Capital Gains Tax on Shares & Mutual Funds (FY 2025-26)

Short-term vs long-term — it's about holding period

Capital gains are split into short-term (STCG) and long-term (LTCG) based on how long you held the asset. The dividing line depends on the asset type.

For listed equity shares and equity mutual funds, the line is 12 months: sell within 12 months and it's short-term; hold longer and it's long-term. For immovable property, the long-term line is 24 months.

Listed shares & equity mutual funds

For transfers on or after 23 July 2024, short-term capital gains (holding of 12 months or less) on listed equity and equity mutual funds are taxed at 20%.

Long-term capital gains (holding over 12 months) are taxed at 12.5%, but only on gains above an annual exemption of ₹1,25,000. In other words, the first ₹1.25 lakh of long-term equity gains in a financial year is tax-free, and the excess is taxed at 12.5%.

A worked example — equity LTCG

Suppose you invested in an equity mutual fund, held it for three years, and booked a long-term gain of ₹3,00,000 in a financial year with no other capital gains.

The first ₹1,25,000 is exempt. The taxable long-term gain is ₹3,00,000 − ₹1,25,000 = ₹1,75,000. Tax at 12.5% is about ₹21,875 (plus any applicable surcharge and cess). If instead you had sold within 12 months, the whole ₹3,00,000 would be short-term and taxed at 20%.

Debt mutual funds — the big change

Debt mutual funds bought on or after 1 April 2023 no longer get the earlier long-term capital gains benefit. Gains are added to your income and taxed at your slab rate, regardless of how long you hold them — so there is no special 12.5% LTCG rate and no indexation for these newer purchases.

This makes debt funds broadly similar to fixed deposits on tax, though they can still differ on liquidity and pre-tax returns. Units bought before 1 April 2023 may follow different transitional rules, so check the purchase date.

Property (immovable assets)

For land or buildings held more than 24 months, gains are long-term. For transfers on or after 23 July 2024, LTCG on property is taxed at 12.5% without indexation.

There is a grandfathering choice for property acquired before 23 July 2024: you may compute tax as the lower of 12.5% without indexation, or 20% with indexation. This choice can meaningfully reduce tax on older property, so it's worth calculating both ways.

Setting off and carrying forward losses

• Capital losses can be set off against capital gains under set rules — short-term losses against short-term or long-term gains; long-term losses only against long-term gains.
• Unused capital losses can generally be carried forward for up to eight assessment years, provided you file your return on time.
• Booking a loss to offset gains ("tax-loss harvesting") is legitimate, but never let the tax tail wag the investment dog.

Key takeaways

• Listed equity/equity MF: STCG 20% (≤12 months); LTCG 12.5% on gains above ₹1.25 lakh a year (>12 months).
• Debt MFs bought on/after 1 April 2023 are taxed at your slab rate with no LTCG benefit.
• Property held over 24 months: LTCG 12.5% without indexation, with a grandfathering option for pre-23-July-2024 property.
• Surcharge and 4% health & education cess may apply on top of these base rates.
• These are estimates for FY 2025-26; verify your exact liability with the Income Tax Department or a qualified professional. *Grandfathering choice applies to pre-23-July-2024 property.

Estimate your capital gains tax

Use our capital gains calculator to enter your purchase and sale details and get an estimate of the tax on your shares, mutual funds or property.