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How Capital Gains Are Taxed on Shares, Funds and Property
A capital gain is taxed differently from salary, and how differently depends on two things: what you sold and how long you held it. Once those are clear, most of the calculation follows.
Working out the gain
The gain is the sale price minus what the asset cost you, minus the expenses the rules let you add to that cost. For shares and funds that means brokerage and transaction charges. For property it includes the stamp duty and fees you paid when buying, the cost of improvements, and the brokerage and legal costs of selling.
If the answer is negative you have a capital loss. It is not taxed, and it can be used against gains, as explained further down.
Short-term or long-term
How long you held the asset decides its category. For FY 2026-27:
- Listed shares and equity mutual funds become long-term after 12 months.
- Most other assets, including property, gold and unlisted shares, become long-term after 24 months.
Anything held for less is short-term. Crossing the threshold usually lowers the rate, so the date you sell can matter more than a small difference in price.
Listed shares and equity funds
Short-term gains on listed equity sold on an exchange are taxed at 20%. Long-term gains are taxed at 12.5%, but the first ₹1.25 lakh of long-term equity gains in a financial year is exempt. That limit applies per year across all your equity sales, not per sale.
Say you bought shares for ₹5 lakh and sold them for ₹8 lakh, a gain of ₹3 lakh. Sold after 18 months, ₹1.25 lakh is exempt and ₹1.75 lakh is taxed at 12.5%, which comes to ₹22,750 with 4% cess. Sold after 10 months, the whole ₹3 lakh is short-term and the tax is ₹62,400. Waiting two more months would have saved ₹39,650.
A long-term equity gain of ₹1 lakh, with no other equity gains that year, is not taxed at all.
Property, gold and other assets
Long-term gains on these assets are taxed at 12.5% without indexation. Short-term gains are added to your income and taxed at your slab rate.
Take a flat bought for ₹40 lakh and sold for ₹60 lakh, with ₹2 lakh of purchase costs, improvements and selling expenses. The gain is ₹18 lakh. Held for five years, the tax is ₹2,34,000 including cess. Sold inside two years by someone in the 30% slab, the same gain costs ₹5,61,600.
For land and buildings bought before 23 July 2024, resident individuals can choose the older method instead: 20% with indexation, where the purchase price is raised for inflation before the gain is worked out. When prices have risen slowly, that can mean less tax, so work out both.
Debt funds follow different rules
Units of debt mutual funds bought on or after 1 April 2023 never get long-term treatment. Their gains are taxed at your slab rate however long you hold them. Units bought earlier follow the older rules, so the purchase date matters as much as the kind of fund.
Using losses
A short-term capital loss can be set off against short-term or long-term gains. A long-term loss can only be set off against long-term gains. Losses you cannot use this year can be carried forward for eight years, but only if you filed your return on time for the year of the loss.
Some investors sell a holding that is down before the financial year ends, so the loss can be used against gains they have already made, and buy back later. The set-off is allowed; the costs and timing of selling and rebuying are for you to weigh.
Reducing tax on a property sale
Long-term gains from selling a house, and from some other long-term assets, can be reduced or removed by reinvesting in a residential property or in specified bonds within set time limits. The conditions are detailed and the deadlines are strict, so check them before signing the sale deed.
What an estimate leaves out
Surcharge applies at higher incomes, and special cases such as inherited property, bonus shares or assets held abroad have their own steps. The capital gains tax calculator gives a first estimate and shows what waiting past a holding threshold would save. The rates here are the ones in force for FY 2026-27, and budgets have changed them before.