The Union Budget 2026-27 brought incremental changes to the capital gains tax framework that was substantially overhauled in 2024. While the headline rates remained unchanged, the Budget introduced clarifications on deemed consideration, indexed cost for inherited assets, and treatment of gains from REITs and InvITs.
Current LTCG framework (post-Budget 2026)
Equity and equity mutual funds: - LTCG above ₹1.25 lakh per year: 12.5% (no indexation) - Holding period for LTCG: 12 months - STCG: 20%
Debt mutual funds and bonds: - All gains taxed at slab rate regardless of holding period (since April 2023) - No indexation
Real estate: - LTCG: 12.5% without indexation (since July 2024 Budget) - Or 20% with indexation — taxpayer can choose whichever is lower (reinstated for pre-July 2024 purchases after widespread criticism) - Holding period: 24 months
Gold (physical and ETFs): - Physical gold LTCG: 12.5% after 24 months - Gold ETFs: taxed at slab rate (treated as non-equity funds) - Sovereign Gold Bonds: redemption at maturity fully exempt from capital gains
What the Budget 2026 clarified
The Budget 2026 specifically addressed: - NRI taxation: Clarified that NRIs selling Indian property pay 12.5% LTCG with no indexation, with TDS at 12.5% on full sale consideration - REIT and InvIT distributions: Clarified the tax treatment of various components (interest, dividend, capital repayment) in REIT unit distributions - Grandfathering for pre-2018 equity gains: Confirmed the ₹1 lakh grandfathering floor remains in place for equity gains
Practical implications
For most equity investors, nothing changed materially. The 12.5% LTCG rate and ₹1.25 lakh exemption remain. The key action item: harvest gains up to ₹1.25 lakh every financial year to reset your cost basis — this is a legal, zero-tax strategy that reduces future LTCG liability.
For real estate investors, the reinstated indexation option for pre-July 2024 purchases is significant. Always compute both — with and without indexation — before filing.