Capital Gains Tax on Shares & Mutual Funds FY 2025-26 | STCG & LTCG Rates

Capital gains tax on shares and mutual funds FY 2025-26 guide

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 — Shares & Mutual Funds (FY 2025-26) SHORT-TERM CAPITAL GAINS Holding period: Less than 12 months 20% Listed equity shares & equity MF Section 111A (increased from 15% in Budget 2024) Debt MF: Slab rates (no STCG benefit) No exemption available for STCG LONG-TERM CAPITAL GAINS Holding period: 12 months or more 12.5% Listed equity shares & equity MF Section 112A (increased from 10% in Budget 2024) Exemption: First ₹1.25 lakh LTCG tax-free No indexation benefit on equity incometaxreturnindia.com | Rates applicable from FY 2024-25 onwards

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

Asset TypeHolding PeriodSTCG Tax RateLTCG Tax RateExemption
Listed equity sharesSTCG: <12 months | LTCG: ₹12 months20%12.5%₹1.25 lakh/year LTCG exempt
Equity mutual fundsSTCG: <12 months | LTCG: ₹12 months20%12.5%₹1.25 lakh/year LTCG exempt
Debt mutual funds (post-Apr 2023)No LTCG benefitSlab ratesSlab ratesNone
Unlisted sharesSTCG: <24 months | LTCG: ₹24 monthsSlab rates12.5% (no indexation)None
Real estate / propertySTCG: <24 months | LTCG: ₹24 monthsSlab rates12.5% (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

DescriptionAmount
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.

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