Capital gains tax on shares and mutual funds in India changed significantly from Budget 2024 and continues under the Income Tax Act 2025. Short-term capital gains (STCG) on listed equity are taxed at 20%, while long-term capital gains (LTCG) above ₹1.25 lakh are taxed at 12.5% — with no indexation benefit. This guide covers all rates, exemptions, and how to report capital gains in your ITR.
Capital Gains Tax Rates on Shares & Mutual Funds (FY 2025-26)
| Asset Type | Holding Period | STCG Tax Rate | LTCG Tax Rate | Exemption |
|---|---|---|---|---|
| Listed equity shares | STCG: <12 months | LTCG: ₹12 months | 20% | 12.5% | ₹1.25 lakh/year LTCG exempt |
| Equity mutual funds | STCG: <12 months | LTCG: ₹12 months | 20% | 12.5% | ₹1.25 lakh/year LTCG exempt |
| Debt mutual funds (post-Apr 2023) | No LTCG benefit | Slab rates | Slab rates | None |
| Unlisted shares | STCG: <24 months | LTCG: ₹24 months | Slab rates | 12.5% (no indexation) | None |
| Real estate / property | STCG: <24 months | LTCG: ₹24 months | Slab rates | 12.5% (no indexation) | Sec 54/54F exemption |
LTCG Exemption Limit: ₹1.25 Lakh Per Year
Long-term capital gains on listed equity shares and equity mutual funds are exempt up to ₹1.25 lakh per financial year. This exemption was increased from ₹1 lakh in Budget 2024. Gains above ₹1.25 lakh are taxed at 12.5% without indexation benefit. You can use this exemption strategically — sell and rebuy equity to “harvest” gains each year and reset your cost basis.
How to Report Capital Gains in ITR
Capital gains must be reported in ITR-2 (for individuals with capital gains but no business income) or ITR-3 (for those with business income). If you only have salary income and short-term/long-term capital gains from equity, use ITR-2. The Schedule CG in ITR-2 has separate sections for STCG under Section 111A and LTCG under Section 112A.
LTCG Tax Calculation Example
| Description | Amount |
|---|---|
| Total LTCG from equity sales (FY 2025-26) | ₹3,00,000 |
| Less: Exemption limit | ₹1,25,000 |
| Taxable LTCG | ₹1,75,000 |
| LTCG Tax @ 12.5% | ₹21,875 |
| Add: Surcharge (if applicable) | Nil (income below ₹50L) |
| Add: Health & Education Cess @ 4% | ₹875 |
| Total LTCG Tax Payable | ₹22,750 |
Frequently Asked Questions
Q: Is LTCG on mutual funds taxed the same as equity shares?
A: Yes. Equity mutual funds (where equity allocation is 65% or more) are treated same as listed equity shares — LTCG at 12.5% above ₹1.25 lakh, STCG at 20%.
Q: Is there any indexation benefit on equity LTCG?
A: No. Indexation benefit on equity shares and equity mutual funds was removed. For real estate sold after July 23, 2024, you can choose between 12.5% without indexation or 20% with indexation (for properties purchased before July 23, 2024).
Q: Do I need to pay advance tax on capital gains?
A: Yes. If your estimated tax liability (including capital gains tax) exceeds ₹10,000 for the year, you must pay advance tax. Capital gains that arise before March 15 must be included in the March 15 advance tax instalment.