The 2025 updates to capital gains taxation in India 🇮🇳 and the United States 🇺🇸 bring important changes and clarifications for investors, immigrants, and anyone with cross-border financial interests. Understanding these updates is essential for making smart decisions, especially if you have assets in either country or are planning to move between them. This summary explains what has changed, who is affected, what actions are required, and what these changes mean for pending and future applications.
Summary of What Changed
India 🇮🇳:
– No new rate changes in the 2025 Union Budget for capital gains taxation. The rules set in July 2024 continue for the 2024–25 and 2025–26 financial years.
– Short-term capital gains (STCG) on equities increased to 20% (up from 15%) for gains realized on or after July 23, 2024.
– Long-term capital gains (LTCG) on equities and mutual funds remain at 12.5% for gains above ₹1.25 lakh, with no indexation benefit.
– Debt mutual funds have different rules depending on when the investment was made. For investments after April 1, 2023, all gains are taxed as ordinary income, with no distinction between short-term and long-term, and no indexation.
– Special exemptions for Sovereign Wealth Funds (SWFs) and Pension Funds on unlisted debt are extended until March 31, 2030.
– One-time relief allows long-term capital losses (LTCL) up to March 31, 2026, to be set off against short-term capital gains from Assessment Year (AY) 2026–27 onwards.
– Reporting requirements have been updated, with new instructions for different Income Tax Return (ITR) forms.
United States 🇺🇸:
– No changes to capital gains tax rates for 2025. The “One Big Beautiful Bill” passed on July 4, 2025, extends the current rates through at least 2027.
– Long-term capital gains (LTCG) rates remain at 0%, 15%, or 20% depending on income.
– Short-term capital gains (STCG) are taxed as ordinary income (10–37%).
– Net Investment Income Tax (NIIT) of 3.8% continues to apply to high-income taxpayers.
– Indexation for capital gains (adjusting for inflation) is still only a proposal and has not been enacted.
Who Is Affected
India 🇮🇳:
– Individual investors in equities, mutual funds, debt funds, real estate, and other capital assets.
– Non-resident Indians (NRIs) and resident but not ordinarily resident (RNOR) taxpayers.
– Institutional investors such as SWFs and Pension Funds, especially those holding unlisted debt.
– Taxpayers with legacy investments (assets bought before April 1, 2023, or July 23, 2024) who need to understand transitional rules.
– Anyone filing Indian tax returns for the 2024–25 or 2025–26 financial years.
United States 🇺🇸:
– All U.S. taxpayers with capital gains from the sale of stocks, mutual funds, real estate, or other assets.
– High-income individuals who may be subject to the NIIT.
– Immigrants and expatriates with assets in the United States or planning to move assets between countries.
Effective Dates
- India 🇮🇳: The main changes took effect on July 23, 2024, and continue for the 2024–25 and 2025–26 financial years. Special rules for SWFs and Pension Funds start April 1, 2025, and last until March 31, 2030.
- United States 🇺🇸: The current capital gains tax regime is extended through at least the 2025 tax year, with no changes expected before 2027.
Required Actions
For India 🇮🇳:
– Check acquisition dates for all assets. The tax treatment depends on when you bought your shares, mutual funds, or other assets.
– Use the correct ITR form:
– ITR 1/4: Can report exempt LTCG up to ₹1.25 lakh.
– ITR 2/3: Must report gains separately for periods before and after July 23, 2024.
– Calculate gains using new rates:
– For equities and equity mutual funds: 20% STCG (if held ≤12 months), 12.5% LTCG (if held >12 months, above ₹1.25 lakh).
– For debt mutual funds: If bought after April 1, 2023, all gains are taxed as ordinary income, regardless of holding period.
– Claim exemptions if you are a SWF or Pension Fund holding unlisted debt.
– Set off long-term capital losses against short-term capital gains if you qualify under the new one-time relief (from AY 2026–27).
– Keep detailed records of acquisition and sale dates, cost, and sale proceeds for each asset.
For the United States 🇺🇸:
– Report all capital gains on Schedule D and Form 8949 when filing your federal tax return.
