What is the LTCG tax rate on shares and equity mutual funds in India?

Eligible listed Indian shares and equity-oriented mutual funds held for more than 12 months are taxed at 12.5% on aggregate long-term gains above ₹1.25 lakh in a financial year. Short-term gains on these assets are taxed at 20%.

Does the ₹1.25 lakh LTCG exemption apply to US stocks?

No. Shares listed on foreign exchanges generally do not qualify for the Section 112A treatment, so the ₹1.25 lakh exemption does not apply. Long-term gains generally require a holding period of more than 24 months and are taxed at 12.5% without indexation.

How is physical gold taxed under current LTCG rules?

Physical gold generally becomes long-term after more than 24 months. Long-term gains are taxed at 12.5% without indexation for transfers on or after July 23, 2024.

Is indexation available on property sales now?

The general LTCG rate on property is 12.5% without indexation from July 23, 2024. Resident individuals and Hindu Undivided Families selling property acquired before that date can compare against the earlier 20% with indexation and choose the lower tax.

How are debt mutual funds taxed?

Debt fund units covered by Section 50AA and acquired on or after April 1, 2023 are taxed at the investor's slab rate irrespective of how long they are held. They do not qualify for the 12.5% LTCG rate.

Has the government announced an LTCG tax cut in Budget 2027?

No. Finance Minister Nirmala Sitharaman discussed LTCG, STT and asset class taxation on October 13 but did not announce a tax cut or promise relief. The government has made no formal announcement on changes.

LTCG Tax Rules: 12.5% Rate, ₹1.25 Lakh Exemption Limited to Indian Equity and Equity Funds

LTCG tax rules are back in focus ahead of Budget 2027 after Finance Minister Nirmala Sitharaman spoke about long-term capital gains tax, securities transaction tax (STT) and taxation across asset classes at the Bloomberg New Economy Forum on October 13. She did not announce a tax cut or promise relief, and the government has made no formal announcement on changes. Investors therefore continue to calculate returns under the rules in force since the July 2024 Budget.

How LTCG Applies Across Assets

Asset	Long-term holding period	LTCG treatment (transfers on or after July 23, 2024)
Listed Indian shares, equity-oriented mutual funds	More than 12 months	12.5% on aggregate gains above ₹1.25 lakh a year
US and other foreign-listed shares	Generally more than 24 months	12.5% without indexation; no ₹1.25 lakh exemption
Physical gold	Generally more than 24 months	12.5% without indexation
Gold ETFs	Generally more than 12 months, depending on classification	Depends on instrument and provisions
Property	Generally more than 24 months	12.5% without indexation, with transitional relief for older purchases
Debt mutual funds under Section 50AA (acquired on or after April 1, 2023)	Not applicable	Slab rate irrespective of holding period
Unlisted shares	More than 24 months	12.5% without indexation; no ₹1.25 lakh exemption

Equity: The ₹1.25 Lakh Exemption in Practice

Under Section 112A, eligible gains from listed Indian shares and equity-oriented mutual funds held for more than 12 months are taxed at 12.5% on aggregate gains above ₹1.25 lakh in a financial year. On total eligible long-term gains of ₹2 lakh, ₹75,000 is taxable, producing a basic tax of ₹9,375 before surcharge and cess. The exemption is an annual limit across eligible gains, not a separate limit for each holding. STT must be paid on the transfer, and for equity shares generally also at acquisition, subject to exceptions. Eligible short-term gains are taxed at 20% under Section 111A.

US Stocks, Gold, Property and Debt Funds

Shares listed on a foreign exchange generally do not qualify for Section 112A treatment. A long-term gain of ₹2 lakh on US stocks would attract a basic tax of ₹25,000 at 12.5%, before surcharge and cess, because the ₹1.25 lakh exemption does not apply. Gains also have to be converted into rupees under applicable rules.

On physical gold, an investor who buys for ₹5 lakh and sells after three years for ₹7 lakh has a ₹2 lakh gain, and the basic tax at 12.5% is ₹25,000. Indexation is no longer generally available.

For property, the July 2024 Budget cut the general LTCG rate from 20% to 12.5% and removed indexation. Resident individuals and Hindu Undivided Families selling land or a building acquired before July 23, 2024 can compare tax under the new regime with the earlier 20% with indexation and choose the lower liability. For debt funds covered by Section 50AA, a long holding period does not qualify gains for the 12.5% rate.

Policy History

Long-term equity gains were exempt before 2018. The Budget 2018 reintroduced LTCG at 10% on gains above ₹1 lakh, with grandfathering for gains accrued up to January 31, 2018. The July 2024 Budget raised the rate to 12.5%, lifted the exemption to ₹1.25 lakh and raised short-term equity tax from 15% to 20%. Budget 2025 left these settings unchanged, and Budget 2026 raised STT on certain derivatives transactions.

Market and Sector Impact

The Sensex gained 1.54% and the Nifty 50 rose 1.60% on October 13 after Sitharaman's remarks. SBI Research has recommended abolishing LTCG tax on equities, while the counterpoint is that the levy is an important source of government revenue. Other demands include lower STT, greater consistency across asset classes and a review of the removal of indexation. These are proposals, not government decisions.

What to Watch

Track Budget 2027 preparations, any formal proposal on LTCG or STT, and whether the government changes exemptions, holding periods or indexation while keeping headline rates.