Capital gains: short-term vs long-term
Part of Tax on investments. 6 min read. Free lesson with a short video, quiz and practice.
When you sell something you own, such as shares, fund units, gold or a flat, for more than you paid, the profit is a capital gain. If you sell for less, it is a capital loss. How long you held the asset decides whether the gain is short-term or long-term, and that decides the tax.
Working out the gain
Gain = sale price − cost of buying − costs of selling (such as brokerage). Improvements, like renovating a flat, can be added to the cost. Securities transaction tax (STT) cannot be deducted.
Holding period: when does long-term start?
- More than 12 months: listed shares, equity mutual funds, and other listed securities such as listed bonds and ETFs.
- More than 24 months: everything else, such as property, physical gold, unlisted shares and non-equity mutual funds.
Tax rates, tax year 2026-27
| Asset | Short-term | Long-term |
|---|---|---|
| Listed shares, equity funds | 20% | 12.5% on gains above ₹1.25 lakh a year |
| Property, gold, unlisted shares and others | Your slab rate | 12.5%, no indexation |
| Debt funds bought on or after 1 April 2023 | Your slab rate | Your slab rate (always) |
These rates have applied since 23 July 2024 and continue under the Income-tax Act, 2025. Cess, and surcharge for high incomes, are added on top.
Indexation used to raise your cost for inflation before working out long-term gains. It was removed in 2024. One exception: land or buildings bought before 23 July 2024 by resident individuals can still choose 20% with indexation if that is lower.
A worked example
Sunita bought gold jewellery for ₹2,00,000 in 2021 and sells it for ₹3,00,000 in 2026. She held it for more than 24 months, so the ₹1,00,000 gain is long-term: tax = 12.5% × ₹1,00,000 = ₹12,500, plus cess = ₹13,000.
Had she sold it within 24 months, the gain would be added to her income and taxed at her slab rate.
First in, first out
If you bought the same share or fund at different times, the oldest units are treated as sold first. With SIPs, each instalment has its own holding period.
Key takeaways
- A capital gain is the profit from selling an asset; a loss is the opposite.
- Listed shares and equity funds become long-term after 12 months; most other assets after 24 months.
- Equity: 20% short-term; 12.5% long-term on gains above ₹1.25 lakh a year.
- Other assets: slab rate short-term; 12.5% long-term with no indexation.
- Debt funds bought from April 2023 are always taxed at your slab rate.
Quick quiz
When do listed shares become long-term?
Answer: After 12 months. Listed shares and equity funds are long-term after more than 12 months.
What is the long-term rate on gold held over 24 months?
Answer: 12.5% without indexation. Long-term gains on gold are taxed at 12.5% with no indexation.
A debt fund bought in 2024 is sold after 3 years. How is the gain taxed?
Answer: At your slab rate. Debt funds bought on or after 1 April 2023 are always taxed at slab rates.
Which can be deducted when working out a gain?
Answer: Brokerage on buying and selling. Costs of buying and selling, like brokerage, can be deducted; STT cannot.