Equity Capital Gains Tax explained: this guide covers what Equity Capital Gains Tax means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Key Highlights
- STCG on equity (STT paid): 20% (raised from 15% — Budget 2024, effective 23 July 2024)
- LTCG on equity (STT paid): 12.5% (raised from 10% — Budget 2024)
- LTCG exemption: Rs 1,25,000 per year (raised from Rs 1 lakh — Budget 2024)
- Holding period: 12 months for listed equity LTCG (unchanged)
- Grandfathering for pre-January 2018 gains: Cost of acquisition = FMV as on 31 January 2018
- Equity mutual funds (growth option): same rates as direct equity
- Debt mutual funds purchased after 1 April 2023: taxed at slab rates (not capital gains rates)
1. Holding Period for Equity
| Type | Holding Period | Classification |
|---|---|---|
| Listed shares (BSE/NSE) | 12 months or less | STCG |
| Listed shares | More than 12 months | LTCG |
| Equity mutual funds | 12 months or less | STCG |
| Equity mutual funds | More than 12 months | LTCG |
| Unlisted shares | 24 months or less | STCG |
| Unlisted shares | More than 24 months | LTCG (20% with indexation or 12.5% without) |
2. Capital Gains Tax Rates: Equity (Post Budget 2024)
| Type | Rate before 23 July 2024 | Rate from 23 July 2024 |
|---|---|---|
| STCG on equity (STT paid) | 15% | 20% |
| LTCG on equity above exemption (STT paid) | 10% | 12.5% |
| LTCG exemption per year | Rs 1,00,000 | Rs 1,25,000 |
3. LTCG on Equity: Detailed Rules
- LTCG on listed equity is taxed at 12.5% on gains exceeding Rs 1,25,000 per year
- For equity acquired before 31 January 2018: cost of acquisition = FMV as on 31 January 2018 (grandfathering provision)
- No benefit of indexation on equity LTCG
- Section 157 rebate (which makes income up to Rs 12 lakh zero-tax) does NOT reduce equity LTCG tax — LTCG above Rs 1.25L is always taxed at 12.5%
- Surcharge on LTCG on equity is capped at 15% (not 37%) — regardless of income level
4. LTCG Computation Example
Illustrative only. Neha sold equity shares in Tax Year 2026-27 with LTCG of Rs 3,00,000.
| Particulars | Amount |
|---|---|
| LTCG (holding > 12 months, STT paid) | Rs 3,00,000 |
| Less: Annual exemption | (Rs 1,25,000) |
| Taxable LTCG | Rs 1,75,000 |
| Tax at 12.5% | Rs 21,875 |
| Add: 4% cess | Rs 875 |
| Total tax on LTCG | Rs 22,750 |
5. STCG Computation Example
Illustrative only. Ramesh sold shares held for 6 months with STCG of Rs 80,000.
- STCG = Rs 80,000; Tax at 20% = Rs 16,000 + 4% cess = Rs 16,640
- No exemption for STCG (the Rs 1.25L exemption applies only to LTCG)
- STCG cannot be reduced by Section 157 rebate: it is charged separately at 20% regardless of other income
6. Equity Mutual Funds
Equity-oriented mutual funds (funds investing at least 65% in equity) are treated exactly like direct equity for capital gains tax purposes — same holding period (12 months), same LTCG (12.5% above Rs 1.25L) and STCG (20%) rates. Balanced/hybrid funds may be equity-oriented or debt-oriented depending on their equity allocation — the classification affects the tax rate.
7. Debt Mutual Funds: No Capital Gains Treatment
Debt mutual funds purchased on or after 1 April 2023 are taxed at slab rates regardless of holding period — they do not get LTCG/STCG treatment. This was changed by Finance Act 2023 and continues under ITA 2025. Debt mutual funds purchased before 1 April 2023 retain old LTCG treatment (20% with indexation after 36 months).
8. LTCG Carry-Forward
Long-term capital loss from equity can be set off against long-term capital gains only — not against STCG or other income. It can be carried forward for 8 Tax Years (Section 113 of ITA 2025). Short-term capital losses can be set off against both STCG and LTCG.
9. Latest Updates Under ITA 2025
- STCG: 20% (Budget 2024); LTCG: 12.5% above Rs 1.25L (Budget 2024) — both codified in ITA 2025
- Section 157 rebate does NOT apply to LTCG/STCG — these are taxed at special flat rates
- Surcharge on equity capital gains: capped at 15%
- Debt MF: slab rate taxation from 1 April 2023 — confirmed in ITA 2025
10. Why TaxClue
Equity capital gains require careful computation — correct holding period, grandfathering for old shares, regime interaction, and debt MF tax treatment. TaxClue files ITR with complete and accurate capital gains schedules. Contact us for equity capital gains tax computation and ITR filing.