Capital Gains Tax on Mutual Funds and Shares — FY 2026-27

These rules apply to listed shares and equity-oriented funds (those with at least 65% in Indian equity) where securities transaction tax is paid.

• Long-term (held over 12 months): 12.5% on total long-term gains above ₹1.25 lakh in the financial year. The ₹1.25 lakh exemption is per person per year, across all your equity holdings.
• Short-term (held 12 months or less): 20% on the whole gain, with no exemption.
• Old investments: for equity bought before 1 February 2018, the cost can be taken as the higher of actual cost and the market price on 31 January 2018 (capped at the sale price). This grandfathering still applies.

These rates have applied since 23 July 2024, when Budget 2024 raised them from 10% and 15% and increased the exemption from ₹1 lakh.

Long-term: a SIP redeemed after several years

You redeem equity fund units that cost ₹5 lakh for ₹8 lakh, all held over 12 months. Gain: ₹3 lakh. Taxable after the ₹1.25 lakh exemption: ₹1.75 lakh. Tax at 12.5%: ₹21,875, plus 4% cess = about ₹22,750.

Short-term: shares sold within a year

Shares bought for ₹4 lakh are sold for ₹5 lakh after eight months. Gain: ₹1 lakh. Tax at 20%: ₹20,000, plus cess = ₹20,800.

Debt fund bought in 2025

A ₹50,000 gain on a debt fund bought after 1 April 2023 is added to income. In the 30% slab that costs ₹15,000 plus cess, whether you held it for six months or six years.

Check a sale of your own in the Equity Capital Gains calculator.

• Debt funds bought on or after 1 April 2023: taxed at slab rate regardless of holding period, with no indexation. This put them on a similar tax footing to fixed deposits — see FD vs RD vs PPF.
• Debt funds bought before 1 April 2023: if held more than 24 months, long-term gains are taxed at 12.5% without indexation for sales after 23 July 2024; otherwise at slab rate.
• Hybrid, gold, international and fund-of-funds: treatment depends on the fund's equity and debt mix and its structure. Check the scheme's tax note before selling.

A note on law: from 1 April 2026 the Income-tax Act, 2025 renumbers the familiar sections — 111A (short-term equity), 112A (long-term equity) and 50AA (specified debt funds). The rates above carry over; returns and forms may show new section numbers.

• Special rates, not slabs: equity gains are taxed at 12.5% and 20% whichever regime you choose.
• 87A rebate: in the new regime, the rebate that makes tax nil up to ₹12 lakh of taxable income cannot be used against tax on these special-rate gains.
• Basic exemption: a resident whose other income is below the basic exemption limit can use the unused part against capital gains.
• Losses: short-term losses can be set off against short- or long-term gains; long-term losses only against long-term gains. Unused losses carry forward for 8 years if you file your return on time.
• Advance tax: large gains during the year may mean you need to pay advance tax — see our advance tax guide.

• Hold equity over 12 months where it suits your goal — the rate drops from 20% to 12.5% and the ₹1.25 lakh exemption applies.
• Use the exemption each year. Some investors book long-term gains up to ₹1.25 lakh annually and reinvest, resetting their cost. Consider exit loads and the market risk of being out of the market.
• Offset gains with genuine losses in the same year.
• Redeem in a planned way near a goal, spreading sales across financial years if large.

Mutual fund investments are subject to market risk, and tax should not be the only reason to buy or sell. For long-term SIP projections see the SIP calculator; to estimate tax on a specific sale, use the Equity Capital Gains calculator.