Short-term or long-term?
How your gain is taxed depends on the type of asset and how long you held it. The rates below apply to sales on or after 23 July 2024 and continue for tax year 2026-27.
| Asset | Long-term if held | Short-term tax | Long-term tax |
|---|---|---|---|
| Listed shares, equity mutual funds | More than 12 months | 20% | 12.5% on gains above ₹1.25 lakh a year |
| Debt mutual funds bought on or after 1 April 2023 | Never | Your slab rate | (always short-term) |
| Gold, gold ETFs and gold funds, international funds | More than 12–24 months | Slab rate | 12.5%, no indexation |
| Property, unlisted shares | More than 24 months | Slab rate | 12.5%, no indexation* |
*For land or buildings bought before 23 July 2024, resident individuals can choose between 12.5% without indexation and 20% with indexation, whichever gives lower tax. Gold ETFs and funds became long-term after 12 months from April 2025; physical gold needs 24 months. A 4% cess is added to all rates.
Worked example
Gain = sale value − purchase cost (− transfer expenses)
Tax = (gain − exemption) × rate × 1.04Ways to reduce capital gains tax legally
- Use the ₹1.25 lakh exemption every year: sell equity units with gains up to that amount and buy them back ("tax harvesting"), resetting your purchase cost.
- Hold equity for more than a year to move from 20% to 12.5%.
- Book losses: short-term losses offset both short and long-term gains; long-term losses offset only long-term gains. Unused losses carry forward for 8 years if you file on time.
- Reinvest property gains: long-term gains on a house can be exempt if reinvested in another residential house or specified bonds, within limits.
The rebate that makes income up to ₹12 lakh tax-free does not apply to capital gains taxed at these special rates. Include your total picture on the income tax calculator.
Frequently asked questions
Is there tax on SIP redemptions?
Yes. Each SIP instalment is treated separately and is long-term only after it has been held for more than 12 months (for equity funds). Units are sold first-in, first-out.
Do I pay tax if I reinvest the money?
Yes, for shares and mutual funds. Selling triggers tax even if you reinvest. Only specific reinvestments of property gains qualify for exemption.
Is the ₹1.25 lakh exemption per fund or per year?
Per person, per year, across all listed equity shares and equity-oriented funds combined.
Official references: Income Tax Department