Capital Gains Tax on Shares & Mutual Funds in India (2026)
If you sold listed shares or redeemed mutual fund units in FY 2026-27, understanding capital gains tax on shares and funds is essential before you file your ITR. The rules were significantly updated by the Union Budget 2024, and those changes continue to apply in FY 2026-27.
Types of Capital Gains on Shares and Equity Mutual Funds
Capital gains are classified based on how long you held the asset before selling it.
Short-Term Capital Gains (STCG)
If you sell listed equity shares or equity-oriented mutual funds within 12 months of purchase, the profit is treated as Short-Term Capital Gain. Under Section 111A of the Income Tax Act, STCG on these assets is taxed at a flat rate of 20% (increased from 15% by Budget 2024), plus applicable surcharge and cess.
Long-Term Capital Gains (LTCG)
Gains arising after holding listed equity shares or equity mutual funds for more than 12 months are Long-Term Capital Gains, taxed under Section 112A. The key points are:
- The first ₹1.25 lakh of LTCG in a financial year is exempt from tax (revised upward by Budget 2024 from the earlier ₹1 lakh).
- Gains above ₹1.25 lakh are taxed at 12.5% (increased from 10% by Budget 2024), without the benefit of indexation.
- This applies only where Securities Transaction Tax (STT) has been paid on both purchase and sale.
Capital Gains Tax on Debt Mutual Funds
For debt mutual funds purchased on or after 1 April 2023, the indexation benefit and the earlier flat 20% LTCG rate no longer apply. Gains from such funds — regardless of holding period — are now added to your total income and taxed at your applicable slab rate. This rule remains in force for FY 2026-27.
Tax Rates at a Glance
| Asset Type | Holding Period | Tax Rate (FY 2026-27) |
|---|---|---|
| Listed Equity Shares / Equity MFs | Up to 12 months (STCG) | 20% + surcharge + 4% cess |
| Listed Equity Shares / Equity MFs | More than 12 months (LTCG) | 12.5% on gains above ₹1.25 lakh + surcharge + 4% cess |
| Debt Mutual Funds (purchased ≥ Apr 2023) | Any period | As per income tax slab |
| Unlisted Shares | Up to 24 months (STCG) | As per income tax slab |
| Unlisted Shares | More than 24 months (LTCG) | 12.5% without indexation |
Grandfathering Rule for LTCG on Equity
For equity shares and equity mutual funds purchased before 31 January 2018, gains accrued up to that date are exempt under the grandfathering provision. The cost of acquisition for such assets is deemed to be the higher of the actual purchase price or the Fair Market Value (FMV) as on 31 January 2018, subject to the actual sale price not being lower. This ensures older unrealised gains are not taxed retrospectively.
Setting Off and Carrying Forward Capital Losses
Capital losses from shares and mutual funds can be used to reduce your tax burden strategically:
- STCG losses can be set off against both STCG and LTCG from any capital asset.
- LTCG losses can only be set off against LTCG.
- Unabsorbed capital losses can be carried forward for up to 8 assessment years, provided the ITR is filed on time.
STT and Its Role
Securities Transaction Tax (STT) is levied at the time of buying and selling equity shares or equity mutual fund units on recognised stock exchanges. The concessional STCG rate of 20% and LTCG rate of 12.5% under Sections 111A and 112A are available only if STT has been paid. Off-market transactions without STT are taxed at slab rates for STCG and at 12.5% without indexation for LTCG on listed securities held beyond 12 months.
How to Calculate Your Capital Gains Tax
Calculating capital gains manually — especially when you have multiple transactions across the year — can be error-prone. Use KyaTax's Tax Calculator to quickly estimate your STCG and LTCG liability, factor in the ₹1.25 lakh exemption, and plan your investments accordingly.
Advance Tax on Capital Gains
If your estimated capital gains tax liability for the year exceeds ₹10,000, you are required to pay advance tax. Capital gains realised after 15 March can be paid in full by 31 March of the same financial year without attracting interest under Section 234C, provided other advance tax instalments were paid on time.
Try the related KyaTax tool — fast, affordable and self-service.
Open Tax Calculator →Frequently asked questions
What is the LTCG tax rate on listed shares for FY 2026-27?
Long-term capital gains on listed equity shares held for more than 12 months are taxed at 12.5% under Section 112A, with the first ₹1.25 lakh of gains in a financial year being exempt. This rate applies where STT has been paid on the transaction.
Are gains from debt mutual funds still taxed differently from equity funds?
Yes. For debt mutual funds purchased on or after 1 April 2023, all gains — regardless of holding period — are added to your taxable income and taxed at your applicable income tax slab rate. The earlier benefit of 20% tax with indexation after 3 years has been removed.
Can I set off a short-term capital loss on shares against long-term capital gains?
Yes. A short-term capital loss (STCL) can be set off against both short-term and long-term capital gains in the same year. If it cannot be fully set off, the remaining loss can be carried forward for up to 8 assessment years, but only if the ITR is filed within the due date.
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