Capital Gains Tax on Stocks and Mutual Funds in India: FY 2026-27 Guide with Examples
Equity gains are taxed at 20% or 12.5%, debt-fund gains at your slab rate, and the ₹1.25 lakh yearly exemption is worth using every year. Here is the full picture for the tax year 2026-27, with worked examples.
By Pradeep RawalNISM-certified (Series XV & VIII) · Updated · First published 6 Sep 2026 · 6 min read
Update 8 Oct 2026: Reviewed after Budget 2026, which kept capital gains rates unchanged, and for the Income-tax Act, 2025 that applies from 1 April 2026. Added worked examples and the 2026 STT change for F&O traders.
Key takeaways
- Listed equity shares and equity mutual funds: gains within 12 months are taxed at 20%; after 12 months at 12.5% on total long-term gains above ₹1.25 lakh in the year.
- Debt mutual fund units bought on or after 1 April 2023 are taxed at your slab rate however long you hold them.
- Most other assets (listed bonds and gold ETFs after 12 months; property, unlisted shares, physical gold and gold funds after 24 months) are taxed at 12.5% long-term, without indexation.
- Short-term losses can be set off against any capital gain; long-term losses only against long-term gains. Unused losses carry forward for 8 years if you file on time.
- Harvesting ₹1.25 lakh of long-term equity gains every year (sell and buy back) can save up to ₹16,250 of tax a year at no cost other than brokerage.
You pay capital gains tax when you sell an investment for more than you paid. How much depends on two things: what you sold and how long you held it. The rules were simplified in July 2024, when most long-term rates moved to 12.5% and indexation was largely removed. Budget 2026 left the rates unchanged for the tax year 2026-27, the first year under the new Income-tax Act, 2025.
Rates at a glance (FY 2026-27)
| What you sell | Long-term if held more than | Short-term rate | Long-term rate |
|---|---|---|---|
| Listed equity shares, equity mutual funds (STT paid) | 12 months | 20% | 12.5% on gains above ₹1.25 lakh a year |
| Debt mutual funds bought on or after 1 April 2023 | Not applicable | Slab rate | Slab rate (always treated as short-term) |
| Debt mutual funds bought before 1 April 2023 | 24 months | Slab rate | 12.5% without indexation |
| Listed bonds and debentures, gold ETFs, other listed securities | 12 months | Slab rate | 12.5% |
| Gold mutual funds (fund of funds), international FoFs | 24 months | Slab rate | 12.5% |
| Physical gold, unlisted shares | 24 months | Slab rate | 12.5% |
| Land and buildings | 24 months | Slab rate | 12.5% (or 20% with indexation if bought before 23 July 2024, resident individuals/HUFs) |
Since 1 April 2025, a "specified mutual fund" taxed at slab rates is one that invests more than 65% in debt and money-market instruments (or a fund of funds investing at least 65% in such funds). Gold funds and international fund of funds no longer fall in this category, so units held over 24 months get the 12.5% long-term rate. Equity-oriented funds (at least 65% in Indian equity) follow the equity rules.
How the equity exemption works
The first ₹1.25 lakh of net long-term gains on listed equity and equity mutual funds in a financial year is tax-free. It is one combined limit across all your holdings and brokers, not per fund. Short-term gains get no exemption.
Example 1: long-term gain on an equity fund
Ravi redeems equity fund units bought 20 months ago, with a long-term gain of ₹3,00,000. He has no other capital gains this year.
Tax = ₹1,75,000 × 12.5% = ₹21,875
With 4% cess = ₹22,750
Example 2: short-term gain on shares
Meera sells shares bought eight months ago at a gain of ₹80,000.
Example 3: debt fund
Anil, in the 30% slab, redeems debt fund units bought in 2024 with a gain of ₹1,00,000. The gain is added to his income and taxed at his slab rate, however long he held the units.
Setting off losses
Losses reduce your tax, but only against the right kind of gain:
- Short-term capital loss can be set off against both short-term and long-term gains.
- Long-term capital loss can be set off only against long-term gains.
- Capital losses cannot be set off against salary or other income.
- Unabsorbed capital losses can be carried forward for 8 years, but only if you file your return by the due date.
