Capital gains tax on shares and mutual funds in India
How long you held something decides which rate applies. Here is the whole picture on one page.
Scope. This guide reflects the rules introduced in the July 2024 Union Budget, which apply to sales on or after 23 July 2024. Tax law changes often; always confirm the position for your financial year with a chartered accountant. This is general information, not tax advice.
Short-term vs long-term
A capital gain is the sale price minus what you paid (your cost of acquisition), less transfer expenses such as brokerage. Whether it is short-term (STCG) or long-term (LTCG) depends on how long you held the asset:
| Asset | Long-term if held more than |
|---|---|
| Listed shares, equity mutual funds, equity ETFs, listed bonds, REITs/InvITs | 12 months |
| Unlisted shares (including US stocks), gold, property and most other assets | 24 months |
| Debt mutual funds bought on or after 1 April 2023 | Always taxed at your slab rate, whatever the holding period |
Current rates
| Asset | STCG | LTCG |
|---|---|---|
| Listed equity shares and equity-oriented funds (STT paid) | 20% | 12.5% on gains above ₹1.25 lakh a year |
| Listed bonds and other listed securities | Slab rate | 12.5%, no indexation |
| US and other foreign stocks | Slab rate | 12.5%, no indexation |
| Debt funds bought on or after 1 April 2023 | Slab rate in all cases | |
Add the applicable surcharge and 4% health and education cess on top. The ₹1.25 lakh LTCG exemption is per person per financial year, and applies only to listed equity and equity-oriented funds.
Worked example: equity shares
You bought 100 shares at ₹1,000 in June 2024 and sold them at ₹1,600 in August 2025. That is held for over 12 months, so it is long-term.
- Gain: 100 × (1,600 - 1,000) = ₹60,000
- If this is your only equity LTCG for the year, it is under ₹1.25 lakh, so no tax is due on it.
- Had the gain been ₹2,00,000, the taxable part would be ₹75,000, and tax at 12.5% would be ₹9,375 plus cess.
Sell the same shares after 8 months instead, and the entire ₹60,000 is STCG at 20%: ₹12,000 plus cess. Holding period matters.
Which lots get sold first?
For shares held in demat form, the tax law treats the earliest units bought as the first sold (first-in, first-out). So if you bought in three tranches and sell part of your holding, the gain is calculated on the oldest lots first. That can make part of a sale long-term and part short-term.
Vitta-Kosh shows realised P&L on an average-cost basis, which is what most broker screens show. Its tax estimate uses the buy lots you record, first in, first out. For filing, use your broker's tax P&L statement, which applies FIFO lot by lot to every trade.
Grandfathering for shares bought before February 2018
For listed equity bought on or before 31 January 2018, the cost used for LTCG is the higher of what you paid and the fair market value on 31 January 2018 (capped at the sale price). This protects gains made before LTCG on equity was reintroduced.
US stocks
Shares listed abroad are treated as unlisted in India. They become long-term after 24 months and are then taxed at 12.5%; before that, gains are added to your income and taxed at your slab rate. Gains are computed in rupees using the exchange rates prescribed by the rules, so currency movement is part of your gain or loss. Dividends from US stocks usually have US tax withheld; you may be able to claim credit for it in India under the India-US tax treaty by filing Form 67.
Dividends
Dividends are not capital gains. They are added to your income and taxed at your slab rate.
How to keep this simple
- Keep a record of every buy and sell, with dates. A tracker with a transaction ledger helps.
- Before selling near the 12-month mark, check how many days are left; waiting can drop the rate from 20% to 12.5%.
- Use your yearly ₹1.25 lakh exemption deliberately. Some investors book gains up to this limit each year.
- Review losses before 31 March. See our tax-loss harvesting guide.
The Tax tab in Vitta-Kosh sorts every holding by holding period.