Tax / 6 min read
Capital Gains Tax on Mutual Funds and Stocks in India
How capital gains on equity and debt mutual funds and stocks are taxed in India — STCG and LTCG rates, the ₹1.25 lakh exemption, and how SIPs are taxed.
By Analyze Daily Team · Published 24 June 2026 · Updated 15 July 2026
Key takeaways
- Equity held over 12 months: long-term gains are taxed at 12.5% above a ₹1.25 lakh yearly exemption.
- Equity held under 12 months: short-term gains are taxed at 20%.
- Debt funds bought after April 2023 are taxed at your income slab, regardless of holding period.
- In a SIP, each instalment has its own holding period for deciding short or long term.
Equity funds and stocks
For equity mutual funds (including ELSS) and listed shares, the tax depends on how long you held the investment before selling.
- Long-term (held over 12 months): gains above ₹1.25 lakh in a financial year are taxed at 12.5%.
- Short-term (held under 12 months): gains are taxed at 20%.
- The ₹1.25 lakh annual exemption applies only to equity gains, not to debt or gold funds.
The ₹1.25 lakh long-term exemption resets every financial year, so booking some gains within it each year can reduce your eventual tax.
Debt funds
The rules for debt mutual funds changed in 2023. For debt funds purchased after 1 April 2023, all gains are added to your income and taxed at your slab rate, regardless of how long you held them.
So debt funds no longer enjoy the long-term capital-gains advantage they once did, which is worth remembering when comparing them with fixed deposits.
How SIPs are taxed
A SIP is not one investment but many — each monthly instalment is treated separately for capital gains. So when you redeem, each instalment is judged on its own holding period.
Instalments older than 12 months qualify as long-term, while recent ones may still be short-term. Funds are generally redeemed on a first-in, first-out basis.
Keeping your tax low
A few simple habits reduce the tax drag on your investments without any risky maneuvers.
- Hold equity investments beyond 12 months to access the lower long-term rate.
- Use the ₹1.25 lakh yearly exemption by booking some long-term gains each year.
- Remember that a 4% cess applies on the tax, slightly raising the effective rate.
Sources and review
How this guide was prepared
Material rules and regulated assumptions are checked against primary or first-party references. The page was last reviewed on 15 July 2026. If a rule or figure has changed, please report it through our corrections process.
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