Capital Gains Tax Guide: Stocks, Mutual Funds, Gold and Property (India, 2026)

You sell a mutual fund, a stock, some gold, or a flat, and you make a profit. Congratulations, the taxman now wants a share of it. The question is how much, and the honest answer is: it depends entirely on WHAT you sold and HOW LONG you held it.

This is the part of investing most people get wrong, not because it is complicated, but because nobody sits them down and walks through it asset by asset. Equity is taxed one way. Debt funds are taxed a completely different way since 2023. Gold has its own rulebook. Property has an entirely separate one, with a special exception if you bought before a specific date in 2024. Get the holding period wrong by a week and you can end up paying double the tax you needed to.

This guide lays out the complete 2026 picture for India: stocks, mutual funds (equity and debt), gold, property, and REIT/InvIT units. You will walk away knowing exactly which bucket your gain falls into, what rate applies, and how to use the ₹1.25 lakh exemption and loss set-off rules to legally reduce what you owe.

1. The Two Kinds Of Capital Gains: Short Term And Long Term

Before anything else, understand the split. Every capital gain is classified as either Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG), and that classification depends purely on how long you held the asset before selling it. The holding period threshold that separates STCG from LTCG is different for every asset class, this is the single most common source of confusion, and it is why this guide dedicates a full table to each asset type.

Core rule: the tax rate on your gain depends on the asset type AND the holding period together, never assume one without checking the other.

2. Equity Shares And Equity Mutual Funds

This is the most common one for salaried people investing through SIPs, and it is also the simplest.

Holding period	Classification	Tax rate
12 months or less	STCG	20%
More than 12 months	LTCG	12.5%, only on gains above ₹1.25 lakh in the financial year

"Equity" here covers listed shares and equity-oriented mutual funds (funds with a meaningfully high equity allocation, the kind sold as pure equity, flexicap, midcap, smallcap, index funds tracking equity indices, and similar).

The ₹1.25 lakh figure is an annual exemption, not a per-fund or per-stock exemption. It applies to your TOTAL long-term equity gains (and REIT/InvIT gains, they share the same bucket) across everything you sold in that financial year. If your total LTCG across all equity holdings stays at or under ₹1.25 lakh for the year, you owe zero LTCG tax on it. Cross that line and only the AMOUNT ABOVE ₹1.25 lakh is taxed at 12.5%, not the whole gain.

Say you sell equity mutual fund units you held for 18 months, and the gain works out to ₹1,50,000. That is comfortably past the 12-month mark, so it is LTCG. Of that ₹1,50,000, the first ₹1,25,000 is exempt. Only the remaining ₹25,000 is taxed, at 12.5%. That works out to ₹3,125 in tax, not ₹18,750 (which is what you would owe if the whole amount were taxed at 12.5% with no exemption). This is the single most useful calculation in this entire guide, run it yourself every time you plan to book a large equity gain.

3. Debt Mutual Funds: The Rule That Changed In 2023

This is where a lot of long-time investors still get tripped up, because the rule changed and many people are still running on the old version in their heads.

Core rule: for debt mutual fund units bought on or after 1 April 2023, there is no LTCG concession at all. Every single gain, no matter how long you hold the fund, is added to your total income and taxed at your income tax slab rate. There is no 12-month or 24-month holding period that flips you into a lower rate. There is no ₹1.25 lakh exemption either, that exemption is specific to equity-type assets under Section 112A.

Debt fund purchased	Tax treatment
On or after 1 April 2023	Always taxed at your slab rate, regardless of holding period

If you are in the 30% slab and you book a ₹50,000 gain on a debt fund, you owe roughly ₹15,000 in tax on it, full stop. This is a meaningfully worse deal than equity funds for high-slab taxpayers, and it is exactly why debt funds are usually recommended for genuinely short-term parking or for lower-slab investors, not as a long-term wealth tool the way they used to be marketed before 2023.

