Capital Gains Tax in India 2026: STCG, LTCG, and What Changed in Budget 2024
The Finance Minister's Budget 2024 speech included one line that sent Indian investors scrambling to their calculators: LTCG on equity would increase from 10% to 12.5%, and STCG from 15% to 20%. If you sold equity, mutual funds, or real estate in FY 2024-25 onwards, your capital gains tax bill looks different from what you might have expected. Here's the complete picture.
Capital Gains Tax Rates in India — Updated for 2026
| Asset Type | Holding Period for LTCG | STCG Rate | LTCG Rate | Exemption Limit |
|---|---|---|---|---|
| Listed equity shares / equity MF | More than 12 months | 20% | 12.5% | ₹1.25 lakh/year (LTCG only) |
| Debt mutual funds (after Apr 2023) | N/A — always STCG | As per slab | N/A | None |
| Real estate | More than 24 months | As per slab | 12.5% (no indexation) or 20% with indexation* | None (reinvestment exemption 54/54EC) |
| Gold / gold ETFs / SGBs | More than 24 months (physical); 12 months (ETF) | As per slab | 12.5% | None |
| Unlisted shares | More than 24 months | As per slab | 12.5% | None |
*Real estate: Budget 2024 removed indexation benefit on real estate LTCG as the default. However, property purchased before July 23, 2024 can use the old regime (20% with indexation) or new regime (12.5% without) — whichever is lower.
The ₹1.25 Lakh LTCG Exemption: How It Works
Each financial year, the first ₹1.25 lakh of long-term capital gains from equity and equity mutual funds is fully exempt from tax. This was ₹1 lakh before Budget 2024.
Smart harvesting strategy: If your portfolio has unrealised LTCG, consider redeeming units worth ₹1.25 lakh of gains every March and immediately repurchasing. You "reset" the cost basis without paying tax, reducing future liability. This is called tax-loss (or tax-gain) harvesting and is completely legal.
Debt Funds: The Big Change Since April 2023
Before April 1, 2023, debt mutual funds held for 3+ years attracted 20% LTCG with indexation benefit — making them tax-efficient for high earners. That's gone. Debt fund gains are now added to your income and taxed at your slab rate, regardless of holding period. For someone in the 30% bracket, this significantly reduces the appeal of debt funds vs bank FDs (which are also slab-taxed but without the complexity).
Real Estate Capital Gains: Planning Around Reinvestment Exemptions
Two important exemptions for property sellers:
- Section 54: Reinvest residential property LTCG into another residential property within 2 years (or construct within 3 years) and the gains are exempt up to the reinvestment amount. Maximum exemption: ₹10 crore.
- Section 54EC: Invest LTCG in specified bonds (NHAI, REC) within 6 months of sale. Maximum: ₹50 lakh. Lock-in: 5 years.
STCG Tax Planning: Timing Is Everything
If you're sitting on a short-term gain that would push you to 20% tax, consider whether you can hold the position past the 12-month mark to convert it to LTCG at 12.5%. On ₹5 lakh of gains, this saves ₹37,500. The question is whether the investment risk of holding 1–3 more months is worth the tax saving.
FAQ
Is LTCG from equity mutual funds taxed differently from stocks?
No. Both listed equity shares and equity-oriented mutual funds (with 65%+ equity allocation) are taxed at the same rates: 20% STCG (under 12 months) and 12.5% LTCG (over 12 months) with ₹1.25 lakh annual exemption.
Do I need to pay advance tax on capital gains?
Yes, if your total tax liability (including capital gains tax) exceeds ₹10,000 in a year. Capital gains from equity sales made in Q4 (Jan-Mar) can be paid in the final advance tax instalment in March.
How do I report capital gains in my ITR?
Use ITR-2 (not ITR-1) if you have capital gains. Your broker will provide a Capital Gains Statement — use it to populate Schedule CG in the ITR. For mutual funds, use the Consolidated Account Statement (CAS) from CDSL/NSDL or AMC.
