Section 197 — LTCG Rates FA2024 12.5pc | ITA 2025

Section 197 — - TAX ON LONG-TERM CAPITAL GAINS

Section 197 is the substantive equivalent of 1961 s. 112 -- the GENERAL LTCG RATE provision. FA 2024 WATERSHED: PRE-23-JUL-2024 LTCG: 20% with indexation (using s. 72(2) indexed cost) for all assets. POST-23-JUL-2024 LTCG: 12.5% FLAT for ALL assets, with EXCEPTION FOR INDIVIDUAL / HUF on LAND / BUILDING acquired BEFORE 23-Jul-2024 -- assessee may CHOOSE between 20%-with-indexation OR 12.5%-flat, declare the LOWER. For NR transferors, FX-conversion under s. 72(6) preserves benefit (no indexation). Special rate for NR debentures of Indian co. (NOT being equity ref s. 198): 10% / 20% subject to mode. Practitioner-grade rule: post 23-Jul-2024, indexation generally WITHDRAWN; only land-building individual-HUF retain dual-modeling option.

Statutory text — Income-tax Act, 2025

Marginal note -- Tax on long-term capital gains

197.

(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), (3) and (4), 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%.

(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).

(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 was 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 sub-section (1)(b); B = income-tax computed under sub-section (1)(b) 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”.

(4) In the case of an assessee being a non-resident (not being a company) or a foreign company, the long-term capital gains arising from the transfer of a capital asset, being unlisted securities or shares of a company not being a company in which the public are substantially interested, shall be computed without giving effect to the provisions under section 72(6).

(5) 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.

(6) For the purposes of this section,—

(a) “securities” shall have the same meaning as assigned to it in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 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. Tax on long-term capital gains in certain cases.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 197	INCOME-TAX ACT, 1961 -- s. 112
LTCG flat 12.5% post 23-Jul-2024 (general)	1961 s. 112 [FA 2024]
20% with indexation -- pre 23-Jul-2024 era / land-building individual-HUF election	1961 s. 112(1) Proviso (FA 2024 transition)
NR debentures of Indian co. (non-equity) 10%/20%	1961 s. 112(1)(c)(iii)
Listed securities (other than s. 198 equity) 10% without indexation	1961 s. 112 main
Indexation per s. 72(2) -- preserved for 20%-route	1961 s. 48 second proviso

FA 2024 WATERSHED

Section 197 implements FA 2024's flat-12.5%-without-indexation regime (effective 23-Jul-2024). Pre-23-Jul-2024 LTCG: 20% with indexation per s. 72(2). Post-23-Jul-2024 LTCG: 12.5% flat for ALL assets. EXCEPTION: INDIVIDUAL / HUF on LAND / BUILDING (or both) acquired BEFORE 23-Jul-2024: dual-modeling option -- (a) 20% with indexation (per s. 72(2) indexed cost computation) OR (b) 12.5% flat (without indexation); declare LOWER. Mandatory dual-modeling for individual / HUF land-building sellers; document choice in working papers.

WORKED EXAMPLES

EX 1 -- Individual selling apartment FY 2026-27: bought FY 2010-11 INR 50L; sells INR 2.5 cr. ROUTE A: 12.5% flat: CG = INR 2 cr; tax INR 25L. ROUTE B: 20% indexed: indexed cost = 50L * (CII 376/CII 167) = INR 1.13 cr; CG = INR 1.37 cr; tax INR 27.4L. LOWER = ROUTE A (INR 25L). EX 2 -- Same apartment but sold for INR 1.2 cr. ROUTE A: CG = INR 70L; tax INR 8.75L. ROUTE B: CG = INR 7L (1.2cr - 1.13cr); tax INR 1.4L. LOWER = ROUTE B (INR 1.4L). LOW-APPRECIATION cases favour 20%-indexed; HIGH-APPRECIATION cases favour 12.5%-flat. EX 3 -- Company selling commercial property FY 2026-27 (no individual / HUF election): only 12.5% flat applies; no indexation. EX 4 -- NR selling unlisted Indian-co debenture: s. 72(6) FX conversion; CG computed in FX; rate 10%/20% as per s. 197 Table; indexation NOT available.

OTHER LTCG-CHARGEABLE CATEGORIES

(i) LISTED SECURITIES (other than equity / equity-MF / business-trust covered by s. 198): includes listed bonds / debentures / G-Sec / preference shares -- 10% flat (without indexation) per s. 112(1) carried-over choice. (ii) NR DEBENTURES OF INDIAN CO. (non-equity): NR-investor, FX-conversion under s. 72(6); rate 10% (FX-route) / 20% (rupee-route). (iii) UNLISTED SHARES SOLD BY NR: 10% flat without indexation under 1961 s. 112(1)(c)(iii) preserved. PRACTITIONER: cross-check character of asset before applying rate; STT-paid listed equity goes to s. 198 (12.5% with INR 1.25L exemption, separate regime).

PLANNING NOTES

(i) DUAL-MODELING DISCIPLINE -- individual / HUF on land-building pre-23-Jul-2024 acquisition: model BOTH routes, declare lower, document working. (ii) HOLDING-PERIOD VERIFICATION -- 24 months for land/building; 12 months for listed securities / equity-MF / business-trust units; 36 months for unlisted bonds (post FA 2024 -- forced-STCG via s. 76 / s. 50AA). (iii) ROLLOVER EXEMPTIONS -- s. 82-86 (residential house / agricultural land / SEC bonds / specified-asset-to-residential) preserved alongside s. 197 rate calibration. (iv) NR / FX-CONVERSION -- s. 72(6) / s. 72(7) FX-mechanisms remain operative for NR investors. (v) INDEXATION TRANSITION -- assets acquired BEFORE 23-Jul-2024 retain indexation eligibility for individual/HUF land-building; post-23-Jul-2024 acquisitions: no indexation.

CROSS-REFERENCES

Section 67 -- CG charge.
Section 72 -- Mode of computation including indexation s. 72(2) and FX s. 72(6).
Section 76 -- Forced-STCG (MLDs / Specified MFs / unlisted bonds post 23-Jul-2024).
Section 90 -- Cost definitions including FA 2018 grandfathering for listed equity.
Section 196 -- STCG rates.
Section 198 -- LTCG STT-paid listed equity 12.5% (separate concession).
Sections 82-86 -- Reinvestment exemptions.
CBDT CII annual notification.

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