Capital Gains Tax on Stocks & Mutual Funds — STCG vs LTCG After Budget 2025

Last verified: April 2026, against the Finance Act 2024 (Budget July 2024) capital-gains overhaul, Sections 111A and 112A of the Income Tax Act, and CBDT clarifications issued in 2025.

Budget 2024 quietly rewrote India’s capital gains rulebook. STCG on equity jumped from 15% to 20%, LTCG from 10% to 12.5%. The ₹1 lakh annual LTCG exemption became ₹1.25 lakh. Indexation on real estate and gold disappeared — but with a transition exemption. And LTCG on debt mutual funds is gone forever; everything is at slab rate now. This guide is the complete map for FY 2025-26 — what rate applies, what exemption, what holding period, for every common asset.

The cheat sheet — at a glance

Asset	STCG (rate / holding)	LTCG (rate / holding)
Listed equity, equity MF	20% / <12 months	12.5% above ₹1.25 L / >12 months
Unlisted equity, foreign stocks	Slab / <24 months	12.5% (no indexation) / >24 months
Debt mutual funds (post-Apr-2023)	Slab	Slab — no LTCG concept
Debt mutual funds (pre-Apr-2023 units)	Slab / <24 months	12.5% (no indexation) / >24 months
Real estate (purchased before 23-Jul-2024)	Slab / <24 months	Either 12.5% no-indexation OR 20% with indexation, whichever lower
Real estate (purchased after 23-Jul-2024)	Slab / <24 months	12.5% (no indexation) / >24 months
Gold (physical & digital)	Slab / <24 months	12.5% (no indexation) / >24 months
Sovereign Gold Bonds (held to maturity)	—	Tax-exempt at maturity
Crypto / VDA	30% flat (no STCG/LTCG distinction)	30% flat

4% Health & Education Cess and any applicable surcharge add to all the above except crypto (where 30% is the flat rate; surcharge and cess still apply).

Listed equity & equity mutual funds — the most-asked case

Effective from FY 2024-25 onwards (sales on or after 23 July 2024):

• STCG (sold within 12 months of purchase): 20% under Section 111A. Up from 15% earlier.
• LTCG (held over 12 months): 12.5% under Section 112A on gains exceeding ₹1.25 L per year (combined across all listed equity + equity MF). Up from 10% on gains above ₹1 L.
• Equity MF = scheme with at least 65% in Indian listed equity. Hybrid funds with 35-65% equity are treated under “specified mutual fund” rules — slab-rate STCG, 12.5% LTCG.

Worked example — ELSS holding sold

You SIP’d ₹10,000/month into an ELSS for 3 years. Your ₹3.6 L invested grew to ₹4.5 L. After the 3-year lock-in you redeem ₹2 L of units (at FY26 NAV).

• Cost basis of ₹2 L worth of units (FIFO): say ₹1.6 L
• Capital gain: ₹40,000 — well below ₹1.25 L exemption
• Tax payable: ₹0

The ₹1.25 L exemption is per financial year, per individual. Spreading equity redemptions across years can keep gains tax-free — sometimes called “tax harvesting.”

Real estate — the nuanced one

Budget 2024 originally proposed killing indexation entirely for property. After backlash, the government grandfathered properties bought before 23 July 2024 — owners can choose the lower of:

• 12.5% on gain without indexation, OR
• 20% on gain with indexation (using CII)

For properties bought 23 July 2024 onwards, only the 12.5% no-indexation route is available.

When does the dual-option help?

Indexation helps most for properties held a long time in low-inflation periods. Crude rule: for properties held 8+ years, indexation usually beats no-indexation. For 2-7 year holds, the 12.5% no-indexation route often wins because of the lower rate.

Section 54 / 54F exemptions still apply

You can save the entire LTCG by reinvesting in another residential house (Section 54) or in any new house if the gain came from a non-house asset (Section 54F). Capital Gains Account Scheme deposits work as a parking option till you find a property. ₹50 L cap on Section 54EC bonds (NHAI/REC) for 5-year deferral.

Debt mutual funds — the killed asset class

From 1 April 2023, units of “specified mutual funds” (those with less than 35% in equity) lost the LTCG concept entirely. All gains are now slab-rate STCG regardless of holding period. This caught a lot of investors off guard.

Units purchased before 1 April 2023 retain the old rules: STCG below 36 months at slab, LTCG above 36 months at 20% with indexation (now 12.5% no indexation post Budget 2024).

