Sold shares or redeemed mutual funds? You need to know your capital gains tax liability before filing your ITR. Budget 2024 made major changes to capital gains tax rates — this guide explains everything in plain terms.
Budget 2024 Changes: LTCG tax on equity was raised from 10% to 12.5% (effective 23 July 2024), and STCG from 15% to 20%. Indexation benefit was removed for most assets (except property held pre-2001).
What Are Capital Gains?#
When you sell an asset (shares, mutual funds, property, gold, etc.) for more than you paid for it, the profit is called a capital gain. It's taxed based on:
- Type of asset (equity, debt, property, etc.)
- Holding period (determines if it's LTCG or STCG)
Equity Shares & Equity Mutual Funds#
Holding Period Classification#
| Hold For | Gain Type |
|---|---|
| ≤ 12 months | Short-Term Capital Gain (STCG) |
| > 12 months | Long-Term Capital Gain (LTCG) |
Tax Rates (Post Budget 2024)#
| Gain Type | Tax Rate | Exemption |
|---|---|---|
| STCG on equity (STT paid) | 20% | No basic exemption |
| LTCG on equity (STT paid) | 12.5% | ₹1.25 lakh/year exempt |
LTCG Calculation — Equity Shares#
Example:
- Bought 100 shares of Company X on 1 Jan 2022 at ₹500/share (Total: ₹50,000)
- Sold on 1 Apr 2026 at ₹800/share (Total: ₹80,000)
- Gain: ₹30,000
- LTCG after ₹1.25L exemption: ₹30,000 − (part of ₹1.25L exemption) = ₹0
- Tax: ₹0
If you have multiple gains totaling ₹2 lakh:
- Exempt: ₹1.25 lakh
- Taxable LTCG: ₹75,000
- Tax @12.5% = ₹9,375 + 4% cess = ₹9,750
Debt Mutual Funds#
Budget 2023 removed the indexation benefit from debt funds. Here's the current treatment:
| Purchased | Tax Treatment |
|---|---|
| On/after 1 April 2023 | Taxed as regular income (at slab rate), regardless of holding period |
| Before 1 April 2023 (held ≥ 36 months) | LTCG @12.5% (no indexation) — Budget 2024 change |
| Before 1 April 2023 (held < 36 months) | STCG at slab rate |
No indexation for debt funds: Even for funds bought before April 2023 and held for 3+ years, indexation benefit is no longer available after Budget 2024. Consult a CA for grandfathering details.
Equity Savings / Hybrid Funds#
The classification depends on equity exposure:
| Fund Type | Equity Allocation | Treatment |
|---|---|---|
| Equity-oriented hybrid | ≥ 65% equity | Like equity funds (LTCG after 12 months) |
| Debt-oriented hybrid | < 65% equity | Like debt funds (slab rate post Apr 2023) |
| Arbitrage funds | ≥ 65% equity | Like equity (STT paid) |
How to Report Capital Gains in ITR#
Capital gains from stocks and mutual funds must be reported in ITR-2 (or ITR-3 for business income).
Step 1: Get Your Capital Gains Statement#
- From broker: Download via demat account (Zerodha, Groww, etc. have dedicated CG reports)
- From mutual fund: Get via CAMS/KFintech or individual fund houses
Step 2: Categorize Gains#
Split into:
- Equity LTCG / STCG
- Debt LTCG / STCG
- Other asset gains
Step 3: Enter in Schedule CG of ITR#
| Schedule | What Goes Here |
|---|---|
| Schedule 112A | LTCG from equity (STT paid) |
| Schedule 115AD | For FIIs (not applicable for most) |
| Other CG entries | Debt funds, other STCG |
If you have gains from multiple brokers or mutual funds, use a tax aggregator or ask a CA to consolidate them. Errors in CG reporting are a top cause of income tax notices.
Tax-Loss Harvesting#
Losses can be used to reduce gains:
| Can Offset Against |
|---|
| Short-term losses can set off STCG and LTCG |
| Long-term losses can only set off LTCG |
Unused capital losses can be carried forward for up to 8 assessment years and set off against future gains.
Advance Tax Obligation#
If your capital gains tax liability is ₹10,000 or more in a year, you must pay advance tax in installments:
| Installment | Due Date | % of Tax |
|---|---|---|
| 1st | 15 June | 15% |
| 2nd | 15 September | 45% |
| 3rd | 15 December | 75% |
| 4th | 15 March | 100% |
Missing advance tax leads to interest under Section 234B and 234C.
Frequently Asked Questions#
Are capital gains taxed in both old and new regimes? Yes. Capital gains are taxed at special rates (12.5% LTCG, 20% STCG for equity) regardless of which regime you choose for slab-rate income.
Can I claim Section 80C deductions against capital gains? No. Chapter VI-A deductions like 80C and 80D only apply to slab-rate income, not to special-rate capital gains.
What if I bought shares before 31 January 2018? The grandfathering rule (Section 112A) allows LTCG on equity shares acquired before 1 Feb 2018 to be computed with the higher of actual cost or fair market value as on 31 Jan 2018. This is still applicable.