The two rates, and the line between them
For listed equity shares, equity mutual funds and equity ETFs on which securities transaction tax (STT) is paid, Indian income tax has one dividing line: 12 months.
| Held | Type of gain | Rate for sales from 23 Jul 2024 | Before 23 Jul 2024 |
|---|---|---|---|
| 12 months or less | Short term (STCG) | 20% flat | 15% |
| More than 12 months | Long term (LTCG) | 12.5% on gains above ₹1.25 lakh a year | 10% above ₹1 lakh |
- Is it listed equity with STT paid?Shares on NSE or BSE, equity funds, equity ETFs. If not, other rules apply.
- Held more than 12 months?Count from the purchase date to the sale date, lot by lot.
- No: short term20% on the whole gain, plus cess.
- Yes: long term12.5% on the year's total above ₹1.25 lakh, plus cess.
Three details trip people up:
- "More than 12 months" means at least a year and a day. Shares bought on 15 Jan 2025 become long term if sold on or after 16 Jan 2026. The note day 364 vs day 366 shows what one day is worth.
- The ₹1.25 lakh is per person, per year, across all long term equity gains. It is not per stock or per fund, and an unused part does not carry forward.
- The rate is a special rate, not your slab. Short term equity gains are taxed at 20% even if your slab is lower or higher. The rebate that makes income up to ₹12 lakh tax free in the new regime does not cover these gains.
The new Act renumbers the sections (196 and 198 replace 111A and 112A) and uses the term "tax year" for what used to be the financial year, but the rates and the 12 month line are the same. The equity taxation module covers the July 2024 changes in detail.
Worked example 1: a short term gain
You buy 100 shares at ₹1,000 on 10 Jan 2026 and sell them at ₹1,200 on 5 Oct 2026, less than 12 months later.
- Sale value: ₹1,20,000. Cost: ₹1,00,000. Gain: ₹20,000.
- Brokerage and other charges on the purchase and sale can be added to the cost or deducted from the sale value. STT cannot.
- Tax: 20% of ₹20,000 = ₹4,000, plus 4% cess = ₹4,160.
Worked example 2: a long term gain
You bought shares for ₹5,00,000 on 2 Jan 2024 and sell them for ₹8,00,000 on 15 Jun 2026. They were held for more than 12 months.
- Gain: ₹3,00,000, all long term.
- Exempt: the first ₹1,25,000 of the year's long term equity gains.
- Taxable: ₹1,75,000 at 12.5% = ₹21,875, plus 4% cess = ₹22,750.
Had the same ₹3 lakh gain been short term, the tax would have been 20% of all of it, ₹60,000, plus cess: ₹62,400.
- Short term, 20%₹62,400
- Long term, 12.5% above ₹1.25 lakh₹22,750
Tax including 4% cess, no other gains in the year, no surcharge. Rates for sales from 23 Jul 2024.
Worked example 3: which shares did you sell? First in, first out
Suppose you bought the same stock three times through a monthly plan:
| Lot | Bought | Shares | Price |
|---|---|---|---|
| 1 | 5 Aug 2025 | 10 | ₹900 |
| 2 | 5 Sep 2025 | 10 | ₹950 |
| 3 | 5 Oct 2025 | 10 | ₹1,000 |
On 15 Sep 2026 you sell 15 shares at ₹1,100. Under first in, first out, those are all 10 shares of lot 1 (held more than 12 months, long term, gain ₹2,000) and 5 shares of lot 2 (bought 5 Sep 2025, held more than 12 months, long term, gain ₹750). Sell a month earlier, on 15 Aug 2026, and lot 1 is long term but lot 2 is still short term. You cannot choose to sell the newest lot first. The SIP in stocks guide explains why every instalment is its own lot.
Worked example 4: grandfathering for shares bought before 2018
Long term gains on listed equity became taxable again from 1 Apr 2018, and gains up to 31 Jan 2018 were protected. For shares bought on or before 31 Jan 2018, the cost for tax is the higher of:
- what you actually paid, and
- the lower of the highest price on 31 Jan 2018 and your sale price.
