What is capital gains tax?
A capital gain is the profit you make when you sell a capital asset, such as listed shares, mutual fund units, property, or gold, for more than what you paid for it. The Income Tax Act splits this profit into short-term and long-term capital gains depending on how long you held the asset, and taxes each category differently.
For listed equity shares and equity-oriented mutual funds on which securities transaction tax (STT) has been paid, a holding period of 12 months or less is short term, and more than 12 months is long term. The Union Budget 2024 revised both the rates and the long-term exemption limit for these assets, with effect from 23 July 2024.
Short term vs long term, by asset type
The holding period that separates short-term from long-term gains is not the same for every asset. The table below covers the most common categories.
| Asset Type | Short Term | Long Term |
|---|---|---|
| Listed equity shares / equity mutual funds (STT paid) | 12 months or less | More than 12 months |
| Debt mutual funds bought on or after 1 Apr 2023 | Always short term | Not applicable |
| Property, unlisted shares, gold, other assets | 24 months or less | More than 24 months |
How the calculator works
This calculator covers listed equity shares and equity-oriented mutual funds. It first works out your capital gain, then applies the LTCG exemption if your holding period is long term, and finally taxes the remaining gain at the applicable rate.
Gain = Sale Value - Purchase Value - Expenses
Tax = max(0, Gain - Exemption) x Rate
In the formula the terms represent the following:
| Term | Meaning |
|---|---|
| Sale Value | The price you sold the shares or mutual fund units for |
| Purchase Value | The price you originally paid to acquire them |
| Expenses | Brokerage, STT, and other costs of buying and selling |
| Exemption | ₹1,25,000 per year, only for long-term gains |
| Rate | 12.5% for long term, 20% for short term |
If the sale value is lower than the purchase value plus expenses, the result is a capital loss. No tax applies, and the loss can be set off against other gains or carried forward.
Capital gains tax rates for FY 2025-26
| Asset Type | Short Term Rate | Long Term Rate |
|---|---|---|
| Listed equity shares / equity mutual funds (STT paid) | 20% | 12.5% above ₹1.25 lakh exemption |
| Debt mutual funds bought on or after 1 Apr 2023 | Slab rate | Not applicable |
| Property, gold, unlisted shares, other assets | Slab rate | 12.5% without indexation |
For property acquired before 23 July 2024, individuals and HUFs can choose between 12.5% without indexation and 20% with indexation, whichever results in a lower tax. Debt mutual fund gains are added to your total income and taxed at your slab rate, with no long-term category available.
Setting off and carrying forward losses
Short-term capital loss
A short-term capital loss can be set off against both short-term and long-term capital gains in the same financial year, across any asset class.
Long-term capital loss
A long-term capital loss can only be set off against long-term capital gains. It cannot be used to reduce short-term gains or other heads of income.
Carry forward
Any loss that remains after set-off can be carried forward for up to 8 assessment years and adjusted against eligible gains in those years, provided the income tax return for the year of the loss is filed before the due date.