4. Gold: Physical, Digital, And ETF Are Taxed Differently

Gold splits into two tax treatments depending on the FORM you hold it in, and this trips people up because "gold is gold" in their head, but the tax code disagrees.

Gold form	LTCG holding period	LTCG rate	₹1.25 lakh exemption applies?
Physical gold (jewellery, coins, bars)	More than 24 months	12.5%	No
Digital gold	More than 24 months	12.5%	No
Gold ETF	More than 12 months	12.5%	No

Notice the ₹1.25 lakh exemption column says no across the board. That exemption is a Section 112A benefit reserved for equity shares, equity mutual funds and REIT/InvIT units. Gold in any form does not get it, so every rupee of long-term gain on gold is taxable at 12.5%, there is no tax-free slice to shelter behind.

Also notice the holding period gap: physical and digital gold need 24 months to reach LTCG, but a gold ETF only needs 12 months. If you are choosing between holding physical gold and a gold ETF for a medium-term goal, that holding-period difference is worth factoring in, not just the storage and purity concerns.

Anything held for less time than the LTCG threshold above is STCG, and STCG on gold (in any form) is taxed at your income slab rate.

5. Property: The Pre vs Post 23 July 2024 Split

Property is the most complicated bucket, because a mid-year 2024 Budget change created two different computation methods depending on WHEN you originally bought the property.

Holding period	Classification
24 months or less	STCG, taxed at your slab rate
More than 24 months	LTCG, 12.5%

That 12.5% LTCG rate is straightforward for property bought on or after 23 July 2024. The complication is for property you already owned BEFORE that date.

For property acquired before 23 July 2024, you get a choice. You can compute your LTCG tax either:

• At 12.5% WITHOUT indexation (the new, simpler method), or
• At 20% WITH indexation (the old method, where your original purchase cost is inflated using the Cost Inflation Index to reflect years of inflation, which shrinks your taxable "gain" on paper)

You are allowed to calculate the tax both ways and pay whichever is LOWER. This matters enormously for property bought many years ago in a high-inflation period, indexation can shrink your taxable gain dramatically, and 20% on a much smaller indexed gain can beat 12.5% on the full unindexed gain. There is no single answer here, you (or your CA) have to run both calculations on your specific numbers before filing.

Core rule: if you bought property before 23 July 2024, always compute your tax both ways (12.5% no indexation, and 20% with indexation) and file using whichever number is lower. Do not assume the new 12.5% flat rate is automatically better.

Exemptions On Property Gains: Section 54 And Section 54F

You do not always have to pay LTCG tax on a property sale, even a large one, if you reinvest correctly.

Section	What it covers	Core condition
Section 54	Sale of a residential house, when you reinvest the gain into another residential house	Must buy a new house within a specified window around the sale (generally within 1 year before or 2 years after, or construct within roughly 3 years), and the exemption is limited to the amount reinvested
Section 54F	Sale of any long-term capital asset OTHER than a residential house (e.g. a plot, gold, listed shares), when you invest the entire net sale proceeds into a residential house	You must not already own more than one other residential house on the date of sale, and the exemption is proportionate if you reinvest less than the full sale proceeds

Both sections exist to encourage reinvestment into housing rather than to let you walk away tax-free with cash in hand. If you sell a house and plan to buy another one anyway, structuring the timeline correctly around Section 54 can save you a real six or seven-figure tax bill. This is exactly the kind of decision worth running past a CA before you sign the sale deed, the timing windows are strict and unforgiving.

6. REIT And InvIT Units

REIT and InvIT units, listed on the exchange and traded like shares, now sit under the same Section 112A framework as equity.

Holding period	Classification	Tax rate
12 months or less	STCG	20%
More than 12 months	LTCG	12.5%, sharing the same ₹1.25 lakh annual exemption bucket as equity gains

If you want the full picture on how REIT distributions themselves are taxed (separate from the capital gain on the unit price), that is covered in the dedicated REIT guide linked below, this section here is purely about what happens when you sell the units for a gain or loss.