You bought at ₹500 in 2016. The highest price on 31 Jan 2018 was ₹800. You sell at ₹1,500 in 2026. Cost for tax: the higher of ₹500 and the lower of ₹800 and ₹1,500, so ₹800. Taxable gain: ₹700 a share, not ₹1,000. For a sense of scale, the Nifty 50 closed at 11,027.70 on 31 Jan 2018 and at 22,363.35 on 12 Oct 2026, NSE's daily closes.
Losses: set off and carry forward
| You book | It can offset | Carry forward |
|---|---|---|
| A short term capital loss | Short term and long term gains | Eight years |
| A long term capital loss | Long term gains only | Eight years, against long term gains |
A worked year: short term gains of ₹60,000, long term gains of ₹2,50,000, a short term loss of ₹40,000 and a long term loss of ₹30,000. Set the short term loss against the short term gains (taxed at the higher rate): net short term ₹20,000. Long term net of the long term loss: ₹2,20,000, of which ₹1,25,000 is exempt. Tax: ₹20,000 at 20% plus ₹95,000 at 12.5%, ₹4,000 + ₹11,875 = ₹15,875, plus cess = ₹16,510. The tax harvesting guide shows how to plan this before 31 March.
MythIf I do not use my ₹1.25 lakh exemption this year, it rolls over to next year.
FactIt does not. The exemption applies to each year's long term gains only. Losses carry forward eight years; the exemption does not carry forward at all.
Small incomes and the basic exemption
A resident whose other income is below the basic exemption limit can use the unused part of that limit against short term and long term equity gains before the special rates apply. Under the new regime the first ₹4 lakh of income is not taxed. So a student with no other income and ₹1,50,000 of short term gains pays no tax on them. This is different from the rebate up to ₹12 lakh, which does not apply to these gains.
Reporting and paying
Sales of shares and fund units appear in your Annual Information Statement (AIS), reported by brokers and registrars. You report each sale in the capital gains schedule of your return, and the AIS and ITR module shows how to reconcile the two. Tax on gains is due through the year as advance tax; a large gain early in the year can bring interest if no advance tax is paid. For the 2026-27 tax year the return for most individuals with capital gains is due by 31 Jul 2027. The capital gains tax calculator works out the tax on your own figures.
How this shows up in RupeeCase
In a RupeeCase strategy the shares sit in your own demat, so every rebalance sale is your sale, taxed under the rules above. A slower rule produces more long term gains; a fast one more short term gains. Your broker's capital gains statement lists each lot. TotalMarket Hybrid holds 51 positions across the whole market with debt and gold, rebalanced every 2 weeks: model CAGR 39.53%, deepest fall −21.82%, as of 27 Apr 2026, before your tax. The mutual fund vs direct stocks tax guide compares the tax of the two routes.
Questions investors ask
What is the capital gains tax on shares in India?
For listed shares with STT paid, sold from 23 Jul 2024: 20% on short term gains (held 12 months or less) and 12.5% on long term gains above ₹1.25 lakh a year (held more than 12 months), plus 4% cess.
How is LTCG on shares calculated?
Add up the year's long term gains on listed equity and equity funds, subtract any long term or short term losses set against them, then subtract ₹1.25 lakh. Tax the rest at 12.5% and add 4% cess.
Is LTCG up to ₹1.25 lakh tax free?
Yes. The first ₹1.25 lakh of long term gains on listed equity and equity funds in a year is exempt. The limit is per person, across all such gains, and does not carry forward.
How many days for long term capital gains on shares?
More than 12 months from the purchase date. Shares bought on 15 Jan 2025 are long term if sold on or after 16 Jan 2026.
Does the 12 lakh rebate cover capital gains?
No. The new regime rebate does not apply to short term and long term equity gains taxed at special rates. A resident with low other income can use the unused basic exemption limit against them.
Do I pay capital gains tax if I reinvest the money?
Yes. Each sale is taxed when it happens, whether or not the money is reinvested. There is no rollover relief for shares.
What is grandfathering in capital gains on shares?
For shares bought on or before 31 Jan 2018, gains up to that date are not taxed: the cost is the higher of the actual cost and the lower of the 31 Jan 2018 highest price and the sale price.