Section 67 of the Income-tax Act, 2025 — Capital Gains: What Is Charged to Tax

In plain language

What Section 67 actually says

Section 67 is the charging section for capital gains under the Income-tax Act, 2025 (effective 1 April 2026). In one line: any profits or gains arising from the transfer of a capital asset during a tax year are chargeable to income-tax under the head "Capital gains", and are deemed to be the income of the year in which the transfer takes place — subject to the exemptions in Sections 82 to 89. It is the direct successor to the well-known Section 45 of the Income-tax Act, 1961, and it consolidates into a single section the many "deemed transfer" rules that used to be scattered across sub-sections of the old Section 45.

The two ingredients that trigger a charge

• There must be a "capital asset" — property of any kind (land, building, shares, mutual funds, gold, crypto/VDAs, goodwill, tenancy rights) other than stock-in-trade, personal effects and specified rural agricultural land.
• There must be a "transfer" — sale, exchange, relinquishment, extinguishment of rights, compulsory acquisition, or conversion into stock-in-trade. No transfer, no capital-gains charge (that is why gifts to relatives, inheritance and partition are outside the net).

The special / deemed-transfer situations inside Section 67

Section 67 does not stop at ordinary sales. It expressly brings the following into charge so that gains cannot escape by structuring:

• Insurance money for damaged/destroyed assets — money or assets received from an insurer because a capital asset was destroyed by flood, earthquake, cyclone, riot, accidental fire, explosion or enemy action is taxed as capital gains in the year of receipt.
• ULIP proceeds — gains on a unit-linked insurance policy that does not qualify for exemption (typically high-premium policies) are charged as capital gains.
• Conversion into stock-in-trade — when you convert a capital asset into business inventory, the fair market value on the date of conversion is treated as the sale consideration; the gain is taxed in the year the stock is actually sold.
• Beneficial interest in dematerialised securities — the beneficial owner (not the depository) is taxed, with cost worked out on a First-In-First-Out (FIFO) basis.
• Introduction of an asset into a firm/AOP as capital contribution, and gains on reconstitution of a firm (a partner receiving money/assets on retirement or dissolution) computed under a formula.
• Compulsory acquisition and enhanced compensation — the initial award is taxed in the year of receipt; later court-enhanced compensation is taxed separately in the year that enhancement is received, with cost taken as nil.
• Joint Development Agreements (JDAs)/specified agreements — for an individual/HUF, capital gain is charged in the year the completion certificate for the project is issued (mirroring the old Section 45(5A)), not on signing the agreement.

Who it applies to

Section 67 applies to every taxpayer — individuals, HUFs, firms, LLPs, companies, trusts, residents and non-residents — whenever a capital asset is transferred. It does not itself prescribe the tax rate; it only fixes chargeability and the year of taxability. The rates and the split between short-term (STCG) and long-term (LTCG) are dealt with in the computation and rate sections (Sections 72 for computation, and 196-198 for rates).

How it interacts with related sections

• Section 72 tells you how to compute the gain (full value of consideration minus cost of acquisition, cost of improvement and transfer expenses).
• Sections 82-89 give the exemptions/roll-overs (e.g., re-investment in a residential house, bonds), and Section 67 is expressly "subject to" them.
• Sections 196-198 fix the rates — broadly 20% STCG and 12.5% LTCG on listed equity/equity mutual funds/business-trust units, with the first ₹1,25,000 of such LTCG each year exempt.

Practical implications

• Timing matters. The gain is taxed in the year of transfer — not necessarily when you get the money. Instalment sale or delayed payment does not defer the tax (except in the specific JDA and enhanced-compensation cases above).
• Structuring won't help. Converting property to stock, contributing to a firm, or holding shares through a depository will still attract the charge.
• Losses. If the transfer results in a loss, it is a capital loss that can be set off/carried forward under the loss provisions — Section 67 charges only "profits or gains".