– Determine holding period to classify gains as short-term (≤1 year) or long-term (>1 year).
– Check your income bracket to see which LTCG rate applies (0%, 15%, or 20%).
– Calculate if NIIT applies: If your Modified Adjusted Gross Income (MAGI) is over $200,000 (single) or $250,000 (married filing jointly), add 3.8% to your tax on investment income.
– Monitor for future changes: While indexation is not available now, keep an eye on legislative developments.
Implications for Pending Applications and Investments
India 🇮🇳:
– Pending sales or redemptions: If you plan to sell equities or mutual funds, the date of sale determines which rate applies. For sales after July 23, 2024, use the new rates.
– Legacy investments: If you bought debt mutual funds before April 1, 2023, and sell after July 23, 2024, you get the 12.5% LTCG rate (if held >24 months) with no indexation.
– Real estate and other assets: For property bought before July 23, 2024, you can choose the lower of 20% with indexation or 12.5% without indexation for LTCG.
– Losses: If you have long-term capital losses up to March 31, 2026, you can set them off against short-term capital gains from AY 2026–27 onwards.
– Institutional investors: SWFs and Pension Funds with unlisted debt can benefit from the new exemption starting April 1, 2025.
United States 🇺🇸:
– No immediate changes for pending sales or tax filings. The same LTCG/STCG rates and NIIT rules apply for 2025.
– No indexation: Gains are calculated without adjusting for inflation, so plan accordingly, especially if you have held assets for many years.
– Future proposals: While some groups are pushing for indexation, it is not law yet. Do not rely on it for current planning.
Detailed Explanation of Capital Gains Taxation Rules
India 🇮🇳:
1. Equity Shares and Equity Mutual Funds
– Short-Term Capital Gains (STCG): If you sell within 12 months, you pay a flat 20% tax on the gain (plus surcharge and 4% cess).
– Long-Term Capital Gains (LTCG): If you sell after 12 months, you pay 12.5% tax on gains above ₹1.25 lakh per year. No indexation is allowed, which means you cannot adjust the purchase price for inflation.
– Example: If you buy shares for ₹10 lakh and sell after 18 months for ₹13 lakh, your gain is ₹3 lakh. The first ₹1.25 lakh is exempt, so you pay 12.5% on ₹1.75 lakh, which is ₹21,875.
2. Debt Mutual Funds
– Investments before April 1, 2023: If held for more than 24 months and sold after July 23, 2024, you pay 12.5% LTCG tax (above ₹1.25 lakh), with no indexation.
– Investments after April 1, 2023: All gains are taxed as ordinary income, no matter how long you hold the investment. There is no indexation and no distinction between short-term and long-term.
– Example: If you invest ₹5 lakh in a debt fund after April 1, 2023, and sell for ₹6 lakh, the ₹1 lakh gain is taxed at your income tax slab rate (for example, 20%), so you pay ₹20,000.
3. Other Assets (Real Estate, Gold, Unlisted Shares)
– LTCG: 12.5% flat, no indexation for assets sold after July 23, 2024.
– STCG: Taxed at your income tax slab rate if held for 24 months or less.
– Legacy indexation: For property bought before July 23, 2024, you can choose the lower of 20% with indexation or 12.5% without indexation.
4. Special Provisions
– SWFs and Pension Funds: Exempt from LTCG/STCG on unlisted debt until March 31, 2030 (from April 1, 2025).
– One-time loss relief: Long-term capital losses up to March 31, 2026, can be set off against short-term capital gains from AY 2026–27.
5. Reporting and Compliance
– ITR 1/4: Report exempt LTCG up to ₹1.25 lakh.
– ITR 2/3: Report gains separately for periods before and after July 23, 2024.
– Keep records: Maintain detailed records of acquisition and sale for each asset.
For more details, visit the official Indian Income Tax website.
United States 🇺🇸:
1. Long-Term Capital Gains (LTCG)
– Definition: Assets held for more than one year.
– Rates:
– 0% for singles up to $48,350; joint filers up to $96,700.
