When you sell an investment for more than it cost you, the profit is a capital gain. How it is taxed comes down to how long you held it. Sell before the holding period for that asset and the profit is a short-term capital gain (STCG). Sell after it and the profit is a long-term capital gain (LTCG), which is normally taxed more lightly.
What is the holding period?
The holding period is the line between short-term and long-term, and it is not the same for every investment:
| Investment | Long-term after |
|---|---|
| Listed shares and equity-oriented mutual funds | 12 months |
| Other listed units, such as gold and silver ETFs | 12 months |
| Debt funds, and unlisted units such as gold, silver and international fund-of-funds | 24 months |
One exception cuts across that table. Units of a specified mutual fund, meaning a fund holding more than 65% in debt and money market instruments, bought on or after 1 April 2023 count as short-term however long you hold them.
How are short term capital gains taxed?
On listed shares and equity-oriented mutual funds sold within 12 months, STCG is taxed at 20%.
On everything else, the gain is added to your income and taxed at your income tax slab rate.
How are long term capital gains taxed?
On listed shares and equity-oriented mutual funds held past 12 months, the first ₹1.25 lakh of long-term gains in a financial year is exempt. Anything above that is taxed at 12.5%, with no indexation.
That exemption is an annual allowance across all your equity long-term gains. It is not per scheme, not per company, and unused headroom does not carry into the next year.
On debt, gold and international funds bought before 1 April 2023 and held past 24 months, LTCG is taxed at 12.5% without indexation.
What is added on top of these rates?
The figures above are base rates. Surcharge, where it applies to you, and Health and Education Cess at 4% on the aggregate of base tax and surcharge are charged over and above them. Your final liability also depends on your total income and the tax regime you have opted for, so treat these rates as the starting point rather than the whole calculation.
Have these rates changed recently?
Yes. The rates above apply to sales made on or after 23 July 2024. Before that date, equity STCG was 15%, equity LTCG was 10% above a ₹1 lakh exemption, and long-term gains on debt could be computed with indexation at 20%. An older return will follow those earlier rules.
Where do I see my own capital gains?
Rupeezy works this out for you. Your mutual fund gains, split by bucket and by short-term against long-term, are in the mutual fund capital gains report, which applies the holding-period, grandfathering and cut-off rules to each lot. For your stock and derivatives gains, see how to download tax P&L reports.
For how all of this lands on mutual funds specifically, including the fund-type buckets, hybrid and gold schemes, IDCW, SIPs, ELSS, indexation and grandfathering, see how does taxation work for my mutual fund investments.
These reports are statements to file from, not tax advice. Rates and exemption limits change with each Union Budget, so check the current position before you file, and take a tax professional's advice on your own position.