Money Basics · Taxes & 80C

Capital gains

When you sell an asset (stock, mutual fund, property, gold) for more than you bought it, the profit is called a capital gain. India taxes it differently depending on how long you held the asset.

Short-Term Capital Gains (STCG)

Held the asset for a SHORT time before selling:

• Equity shares/mutual funds (equity): held less than 12 months → STCG taxed at 20%
• Property, physical gold, gold and international fund-of-funds: held less than 24 months → STCG taxed at your income slab rate
• Listed gold ETFs: held less than 12 months → STCG taxed at your income slab rate
• Debt mutual funds: slab rate whatever you do. The holding-period clock stopped helping in April 2023

Long-Term Capital Gains (LTCG)

• Equity shares/equity mutual funds: held 12+ months → LTCG taxed at 12.5% (above ₹1.25L gains)
• Debt funds: no long-term rate to reach. Gains sit at your slab however long you hold
• Gold ETFs: held 12+ months → 12.5% without indexation. Gold and international FoFs: 24+ months for the same 12.5%
• Property: held 24+ months → LTCG at 12.5% without indexation. Property bought before 23 July 2024 keeps a choice. 12.5% without indexation, or 20% with it, whichever comes out lower

> The ₹1.25 lakh LTCG exemption is per financial year across ALL equity gains. Gains up to ₹1.25L: zero tax. Above that: 12.5%.

12 monthsHolding period for equity LTCG qualification

12.5%LTCG rate on equity above ₹1.25L annual exemption

20%STCG rate on equity

Practical implications

• Hold equity investments for 12+ months. This reduces tax from 20% to 12.5% and gives you a ₹1.25L free ride each year.
• The ₹1.25L exemption does not carry forward. Gains not booked in a financial year do not add to next year's allowance. Selling and buying back also costs brokerage and STT, which eats into a small harvest.
• Don't let tax tail wag the investing dog. A fundamentally broken company shouldn't be held just to qualify for LTCG treatment.

Takeaway. Hold equity 12+ months for LTCG treatment (12.5%) vs STCG (20%). The ₹1.25L LTCG exemption resets annually. Use it to harvest tax-free gains each year.