Capital Gains Tax in India: STCG, LTCG, and How to Save
Simple explanation of short-term and long-term capital gains tax on stocks, mutual funds, property, and gold — with real examples and saving strategies.
11 Aug 20269 min read
When you sell an investment for a profit, the government wants its share. How much tax you pay depends on what you sold and how long you held it.
Equity (Stocks & Equity Mutual Funds)
| Holding Period | Type | Tax Rate | Exemption |
|---|---|---|---|
| Less than 1 year | STCG | 20% | None |
| More than 1 year | LTCG | 12.5% | ₹1.25 lakh/year |
Debt Mutual Funds
All gains taxed at your income tax slab rate, regardless of holding period (changed from April 2023).
Real Estate
| Holding Period | Type | Tax Rate |
|---|---|---|
| Less than 2 years | STCG | Slab rate |
| More than 2 years | LTCG | 12.5% (no indexation) |
How to Save Capital Gains Tax
- Hold equity for 1+ years — STCG rate drops from 20% to 12.5% LTCG
- Use the ₹1.25 lakh LTCG exemption — harvest gains each year to stay within limit
- Section 54 (Property) — reinvest property sale proceeds in another house within 2 years
- Tax loss harvesting — sell losing investments to offset gains
Example: You invested ₹5 lakh in an equity fund. After 2 years, it's worth ₹7 lakh. Gain = ₹2 lakh. Minus ₹1.25 lakh exemption = ₹75,000 taxable. Tax = ₹75,000 × 12.5% = ₹9,375. Effective tax rate on ₹2 lakh profit: just 4.7%.
capital gainsLTCGSTCGtax on sharestax on mutual funds
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This article is for informational and educational purposes only and does not constitute financial, tax, or investment advice. Consult a qualified professional before making financial decisions.