7. The Full Picture: One Table For Every Asset Class

Here is everything above, side by side, so you can find your asset in one look.

Asset	STCG threshold	STCG rate	LTCG threshold	LTCG rate	₹1.25L exemption?
Equity shares / equity mutual funds	12 months or less	20%	More than 12 months	12.5%	Yes
Debt mutual funds (bought on/after 1 Apr 2023)	Any holding period	Slab rate	Not applicable	Slab rate	No
Physical / digital gold	24 months or less	Slab rate	More than 24 months	12.5%	No
Gold ETF	12 months or less	Slab rate	More than 12 months	12.5%	No
Property	24 months or less	Slab rate	More than 24 months	12.5% (or 20% with indexation, if bought before 23 Jul 2024)	No
REIT / InvIT units	12 months or less	20%	More than 12 months	12.5%	Yes, shared with equity

How Do You Set Off And Carry Forward Capital Losses?

Not every sale is a gain. When you sell at a loss, the tax rules let you use that loss to reduce your tax bill elsewhere, in plain terms, here is how it works.

• Short-term capital loss can be set off against BOTH short-term gains and long-term gains in the same year, on any capital asset.
• Long-term capital loss can only be set off against long-term gains, it cannot reduce a short-term gain.
• If you cannot use up the entire loss in the same financial year (because you did not have enough gains to offset it against), you can carry it forward for up to 8 assessment years, and use it against future capital gains in those years.
• To carry a loss forward, you must file your income tax return ON TIME for the year the loss was incurred. File late, and you lose the right to carry it forward, even though the loss genuinely happened.

Say you booked a ₹40,000 long-term loss on one equity fund this year, and a ₹60,000 long-term gain on another. You net them against each other first: ₹60,000 minus ₹40,000 leaves ₹20,000 of net long-term gain. That is comfortably under the ₹1.25 lakh exemption, so you owe nothing on it this year. The set-off happened automatically in your computation, you just have to report both transactions correctly in your return.

What Counts As Your "Holding Period" Exactly?

Your holding period is measured from the date you actually acquired the asset (purchase, allotment, or in the case of inherited property, generally from the date the original owner acquired it, not the date you inherited it) to the date you sell or transfer it. For mutual funds bought via SIP, this is important: EACH SIP INSTALLMENT IS TREATED AS A SEPARATE PURCHASE with its own holding period. If you have been doing a monthly SIP for two years and you redeem the whole thing today, your earliest installments may qualify for LTCG while your most recent ones are still STCG, all within the same redemption. Your fund house's capital gains statement will typically break this out lot by lot.

Is There Any Way To Legally Reduce Your Capital Gains Tax?

Yes, mainly through three levers, all covered in more depth elsewhere in this guide and its related guides:

• Use the ₹1.25 lakh annual LTCG exemption on equity and REIT/InvIT gains by timing large redemptions across financial years instead of booking everything in one year.
• Set off losses against gains deliberately (sometimes called tax-loss harvesting), selling a genuinely underperforming holding at a loss specifically to offset a gain elsewhere, as long as it also makes sense for your portfolio.
• Use Section 54 or 54F reinvestment exemptions on property gains if you were planning to buy another house anyway.

None of these are loopholes, they are simply the rules as written. The mistake most people make is not knowing these levers exist until after they have already booked the gain and it is too late to plan around it.

Related Guides

• Income Tax Explained Simply
• Mutual Funds Guide (India)
• Gold Investment Guide (India)
• ETF Investing Guide (India)
• REIT Guide (India)
• Tax Saving Guide (India)

Disclaimer

This guide is for educational purposes only and does not constitute tax or financial advice. Capital gains tax involves several holding-period thresholds and asset-specific rules, and getting the classification wrong can meaningfully change what you owe. Figures are based on rules current in 2026 and may change in future Budgets. Evaluate your own transactions and consult a qualified chartered accountant or a SEBI-registered investment advisor before filing your return or making a sale decision based on tax outcomes.