At a Glance (3-Minute Quick Read):
  • Stocks & Equity Mutual Funds: Sold in ≤12 months? That is Short-Term (STCG) taxed at 20% (Section 111A). Held >12 months? That is Long-Term (LTCG) under Section 112A—the first ₹1.25 lakh profit each year is 100% tax-free, and anything above is taxed at 12.5%.
  • Selling a Property? Held over 24 months, it is taxed at 12.5% without indexation. If bought before July 23, 2024, resident individuals can pick 20% with indexation (using the official CBDT index of 384 for FY 2026–27) if it saves tax.
  • Debt Funds & Gold: Pure debt funds (>65% debt) are taxed at your income slab rate under Section 50AA. Gold ETFs held >12 months face 12.5% LTCG. Sovereign Gold Bonds (SGB) redeemed with the RBI remain 100% tax-free under Section 47(viic).

Picture this: You log into your investment app on a Sunday morning. You tap on your portfolio, and there it is—a clean green profit of ₹2,00,000.

Your first reaction is excitement: that is your vacation fund or a big chunk of your home down payment. But then a headline about recent tax changes pops into your mind, and a familiar question hits: How much of this actually stays in my bank account, and how much goes to income tax?

Let us walk through the new capital gains rules together—plain and simple—so you know exactly what happens to your money.

The Two Clocks That Decide Your Tax

Before looking at tax rates, the Income Tax Department checks one thing: How long did you hold the asset before selling?

Think of it as two ticking clocks:

  1. The 12-Month Clock (Listed Investments): For stocks, equity mutual funds, and gold ETFs on the exchange, the mark is 12 months. Sell before 12 months, and it is Short-Term (STCG). Hold for even one day past 12 months, and it becomes Long-Term (LTCG).
  2. The 24-Month Clock (Real Estate & Gold): For flats, land, physical gold jewellery, and unlisted startup shares, the threshold is 24 months.

Crossing that line makes a massive difference to what you take home.

Your Stocks and Mutual Funds: The Real Math

Let us take that ₹2,00,000 profit and see what happens in two everyday situations.

Scenario A: You Sold Too Early (Under 12 Months)

Suppose you bought shares six months ago and sold them for a ₹60,000 gain. Because your holding was under 12 months, it is Short-Term under Section 111A:

  • Tax Rate: A flat 20% (+ 4% cess = 20.8%).
  • Tax You Pay: ₹60,000 × 20.8% = ₹12,480.

Scenario B: You Patiently Held (Over 12 Months)

Now suppose the remaining ₹1,40,000 profit came from an equity mutual fund you held for two years through monthly SIP investments. Because you waited past 12 months, Section 112A gives you a built-in tax shield:

  • The ₹1.25 Lakh Free Pass: Every financial year, the first ₹1,25,000 of your total equity LTCG is completely tax-free.
  • Taxable Profit: ₹1,40,000 − ₹1,25,000 = ₹15,000.
  • Tax Rate: A concessional 12.5% (+ 4% cess = 13.0%).
  • Tax You Pay: ₹15,000 × 13% = ₹1,950.

By simply letting your mutual fund cross the one-year mark, your tax dropped from over ₹29,000 to under ₹2,000. (For tax-saving funds, check out our ELSS Mutual Funds Guide to see how the 3-year lock-in guarantees LTCG status).

Selling a House? The Choice That Saves Lakhs

What if you are selling a family flat? Under the new rules, property held over 24 months is taxed at 12.5% without indexation.

Losing inflation indexation sounds alarming, but if you purchased the property before July 23, 2024, resident individuals get a choice called Grandfathering.

You can compute your tax both ways and pay whichever is lower:

  • Option A (New Rule): 12.5% tax on your actual profit without indexation.
  • Option B (Old Rule): 20% tax on profit adjusted with the official Cost Inflation Index (CII). For FY 2026–27, the official CBDT index is 384 (up from 240 in FY 2014–15).

A Real-Life Flat Sale

Suppose Priya bought a flat in 2014 for ₹40 Lakh and sells it in 2026 for ₹75 Lakh (net ₹74 Lakh after expenses):

  • Option A (12.5% flat): Profit is ₹34 Lakh. Tax = ₹4,42,000.
  • Option B (20% with indexation): Her purchase cost adjusts to ₹64 Lakh (₹40L × 384 / 240), leaving just ₹10 Lakh in taxable profit. Tax = ₹2,08,000.

Priya chooses Option B and legally saves ₹2,34,000 in cash. And if indexation results in a paper loss, her tax is recognized as ₹0.

Debt Funds, Gold, and Legal Exemption Routes

  • Debt Mutual Funds: If a fund invests over 65% in debt, Section 50AA treats all gains as short-term income taxed at your salary slab rate. For steady income alternatives, explore our SWP vs FD Monthly Income Guide.
  • Gold ETFs & SGB: Gold ETFs held over 12 months face 12.5% LTCG. But Sovereign Gold Bonds (SGB) redeemed with the RBI remain 100% tax-free under Section 47(viic). Compare them in our Gold Investment Guide.
  • Saving on Property Gains: You can legally wipe out property capital gains by reinvesting the profits into another house under Section 54 or buying 5-year Section 54EC bonds (NHAI/REC up to ₹50 Lakh). If you have not finalized a new house before your ITR due date (July 31), deposit the funds into an authorized Capital Gains Account Scheme (CGAS) at a bank to keep your exemption safe.

Frequently Asked Questions

What are the new capital gains tax rates in India for FY 2026-27?

Short-term gains on listed equity shares and equity mutual funds (held ≤ 12 months) are taxed at 20% under Section 111A. Long-term equity gains (held > 12 months) enjoy a ₹1.25 lakh annual exemption, with excess taxed at 12.5% under Section 112A. Real estate held over 24 months is taxed at 12.5% without indexation, or 20% with indexation if bought before July 23, 2024.

How does the ₹1.25 lakh equity LTCG exemption work?

The ₹1.25 lakh exemption under Section 112A is an aggregate annual limit across all your listed stocks and equity mutual funds combined. If your total long-term profits total ₹1,50,000, only ₹25,000 is taxed at 12.5% (+ 4% cess), while ₹1,25,000 is completely tax-free.

Can I set off share market losses against my salary income?

No. Capital losses can never be set off against your salary or business income. Short-term losses can offset both short-term and long-term capital gains, while long-term losses can only offset long-term gains. You can carry forward unused losses for up to 8 years if you file your ITR on time.

Can I claim the Section 87A rebate on long-term equity profits?

No. Section 112A(6) bars Section 87A rebate against equity long-term capital gains. However, Section 87A rebate is permitted against short-term equity gains (Section 111A) and non-equity gains (Section 112) if your total income is within the rebate threshold.

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