Capital Gains Tax on Stocks and Property in India: The Complete 2026 Guide
Published 28 July 2026 · Investing
Vikram sold an apartment he bought in 2015 for ₹45 lakh, for ₹95 lakh in 2026. His father, who sold a nearly identical flat in 2023, paid tax on a much smaller gain — after adjusting the purchase price for inflation. Vikram couldn't use that adjustment at all. Same profit on paper, very different tax bills, because of one Budget change that quietly reshaped property taxation.
Capital gains tax in India isn't one rule — it's a different rate and a different rulebook depending on whether you sold shares, mutual funds, or property, and exactly when you sold it. Here is the complete 2026 picture.
Stocks and Equity Mutual Funds
For listed shares and equity mutual funds where Securities Transaction Tax (STT) has been paid, the holding period splits gains into two categories:
| Holding Period | Classification | Tax Rate |
|---|---|---|
| Less than 12 months | STCG (Short-Term) | 20% flat |
| 12 months or more | LTCG (Long-Term) | 12.5% above ₹1.25L exemption/year |
The ₹1.25 lakh LTCG exemption applies per financial year, across all your equity and equity-fund gains combined — not per stock or per fund. Sell equity worth ₹1.2L in gains this year and ₹1.2L next year, and both years fall entirely within the exemption. Sell ₹3L in one year, and only the ₹1.75L above the exemption is taxed at 12.5%.
Debt Mutual Funds: No LTCG Benefit at All
For any debt mutual fund bought on or after April 1, 2023, there is no long-term category. Every gain — whether you held the units for 6 months or 6 years — is treated as short-term and taxed at your regular income tax slab rate. There is no 12.5% concessional rate and no ₹1.25L exemption for these units.
Debt fund units bought before April 1, 2023 are grandfathered — they still qualify for LTCG treatment (12.5%, no indexation) if held over 24 months.
Property: The Indexation Change That Cost Vikram
Before July 23, 2024, sellers could apply indexation — adjusting their original purchase price upward using the government's Cost Inflation Index — before calculating a 20% LTCG tax. This meant a house bought a decade ago for ₹45L might have an "indexed cost" of ₹70L or more by the time it sold, sharply reducing the taxable gain.
For any property sold on or after July 23, 2024, indexation is gone. LTCG on property is now a flat 12.5% on the actual gain, with no inflation adjustment. Vikram's ₹50L gain (₹95L − ₹45L) is taxed at 12.5% = ₹6.25L, full stop.
There is one grandfather clause: if you bought the property before July 23, 2024, you can choose whichever is cheaper — 12.5% with no indexation, or 20% with indexation. Run both numbers before filing; for older properties in high-inflation years, the 20%-with-indexation option is often still lower.
How to Legally Avoid Property Capital Gains Tax
Section 54: if you sell a residential house (held long-term) and reinvest the entire capital gain into a new residential house within 1 year before or 2 years after the sale (or construct one within 3 years), the gain is exempt. You can even split the gain across two houses, but only once in your lifetime and only if the total LTCG is ₹2 crore or less.
Section 54EC: if you don't want to buy another house, you can instead invest up to ₹50 lakh of the gain into specified capital gains bonds (NHAI, REC) within 6 months of the sale, locking the money in for 5 years, to claim the same exemption.
Run this for your own numbers
See How Capital Gains Add to Your Total Tax →What Most People Get Wrong
"Switching mutual fund schemes doesn't count as a sale." It does. Moving from a regular plan to a direct plan of the same fund, or switching AMCs, is a redemption for tax purposes — it triggers capital gains tax on the units sold, even though the money went straight back into another fund.
"F&O trading gains are capital gains." They're not — F&O (futures and options) profit is treated as business income, taxed at your slab rate, not at LTCG/STCG rates. It also requires ITR-3, not ITR-1 or ITR-2. Note that Budget 2026 also raised the Securities Transaction Tax on F&O — futures STT from 0.02% to 0.05%, and options premium STT from 0.10% to 0.15% — effective April 1, 2026, which raises the cost of every trade for active traders even before tax on profit is calculated.
The Surcharge Cap Most Investors Don't Know About
If your total income (including capital gains) crosses ₹2 crore, income tax surcharge normally climbs as high as 25–37%. But for STCG (20%) and LTCG (12.5%) specifically, the surcharge is capped at 15% no matter how high your total income is. This matters most for high-net-worth investors selling large equity or property holdings in a single year — the surcharge cap alone can be worth lakhs compared to what the headline surcharge rate would otherwise imply.
Frequently Asked Questions
What is the LTCG tax rate on stocks and mutual funds in 2026?
12.5% on gains above ₹1.25 lakh per financial year, for equity shares and equity mutual funds held over 12 months where STT was paid. Gains held under 12 months are STCG, taxed at a flat 20%.
Is indexation still available for property sold in 2026?
No, not for property sold on or after July 23, 2024 — LTCG is a flat 12.5% on the actual gain with no inflation adjustment. If you bought the property before that date, you can choose between 12.5% without indexation or 20% with indexation, whichever gives a lower tax bill.
How do I avoid paying capital gains tax on selling a house?
Reinvest the entire long-term capital gain into another residential house within 1 year before or 2 years after the sale (Section 54), or invest up to ₹50 lakh in NHAI/REC capital gains bonds within 6 months (Section 54EC). Both routes make the gain exempt, subject to the reinvestment conditions.
Are debt mutual funds still eligible for LTCG tax treatment?
Only if bought before April 1, 2023, and held over 24 months — those units get 12.5% LTCG with no indexation. Debt fund units bought on or after April 1, 2023 have no long-term category at all; every gain is taxed at your income slab rate regardless of holding period.
Does the ₹1.25 lakh LTCG exemption apply separately to stocks and mutual funds?
No — it's one combined exemption of ₹1.25 lakh per financial year across all your equity share and equity mutual fund long-term gains put together, not ₹1.25L per asset or per fund.
If you sold anything this year — shares, a fund, a house — have you actually checked which holding-period bucket it fell into, or assumed the rate that applied last time still applies now?