Capital gains tax on Indian shares: STCG, LTCG and the rules after July 2024

The tax on share profits in India is not complicated, but it changed in the middle of 2024 and a lot of what is written online still describes the old rules. This lesson covers listed shares and equity mutual funds on which securities transaction tax was paid, which is nearly everything a retail investor touches. It is general information, not advice for your return; a chartered accountant earns their fee on the edge cases.

Twelve months is the line

Sell a listed share within twelve months of buying it and the profit is a short-term capital gain. Hold it for more than twelve months and the profit is long-term. The clock runs from the date of purchase, trade date to trade date, and for shares bought in instalments each lot has its own clock, matched first in, first out.

	Held 12 months or less	Held more than 12 months
Called	Short-term capital gain (STCG)	Long-term capital gain (LTCG)
Rate for sales on or after 23 July 2024	20%	12.5% on gains above 1.25 lakh a year
Rate before that date	15%	10% on gains above 1 lakh a year
Indexation for inflation	No	No

Add the 4 percent health and education cess to each rate, and a surcharge if your total income is high (for these gains the surcharge is capped at 15 percent). The rates are the same whether you file under the old or the new tax regime.

The 1.25 lakh exemption applies to the total of your long-term gains on listed equity and equity funds in a financial year, not to each sale. There is no equivalent exemption for short-term gains.

Two worked examples

You bought shares for 3 lakh rupees in June 2024 and sold them for 5.5 lakh in September 2026. Gain: 2.5 lakh, long-term. Subtract the 1.25 lakh exemption and 1.25 lakh is taxable at 12.5 percent, which is 15,625 rupees, plus 625 of cess, so 16,250.

Same shares, but you sold in March 2025, nine months after buying. Gain: 2.5 lakh, short-term. No exemption. 20 percent is 50,000 rupees, plus 2,000 of cess, so 52,000. Patience, in this example, was worth about 36,000 rupees. That is the single most practical thing in this lesson.

Shares bought before 2018

Long-term gains on listed shares were tax-free until 31 January 2018. For shares bought before that date, the law lets you treat the higher of your actual cost and the share’s price on 31 January 2018 as your cost (but never more than what you sold for). This “grandfathering” still applies. If you hold shares from a decade ago, dig out that date’s price before computing anything.

Dividends

Since April 2020 dividends are added to your income and taxed at your slab rate. Companies deduct 10 percent tax at source once the dividends they pay you in a year cross 10,000 rupees (the threshold was 5,000 until March 2025). The deduction shows up in your annual tax statement on the income tax portal and is adjusted when you file.

Buybacks

This rule has flipped twice. Until September 2024 a buyback was tax-free for the shareholder, because the company paid the tax. From 1 October 2024 the whole amount you received was taxed as a dividend at your slab rate, with your purchase cost allowed only as a separate capital loss.

The Finance Act, 2026 changed it again for buybacks from 1 April 2026. An ordinary shareholder is now taxed only on the gain over cost, as a capital gain at the short-term or long-term rate above. Promoters pay an extra tax on top. A buyback you tendered into between October 2024 and March 2026 stays under the dividend rule.

Intraday and F&O are not capital gains

If you buy and sell the same share on the same day without taking delivery, the profit is speculative business income. Profit or loss from futures and options is non-speculative business income. Both are taxed at your slab rate, both require the business form of the return (ITR-3), and both bring in the idea of “turnover”, which for F&O is computed from the absolute value of your profits and losses and decides whether you need a tax audit. If you did more than a handful of such trades in a year, a professional’s help is money well spent.

When losses are useful

A short-term capital loss can be set off against short-term or long-term capital gains. A long-term capital loss can be set off only against long-term gains. Whatever you cannot use this year carries forward for eight years, but only if you file your return by the due date. That is 31 July if you file ITR-2. Since the 2026 Budget, ITR-3 filers who do not need a tax audit have until 31 August. Miss the date and the loss is gone.

A speculative (intraday) loss can be set off only against speculative profit and carries forward four years. An F&O loss can be set off against any income other than salary and carries forward eight years.

This makes a deliberate strategy possible. If you are sitting on a losing position you no longer believe in, selling it before 31 March realises a loss that reduces the tax on your gains. India has no rule against buying the same share back the next day, so a position you still want can be sold for the loss and repurchased, with the new purchase starting a fresh twelve-month clock at the new cost. Keep the brokerage and the fresh clock in mind before treating this as free money.

Paying as you go

If your total tax for the year after deductions at source exceeds 10,000 rupees, you are expected to pay advance tax in four instalments, in June, September, December and March, and capital gains count. Gains are hard to predict, so the law lets you pay the tax on a gain in the instalment that falls after you make it. Pay late and you owe interest on the shortfall; it is small per month, and it adds up.

Filing

Individuals with capital gains and no business income use ITR-2. Anyone with intraday or F&O activity uses ITR-3. Your broker publishes a tax profit and loss report for the financial year that classifies every trade; download it in April, reconcile it against the Annual Information Statement on the income tax portal, which now lists your trades and dividends, and sort out any mismatch before you file rather than after a notice.

Try this before moving on

Download last financial year’s tax P&L report from your broker and classify every line into one of five buckets: short-term gain or loss, long-term gain or loss, dividend, intraday, F&O. Then compute the tax on the first two buckets by hand using the table above. If the result surprises you, that surprise is the reason the holding period deserves a place in every buying decision.

The rates come from the Finance (No. 2) Act, 2024 and were left unchanged by the 2025 and 2026 Budgets; the buyback rule comes from the Finance Act, 2026. From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act, renumbering most sections and replacing “previous year” with “tax year” without changing these rates. Rechecked against published summaries in November 2026. Confirm with the current Act or a chartered accountant before filing.