Tax rates for 2026-27
| What you sold | Long-term if held | Long-term tax | Short-term tax |
|---|---|---|---|
| Listed shares, equity funds, equity ETFs | Over 12 months | 12.5% above ₹1.25 lakh a year | 20% |
| Debt funds bought on or after 1 April 2023 | Never long-term | Slab rate | Slab rate |
| Gold ETFs | Over 12 months | 12.5% | Slab rate |
| Gold funds, international funds (not ETFs) | Over 24 months | 12.5% | Slab rate |
4% health and education cess is added on top. There is no indexation benefit on these gains.
An example
You invested ₹5 lakh in an equity fund and sell after 2 years for ₹8 lakh. The gain is ₹3 lakh. The first ₹1.25 lakh is exempt, so tax is 12.5% of ₹1.75 lakh = ₹21,875, plus cess = ₹22,750.
Ways to pay less
- Hold equity for over a year: the rate falls from 20% to 12.5%, and the first ₹1.25 lakh is free.
- Harvest gains each year: book up to ₹1.25 lakh of long-term gains and reinvest, raising your cost price.
- Set off losses: losses can be set off against gains and carried forward for 8 years if you file your return on time.
- SIPs: each instalment has its own holding period, and units are sold first-in, first-out.
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Questions people ask
Is the ₹1.25 lakh exemption per fund or per year?
Per person, per financial year, across all listed equity shares and equity funds together.
Does the 87A rebate apply to capital gains?
The rebate does not reduce tax on gains taxed at special rates, such as 20% STCG and 12.5% LTCG on equity.
Do I pay tax if I switch between funds?
Yes. A switch is a sale of one fund and a purchase of another, so gains on the units sold are taxable.