically at a flat rate. The tax rate for short-term capital gains is generally around 20%.
A Capital Gains Tax Calculator is a financial tool designed to help individuals and investors determine the amount of tax they owe on profits made from the sale of capital assets, such as stocks, real estate, or other investments. This calculator considers various factors, including the purchase price, selling price, holding period, and applicable tax rates, to provide an estimate of the capital gains tax liability.
The Capital Gains Tax Calculator provides essential benefits for users by estimating potential tax liabilities before selling an asset, thus enhancing financial planning. It clarifies tax implications, enabling informed investment decisions and ensuring compliance with tax regulations to reduce underpayment risks. Incorporating tax costs into broader strategies helps optimize returns and serves as an educational tool for understanding capital gains and their tax implications.
In the real world, these benefits empower investors and taxpayers to make smarter financial decisions, ultimately leading to greater financial security and success.
To simplify the process further, you can utilize online tools like the Chegg Capital Gains Tax Calculator to calculate capital gains tax. Follow these steps to calculate your capital gains tax effortlessly:
Step 1: Visit the Chegg website or app and navigate to the calculate Capital Gains Tax in India.
Step 2: Select the type of property you’re dealing with (e.g., real estate, stocks).
Step 3: Enter the necessary purchase details, including the purchase price and any associated expenses.
Step 4: Enter the details of the sale, including the sale price.
Step 5: Specify the holding period as either short-term or long-term.
Step 6: Select your tax filing status (e.g., single, married, filing jointly).
Step 7: Click on “Calculate” to obtain your capital gains tax.
Example Calculation:
Let’s illustrate the calculation with an example. Assume you sold a piece of real estate for $500,000 on June 1, 2023. You purchased the property for $400,000 on January 1, 2018, and incurred $10,000 in closing costs. Additionally, you paid $15,000 in selling expenses.
Results:
Capital Gain: $100,000 ($500,000 – $400,000)
Taxable Gain: $85,000 ($100,000 – $15,000)
Tax Rate: Based on your tax bracket for calculating long-term capital gains.
Calculate Capital Gains Tax: The calculated amount is based on the tax rate and taxable gain.
Capital gains are profits earned from the sale of capital assets like property, stocks, or mutual funds. However, under certain sections of the Income Tax Act, 1961, you can claim exemptions on capital gains and significantly reduce your tax liability.
Key Capital Gains Exemptions:
To reduce your capital gains tax liabilities, consider these strategies:
The 2025 Union Budget updated capital gains tax rules. Here’s what you need to know:
Stay updated, plan wisely, and optimize your tax savings under the new rules!
Understanding how to calculate capital gains tax in India 2025 using the correct capital gains tax formula and slab rates is essential for every investor. Knowing the difference between short-term and long-term capital gains tax slab rates India, along with available exemptions like Sections 54 and 54F, empowers you to minimize your tax liability effectively. Use trusted methods to stay compliant and optimize your financial growth confidently.
Want to explore helpful techniques to save and grow your hard-earned money? Dive into our guide on saving money.
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The formula to calculate capital gains tax return is: Capital Gains Tax = Capital Gain x Applicable Tax Rate, where Capital Gain = Sale Price – Cost Basis.
Rs. 1 lakh
Gains up to Rs. 1 lakh in a financial year are not taxable, which is particularly beneficial for small investors. Non-equity assets: There is no such exemption limit for non-equity assets.
To avoid capital gains tax in India after selling property, you can reinvest the gains in specified options like purchasing another residential property within 2 years or constructing one within 3 years. Alternatively, investing in the Capital Gains Account Scheme (CGAS) can defer tax.
To calculate capital gains return, subtract the original purchase price from the selling price of an asset. Then, divide the gain by the original purchase price and multiply by 100 to get the percentage return. Formula: (Selling Price – Purchase Price) / Purchase Price * 100.
The formula to calculate capital gains tax is: Capital Gains Tax = Capital Gain x Applicable Tax Rate, where Capital Gain = Sale Price – Cost Basis.
The formula for calculating capital gains is net capital gain = capital proceeds – cost base. This amount is then included in your assessable income for the relevant financial year and taxed at the applicable rate.
Long-term capital gains may qualify for lower tax rates, and exemptions like the home sale exclusion or deductions through retirement accounts may apply based on income and asset type.
Long-term capital gains are taxed at significantly lower rates than short-term gains, which are taxed as ordinary income. This distinction encourages long-term investment and is firmly based on holding periods set by tax laws.
Authored by, Sakshi Arora
Digital Content Writer
Sakshi is a Content Creator and Strategist who specializes in crafting well-researched content across diverse topics including economics, finance, health, and more. She brings a fresh perspective to every piece she writes, always aiming to offer real value to her readers. When she’s not writing, you’ll likely find her curled up with a book—she’s a proud bookworm—or sipping on endless cups of chai, her favorite obsession.
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Chegg India does not ask for money to offer any opportunity with the company. We request you to be vigilant before sharing your personal and financial information with any third party. Beware of fraudulent activities claiming affiliation with our company and promising monetary rewards or benefits. Chegg India shall not be responsible for any losses resulting from such activities.
