Capital Gains Tax in India: Complete Guide for Stock & Mutual Fund Investors
Budget 2024 brought the most significant changes to capital gains taxation in India in a decade. For investors in stocks, mutual funds, and property, these changes mean higher taxes on gains but also a higher LTCG exemption. This guide breaks down every rule you need for your FY 2025-26 filings.
What Changed in Budget 2024 (Effective FY 2024-25 Onwards)
| Before Budget 2024 | After Budget 2024 | |
|---|---|---|
| LTCG on equity/MF | 10% above ₹1L exemption | 12.5% above ₹1.25L exemption |
| STCG on equity/MF | 15% | 20% |
| LTCG on other assets (property, gold) | 20% with indexation | 12.5% without indexation |
| STCG on other assets | Slab rate | Slab rate (unchanged) |
| Holding period for LTCG (equity) | 12 months | 12 months (unchanged) |
| Holding period for LTCG (property/gold) | 24 months | 24 months (unchanged) |
Short-Term Capital Gains (STCG) — 20%
What qualifies as STCG:
- Listed equity shares / equity mutual funds held < 12 months
- Any other capital asset (property, gold, debt MF) held < 24 months (or 36 months for unlisted shares)
Example: You bought 100 shares of Reliance at ₹2,800 in November 2025 and sold at ₹3,100 in February 2026.
- Gain: ₹30,000
- STCG tax: 20% × ₹30,000 = ₹6,000 (+4% cess = ₹6,240)
Long-Term Capital Gains (LTCG) — 12.5%
What qualifies as LTCG:
- Listed equity shares / equity mutual funds held ≥ 12 months
- Property/gold/debt MF held ≥ 24 months
The ₹1.25 Lakh LTCG Exemption
The first ₹1.25 lakh of LTCG on equity and equity-oriented mutual funds is exempt every financial year. This exemption is per person, per year — not per transaction.Example: You sold Nifty ETF units with a long-term gain of ₹1,80,000 in FY 2025-26.
- Exempt: ₹1,25,000
- Taxable: ₹55,000
- LTCG tax: 12.5% × ₹55,000 = ₹6,875 (+4% cess = ₹7,150)
Indexation Removed — Big Change for Property Sellers
Under the old rules, property sellers could inflate the purchase cost using the Cost Inflation Index (CII) to reduce their taxable gain. This "indexation benefit" significantly reduced tax on long-term property sales.From FY 2024-25 onwards, indexation is removed for all assets, with LTCG taxed at a flat 12.5%.
Who is affected most: Long-term property holders (10+ years) who would previously have benefited significantly from CII-adjusted cost.
Exception: Properties purchased before July 23, 2024 can opt for the old regime (20% with indexation) if it results in lower tax. This one-time option is available for FY 2024-25.
Mutual Fund Capital Gains — Category by Category
| Fund Type | Holding for LTCG | LTCG Rate | STCG Rate |
|---|---|---|---|
| Equity MF (≥65% equity) | 12 months | 12.5% (above ₹1.25L) | 20% |
| Hybrid equity-oriented MF | 12 months | 12.5% | 20% |
| Debt MF | 24 months | 12.5% | Slab rate |
| Gold MF | 24 months | 12.5% | Slab rate |
| International MF | 24 months | 12.5% | Slab rate |
| ELSS (after 3-year lock-in) | 12 months | 12.5% (above ₹1.25L) | N/A (locked) |
LTCG Tax Optimisation Strategies
1. Tax-Loss Harvesting
If you hold investments with unrealised losses, sell them to book the loss and immediately re-buy (or buy a similar fund). The loss offsets your gains.Rules:
- STCL (short-term capital loss) can offset both STCG and LTCG
- LTCL (long-term capital loss) can only offset LTCG
- Losses can be carried forward for 8 years
2. Use the ₹1.25L Annual LTCG Exemption
Strategically realise up to ₹1.25L of LTCG every year tax-free. This is especially effective for:- Rebalancing equity portfolios
- Switching between funds
- Partial profit booking
3. Grandfathering Clause for Pre-2018 Gains
For equity/equity MF purchased before January 31, 2018, the purchase cost is "grandfathered" at the higher of:- Actual purchase cost, or
- The market price on January 31, 2018
Crypto and Digital Asset Tax — 30% Flat
Tax rate: 30% flat on all VDA (Virtual Digital Asset) gains — no deductions except cost of acquisition.
What counts as VDA:
- Bitcoin, Ethereum, and all cryptocurrencies
- NFTs
- Stablecoins (USDT, USDC)
- DeFi tokens
- No set-off: Crypto losses cannot be set off against salary, property, or other capital gains
- TDS: 1% deducted by exchanges on transactions above ₹50,000/year (₹10,000 for specified persons)
- Carry-forward: Under the new tax act, VDA losses can be carried forward 8 years to offset future VDA gains only
- Bought 1 ETH at ₹2,00,000 in April 2025
- Sold at ₹3,50,000 in January 2026
- Gain: ₹1,50,000
- Tax: 30% × ₹1,50,000 = ₹45,000 (+4% cess = ₹46,800)
How to Calculate Capital Gains — Step by Step
- List all your capital asset transactions for the year (shares, MFs, property, crypto)
- Classify each as STCG or LTCG based on holding period
- Calculate gain: Sale Price − (Purchase Price + Brokerage + Transfer Expenses)
- For equity LTCG: Apply ₹1.25L exemption
- Apply respective rates: 20% STCG, 12.5% LTCG for equity; slab rate for STCG on other assets
- Set off losses against gains of the appropriate type
- Report in ITR-2 or ITR-3 (capital gains cannot be reported in ITR-1 or ITR-4)
Common Mistakes to Avoid
- Not reporting small STCG — any gain, even ₹500, must be reported
- Using ITR-1 when you have capital gains — automatically disqualifies ITR-1
- Missing TDS credit for crypto — check your broker's tax report for 194S TDS
- Ignoring dividend income — dividends from shares/MFs are taxable at slab rate since 2020
- Not downloading broker's Capital Gains Report — do this before March 31 while it's fresh
Documents You Need for Capital Gains Filing
- Broker's Capital Gains / Tax P&L Report (Zerodha, Groww, Angel: available in the app)
- Mutual Fund CAS (Consolidated Account Statement) from CAMS/KFintech
- Property sale deed and original purchase deed (for property sales)
- Form 26AS — verify TDS credits for crypto transactions
Conclusion
The 2024 capital gains tax changes simplified rates (12.5% LTCG, 20% STCG) but removed the indexation benefit that made long-term property sales more attractive. For equity investors, the higher ₹1.25L exemption helps offset the rate increase. The key is to plan tax harvesting before March 31 each year.
Calculate your capital gains tax → Capital Gains Calculator