Capital gains tax rates 2026-27: 20% STCG, 12.5% LTCG and the ₹1.25 lakh exemption

For tax year 2026-27, short-term gains on listed equity shares, equity-oriented mutual fund units and business trust units (with securities transaction tax paid) are taxed at 20% under section 196 of the Income-tax Act, 2025. Long-term gains on the same assets, held for more than 12 months, are exempt up to ₹1,25,000 a year and taxed at 12.5% above that under section 198. Other long-term assets, such as unlisted shares, gold, property or listed bonds, are taxed at 12.5% without indexation under section 197. Debt mutual funds bought on or after 1 April 2023 are taxed at your slab rate however long you hold them. The 4% cess is added in every case.

These rates apply in both the new and the old regime. The new regime's ₹12 lakh rebate does not reduce tax on special-rate gains.

Rates and holding periods at a glance

The 12- and 24-month holding periods and the 20% / 12.5% rates date from the changes made on 23 July 2024. They were carried into the 2025 Act unchanged. Treatment of gold funds, international funds and hybrid funds depends on how much of the fund is in domestic equity. Check the fund's own tax note and the current rules for these.

How the ₹1.25 lakh exemption works

Section 198 taxes long-term gains from equity shares, equity fund units and business trust units exceeding ₹1,25,000 at 12.5%, where securities transaction tax was paid as required. For shares, STT must have been paid on both buying and selling (with notified exceptions, such as IPO allotments). For fund units it is paid on selling.

Illustrative example. In tax year 2026-27 you redeem equity funds with long-term gains of ₹2,10,000 and sell shares with long-term gains of ₹40,000:

1. Total long-term equity gains = ₹2,50,000.
2. Exempt = ₹1,25,000. Taxable = ₹1,25,000.
3. Tax = ₹1,25,000 × 12.5% = ₹15,625. With cess = ₹16,250.

Short-term equity gains of ₹60,000 in the same year: ₹60,000 × 20% = ₹12,000, with cess ₹12,480. The capital gains calculator does this arithmetic.

Grandfathering for equity bought before 1 February 2018

For listed equity and equity fund units bought before 1 February 2018, the cost used to work out the gain is the higher of the actual cost and the lower of the fair market value on 31 January 2018 and the sale price. This protects gains made before long-term gains on equity became taxable. Broker and registrar capital gains statements usually show the 31 January 2018 value.

Property and the indexation choice

Since 23 July 2024, long-term gains on land and buildings are taxed at 12.5% without indexation. For a resident individual or HUF who acquired the property before 23 July 2024, section 197(3) of the 2025 Act ignores any tax above what 20% with indexation would give, so you pay the lower of the two. The capital gains exemptions for reinvesting in a house (sections 82 and 86 of the 2025 Act, formerly 54 and 54F) still apply. Property sales also involve TDS by the buyer and stamp duty valuation rules. Get professional help for property sales, especially if the buyer must deduct TDS on your gain as an NRI seller.

Rebate, basic exemption and capital gains

• Rebate. The section 156 rebate covers only tax at the section 202(1) slab rates. If your salary is ₹10 lakh and you have ₹3 lakh of long-term equity gains, slab tax on salary is nil after the rebate, but the 12.5% tax on ₹1.75 lakh of gains (₹21,875 plus cess) is payable.
• Unused basic exemption. For a resident individual whose other income is below the basic exemption limit, the shortfall reduces the special-rate gains. Example: a retired resident with ₹1,50,000 of other income under the new regime (basic exemption ₹4 lakh) has an unused ₹2,50,000. Short-term equity gains of ₹2,00,000 would be fully absorbed, so no tax.
• Non-residents cannot use the unused basic exemption and usually suffer TDS on gains.

Losses

• A short-term capital loss can be set off against short-term or long-term gains.
• A long-term capital loss can be set off only against long-term gains.
• Unabsorbed capital losses can be carried forward for eight years, only if the return is filed by the due date.
• Capital losses cannot be set off against salary or other heads.

The capital gains calculation examples show set-off and tax-gain harvesting step by step.

Advance tax on gains

Capital gains count for advance tax. If a large gain arises late in the year, pay the tax on it in the remaining instalments. Interest for deferring earlier instalments does not apply to gains that had not yet arisen. See the advance tax guide.

When to consult a professional

Unlisted shares and ESOPs, property sales, buybacks, bonus or split adjustments, foreign shares and large intraday or F&O activity (which is business income, not capital gains) need professional review. This guide is part of the tax year 2026-27 overview.

Gains on which a broker or fund deducts tax are covered in TDS and TCS basics, and how gains interact with the regime choice is in the old vs new regime comparison.

Frequently asked questions

Is the ₹1.25 lakh exemption available in the old regime?

Yes. The capital gains rates and exemption are the same in both regimes.

Are SIP units counted separately for the 12-month rule?

Yes. Each SIP instalment is a separate purchase, and units are treated as sold on a first-in, first-out basis.

Are debt fund gains ever taxed at 12.5%?

Units of debt funds bought before 1 April 2023 and held for more than 24 months can qualify for 12.5% as long-term gains. Units bought on or after that date are taxed at slab rates.

Do I pay tax on gains if I reinvest them in another fund?

Yes. Switching between funds or schemes is a sale and purchase. There is no rollover relief except the specific house-reinvestment exemptions.

Sources

• Income Tax Department: sections 196, 197 and 198 of the Income-tax Act, 2025
• Income Tax e-filing portal: Annual Information Statement entries for share and fund sales
• Securities and Exchange Board of India: investor education on mutual fund categories