Capital gains tax on shares and mutual funds in India

By Smit Bhansali · Updated 13 October 2026

When you sell shares or mutual fund units for more than you paid, the profit is a capital gain. How it's taxed depends on what you sold, how long you held it and when you sold it. This guide covers listed shares and equity mutual funds, with notes on debt funds. It describes the rules in force in October 2026. Since 1 April 2026 they're in the Income-tax Act, 2025, which replaced the Income-tax Act, 1961 with the same rates; sales before that date fall under the 1961 Act. A Budget can change them, so check before you file.

Short-term or long-term?

For listed shares and equity-oriented mutual funds (funds that keep at least 65% in Indian shares), a gain is long-term if you held the shares or units for more than 12 months, and short-term otherwise.

If you bought the same stock or fund several times, the units you bought first count as sold first (first in, first out). So one sale can include both long-term and short-term gains.

The rates

For sales on or after 23 July 2024, on exchange trades and equity fund redemptions:

Short-term gains (STCG): 20% (Section 196 of the 2025 Act; Section 111A of the 1961 Act for sales before 1 April 2026).
Long-term gains (LTCG): 12.5% on the part above ₹1.25 lakh in a financial year (Section 198 of the 2025 Act; Section 112A of the 1961 Act before 1 April 2026).

Before 23 July 2024 the rates were 15% and 10%, and up to FY 2023-24 the yearly exemption was ₹1 lakh. Surcharge and the 4% health and education cess come on top, and there's no indexation.

The ₹1.25 lakh exemption

The first ₹1.25 lakh of long-term gains on shares and equity funds in each financial year is tax-free. It applies to all such gains together, not per stock or per fund.

Example: ₹2,00,000 of long-term gains in a year → ₹75,000 is taxable → tax of ₹9,375 (12.5%), plus cess.

Some investors sell and buy back part of their holdings each year to use the exemption, which raises their cost for the future. The tax harvesting calculator shows the numbers for your case.

Bought before February 2018? Grandfathering

Long-term gains on listed shares and equity funds became taxable from 1 April 2018, but gains made up to 31 January 2018 are protected (“grandfathered”). For shares and equity fund units bought before 1 February 2018, your cost is taken as the higher of what you actually paid and the price on 31 January 2018, but never more than your sale price.

Losses

A short-term loss can be set off against short-term or long-term gains.
A long-term loss can only be set off against long-term gains.
Losses you can't use this year can be carried forward for eight years, as long as you file your return on time.

Intraday trades aren't capital gains

Buying and selling the same shares on the same day is intraday trading. Its profit or loss is treated as speculative business income, taxed at your slab rate, and kept apart from capital gains.

Debt funds and other funds

Debt funds bought on or after 1 April 2023: every gain is taxed at your slab rate, however long you held the units (Section 76 of the 2025 Act; Section 50AA of the 1961 Act before 1 April 2026).
Debt funds bought earlier, and other non-equity funds such as gold or international funds, have their own holding periods (24 months for most fund units, 12 for listed ones such as ETFs) and rates. Check these with a chartered accountant.

How Quantfolio works it out

From your trades and mutual fund statement, Quantfolio matches every sale first-in-first-out, splits short-term and long-term gains by financial year, applies grandfathering, keeps intraday trades separate and shows how much of this year's ₹1.25 lakh exemption is left. Gains on debt and other non-equity funds are shown separately, outside the equity estimate. Try a single sale in the free capital gains calculator.

This is general information, not tax advice. Your own return may involve other income, surcharge and losses; check it with a chartered accountant before you file.