Example 4: gains and losses together
In one year Priya has short-term gains of ₹1,50,000 and short-term losses of ₹60,000, plus long-term gains of ₹2,60,000 and long-term losses of ₹40,000, all on listed equity.
| Step | Amount |
|---|---|
| Net short-term gain (₹1,50,000 − ₹60,000) | ₹90,000 |
| Net long-term gain (₹2,60,000 − ₹40,000) | ₹2,20,000 |
| Long-term gain above ₹1.25 lakh | ₹95,000 |
| Tax: 20% on short-term + 12.5% on taxable long-term, with cess | ₹31,070 |
Had her losses been long-term instead of short-term, she could not have used them against the short-term gain, and her tax would have been higher. The type of loss matters.
Tax-gain harvesting: using the ₹1.25 lakh every year
The exemption is use-it-or-lose-it: unused exemption does not carry forward. If you hold equity funds with long-term gains, you can sell units with up to ₹1.25 lakh of gains each year and buy them back immediately. The gain is tax-free, and your cost for future tax purposes rises to the new purchase price. When you eventually sell, your taxable gain is smaller.
Each year this saves up to ₹16,250 of future tax (12.5% of ₹1.25 lakh, plus cess). Over a decade that is more than ₹1.6 lakh for a few minutes of work a year.
- Check the exit load first; most equity funds charge none after 12 months.
- Buying back starts a new 12-month holding period for those units.
- For shares, brokerage and STT apply on both the sale and the purchase.
The mirror strategy, tax-loss harvesting, sells investments showing a loss to book it against gains, and buys back the same or a similar investment. India has no specific rule against buying back the same security, but the transaction must be genuine.
F&O and intraday trading are not capital gains
Profits from futures and options are business income, taxed at your slab rate, with expenses such as brokerage and internet costs deductible. Intraday equity trading is speculative business income, and speculative losses can be set off only against speculative gains. A tax audit may be needed depending on turnover and profit.
Budget 2026 also raised the securities transaction tax (STT) on derivatives from 1 April 2026: on futures from 0.02% to 0.05% of the sale value, and on options from 0.1% to 0.15% of the premium on the sell side. For active traders this is a meaningful extra cost. See our analysis of why most F&O traders lose money.
Practical checklist before you sell
- Check the purchase date of the units or shares you will sell (FIFO for mutual funds).
- Know whether the gain is short- or long-term, and which rate applies.
- Add up long-term equity gains already booked this financial year against the ₹1.25 lakh limit.
- Look for losses you could book in the same year to offset gains.
- Check exit loads, and for ELSS, the 3-year lock-in.
- Keep your capital gains statements (from CAMS/KFintech for funds and from your broker for shares) for the return.
The bottom line
For most investors the rules are now simple: equity held over a year is taxed at 12.5% above ₹1.25 lakh of gains, equity held for less is taxed at 20%, and newer debt-fund gains are taxed like interest. The biggest controllable savings come from holding equity for more than a year, using the exemption every year, and setting off losses correctly.
Frequently asked questions
Does the ₹12 lakh rebate in the new regime cover capital gains?
No. The Section 87A rebate does not apply to tax on equity gains taxed at the special rates of 20% and 12.5%. However, if your other income is below the basic exemption limit, a resident individual can use the unused part of the limit against these gains.
How is the holding period counted for SIPs?
Each SIP instalment is a separate purchase with its own date. When you redeem, units are treated as sold on a first-in, first-out basis, so the oldest units go first. Some of a redemption can be long-term and some short-term.
What about shares bought before 2018?
For listed equity bought before 1 February 2018, the cost for long-term gains is the higher of the actual cost and the price on 31 January 2018 (but not more than the sale price). This "grandfathering" protects gains made before long-term equity gains became taxable.
Are F&O profits capital gains?
No. Futures and options trading is treated as non-speculative business income and taxed at slab rates, with expenses deductible and audit rules depending on turnover. Intraday equity trading is speculative business income.
Is indexation still available?
Generally no. Since 23 July 2024, long-term gains are taxed at 12.5% without indexation. The main exception is land or buildings bought before that date by resident individuals and HUFs, who can choose the lower of 12.5% without indexation or 20% with indexation.
Sources and further reading
About the author
Pradeep Rawal is an NISM-certified market professional (Series XV Research Analyst and Series VIII Equity Derivatives) with more than 15 years in personal finance and stock market education. He founded Financial Nirvana, wrote the book From Cubicles to Wealth Creation, teaches money and investing workshops, builds quantitative tools and backtesting systems, and writes about personal finance with the working shown.
This article is for education only and is not investment, tax or legal advice. Tax rules quoted are for the tax year 2026-27 (FY 2026-27) unless stated, and can change; check the latest position with the Income Tax Department or a qualified professional before acting. Examples use assumed returns that are not guaranteed.