– 15% for singles $48,351–$533,400; joint filers $96,701–$600,050.
– 20% for gains above those thresholds.
– NIIT: Add 3.8% if your MAGI is over $200,000 (single) or $250,000 (married filing jointly).
– No indexation: You cannot adjust the cost for inflation.
2. Short-Term Capital Gains (STCG)
– Definition: Assets held for one year or less.
– Taxed as ordinary income: 10–37% depending on your tax bracket.
– NIIT applies for high-income taxpayers.
3. Reporting
– Schedule D and Form 8949: Use these forms to report all capital gains and losses.
– No new forms or guidance for 2025; use existing IRS instructions.
4. Example Calculations
– LTCG Example: Buy $50,000 in stock, sell after two years for $80,000. Gain is $30,000. If you file jointly and your taxable income is $100,000, you pay 15% ($4,500). If your MAGI is over $250,000, add NIIT ($1,140), total $5,640.
For more information, see the IRS official capital gains page.
Comparison Table: India 🇮🇳 vs. USA 🇺🇸 Capital Gains Taxation (2025)
| Feature | India (FY 2024–25/AY 2025–26) | USA (Tax Year 2025) |
|---|---|---|
| Equity LTCG Rate | 12.5% (above ₹1.25 lakh), no indexation | 0%/15%/20%, no indexation |
| Equity STCG Rate | 20% flat | Ordinary income (10–37%) |
| Debt MF Taxation | Pre-Apr 2023: 12.5% LTCG, no indexation; Post-Apr 2023: slab rate, no indexation | N/A (debt taxed as ordinary income) |
| Indexation | Not available (except legacy property) | Not available |
| Special Exemptions | SWF/PF exempt on unlisted debt till 2030 | NIIT 3.8% for high earners |
| Loss Set-Off | One-time LTCL relief (proposed) | Standard loss offset rules |
| Reporting | ITR 1/4 (exempt LTCG); ITR 2/3 (detailed) | Schedule D, Form 8949 |
Practical Takeaways and Next Steps
- India 🇮🇳: Review your investment portfolio and check acquisition dates. Use the correct ITR form and be aware of the new LTCG/STCG rates and indexation rules. If you have long-term capital losses, plan to use the one-time relief. Institutional investors should check if they qualify for the SWF/Pension Fund exemption.
- United States 🇺🇸: Continue to report gains as before, but check if you are subject to the NIIT. Watch for any future changes regarding indexation, but do not expect them before 2027.
- Cross-border taxpayers: If you have assets in both countries, pay close attention to the different rules, especially regarding capital gains taxation, LTCG/STCG rates, and indexation. Double taxation agreements may affect your final tax bill.
Where to Get Help
- India: Visit the Central Board of Direct Taxes (CBDT) for official updates, forms, and FAQs.
- USA: Refer to the IRS capital gains topic page for guidance and forms.
As reported by VisaVerge.com, these updates bring more clarity and stability for taxpayers in both India 🇮🇳 and the United States 🇺🇸, but also require careful attention to detail, especially for those with complex or cross-border investments. By staying informed and following the new rules, you can avoid surprises and make the most of your investments under the current capital gains tax regimes.
Learn Today
Long-Term Capital Gains (LTCG) → Profits from assets held over one year, usually taxed at lower rates than short-term gains.
Short-Term Capital Gains (STCG) → Profits from assets held one year or less, typically taxed as ordinary income.
Indexation → Adjustment of asset purchase price to inflation for accurate capital gains calculation, not implemented in India or US.
Net Investment Income Tax (NIIT) → Additional 3.8% tax on investment income for high-income US taxpayers.
Sovereign Wealth Funds (SWF) → State-owned investment funds benefiting from special capital gains tax exemptions in India.
This Article in a Nutshell
The 2025 capital gains tax updates in India and the US maintain stability but introduce important rate changes and exemptions, especially for cross-border investors. Key actions include checking acquisition dates, using correct tax forms, and monitoring rules affecting equities, mutual funds, and institutional investors in both countries.
— By VisaVerge.com