The practical effect: debt MFs are no longer a tax-efficient alternative to FDs for someone in the 30% slab. Use them for liquidity and credit-spread expertise, not for tax savings. See our FD vs debt MF vs RBI bonds comparison.

Crypto / VDA — the punitive bucket

Section 115BBH: 30% flat tax on every gain from sale of any virtual digital asset. No STCG/LTCG distinction. No set-off of losses against other income (or even against other crypto trades — loss in one coin can’t offset gain in another). 1% TDS under Section 194S on every transaction above ₹10K (₹50K for specified persons).

Practical effect: crypto trading in India is a tax-and-paperwork minefield. Most retail traders don’t recover from the regime’s compounding friction.

How to compute and pay capital gains tax

1. Track each holding’s cost basis (FIFO is the standard method for MFs and stocks). Brokers’ P&L statements simplify this; export the Capital Gains Statement from your broker for the year.
2. Aggregate gains by category (equity STCG, equity LTCG, real estate LTCG, etc.).
3. Apply exemption: ₹1.25 L on equity LTCG.
4. Apply tax rate: 20% / 12.5% / slab.
5. Pay advance tax in quarterly instalments if the resulting tax exceeds ₹10,000 in the year (15% by 15 June, 45% by 15 September, 75% by 15 December, 100% by 15 March).
6. Report in ITR-2 (Schedule CG). ITR-1 doesn’t accommodate capital gains.

Use our Capital Gains Calculator to run the math across asset classes.

Five tax-loss-harvesting moves that still work

1. Realise ₹1.25 L equity LTCG annually. Sell and rebuy on the same day to step up your cost basis without changing your portfolio. (Wash-sale rules don’t apply in India — yet.)
2. Spread big real-estate sales across two financial years. Particularly if you’ve used Section 54/54F partial relief.
3. Set off equity STCG against equity STCL. Within the same year. Cannot set off equity STCG against debt STCL.
4. Carry forward losses. Capital losses can be carried forward 8 years, but only if the original loss return was filed before the due date.
5. Use Sec 54EC bonds. ₹50 L max in NHAI/REC bonds within 6 months of property sale defers the LTCG fully (5-year lock-in, 5.25% interest). Useful when reinvestment in property isn’t immediate.

Linked deep-dives

• SIP Calculator — how ₹5,000/month becomes ₹1 Crore
• FD vs Debt MF vs RBI Bonds — what conservative investors should pick
• Old vs new tax regime FY 2025-26
• Capital Gains Calculator
• SIP / Mutual Fund Calculator

FAQs

Is dividend income taxed as capital gain?

No. Dividends are taxed at slab rate as “Income from Other Sources” since FY 2020-21 (after the abolition of DDT). TDS at 10% is deducted by the company if dividend exceeds ₹5,000/year.

What’s the holding period for equity vs debt mutual funds?

Equity MF (65%+ Indian equity): 12 months. Debt MF (post-April 2023): no LTCG concept; all gains slab-rate. Hybrid/balanced (35-65% equity): 24 months for LTCG at 12.5%.

How is foreign stock taxed in India?

Treated as unlisted shares for an Indian resident. STCG at slab below 24 months, LTCG at 12.5% (no indexation) above 24 months. Plus mandatory disclosure in Schedule FA of the ITR.

Can I claim Section 80C against capital gains?

No. Section 80C deductions reduce only “ordinary” income — they don’t apply to STCG or LTCG which are taxed at special rates.

Is buyback by the company taxable?

Post Budget 2024 — yes, fully taxable in the shareholder’s hands as deemed dividend (slab rate). The earlier exemption (where the company paid 23.296% buyback tax and the shareholder received tax-free proceeds) is gone for buybacks announced from 1 October 2024.

Are SGB redemptions taxable?

Sovereign Gold Bonds held to the 8-year maturity: redemption is tax-exempt. Sold on exchange before maturity: standard gold capital-gains rules (12.5% LTCG above 24 months hold, slab below).

Sources & references

• Union Budget 2024-25 — Finance Bill (capital gains overhaul)
• CBDT Circular Nos. 9/2024 and 13/2024 (clarifications on transition for real estate)
• Sections 111A, 112, 112A, 115BBH of the Income Tax Act
• Notification dated 13 August 2024 — grandfather rule for property

Last verified: April 2026. Capital gains rules saw the biggest overhaul in years in Budget 2024 — we re-verify after every CBDT circular and budget revision.