Many people invest in shares to grow their savings and earn profits from the stock market. However, when investors sell shares at a profit, they may have to pay income tax on the amount they earn. The Income Tax law calls this profit a capital gain.
The amount of tax depends on several factors, including how long you hold the shares, whether you invest in listed or unlisted shares, and the applicable tax rates.
In India, the government divides capital gains into two categories: Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG).
For Tax Year 2026–27, qualifying short-term capital gains on listed equity shares generally attract 20% tax. Meanwhile, qualifying long-term capital gains attract 12.5% tax on the amount exceeding ₹1.25 lakh.
Furthermore, the Income-tax Act, 2025 came into effect on 1 April 2026. The Finance Act, 2026 also introduced changes relating to share buybacks and Securities Transaction Tax (STT).
This article explains the latest capital gains tax rules on shares in India, including holding periods, tax rates, calculations, exemptions, tax-saving options and income tax return filing.
Types of Capital Gains on Shares
The Income Tax law classifies capital gains according to the period for which investors hold their shares.
There are two main types of capital gains:
- Short-Term Capital Gain (STCG)
- Long-Term Capital Gain (LTCG)
The following table explains the holding periods for listed and unlisted equity shares.
| Type of Shares | Short-Term Capital Gain | Long-Term Capital Gain |
|---|---|---|
| Listed equity shares | 12 months or less | More than 12 months |
| Unlisted equity shares | 24 months or less | More than 24 months |
Therefore, investors should check the purchase and sale dates before calculating capital gains tax.
1. Short-Term Capital Gain (STCG)
Short-Term Capital Gain arises when investors sell shares within the prescribed short-term holding period and earn a profit.
For example, if you purchase listed equity shares in January and sell them in June of the same year, the profit generally qualifies as a short-term capital gain.
Holding Period for Short-Term Capital Gains
The holding period depends on the type of shares.
For listed equity shares, the short-term holding period is 12 months or less.
However, for ordinary unlisted equity shares, the short-term holding period is 24 months or less.
STCG Tax Rate on Listed Shares
For qualifying listed equity share transactions that satisfy the Securities Transaction Tax conditions, the following tax rates apply:
| Date of Sale | STCG Tax Rate |
|---|---|
| Before 23 July 2024 | 15% |
| On or after 23 July 2024 | 20% |
Accordingly, the general tax rate for qualifying short-term capital gains on listed equity shares in Tax Year 2026–27 is 20%.
In addition, investors must consider Health and Education Cess at 4% and any applicable surcharge.
The earlier Income-tax Act, 1961 covered these qualifying gains under Section 111A. For Tax Year 2026–27, taxpayers should refer to the corresponding provisions of the Income-tax Act, 2025.
Example of Short-Term Capital Gain
Mr. A purchased 100 listed equity shares of XYZ Ltd. on 1 January 2026 at ₹400 per share.
Later, he sold these shares on 1 June 2026 at ₹500 per share through a recognised stock exchange. The transaction satisfied the applicable STT conditions.
Let us calculate his short-term capital gain.
| Particulars | Amount |
|---|---|
| Purchase Price (100 × ₹400) | ₹40,000 |
| Sale Price (100 × ₹500) | ₹50,000 |
| Short-Term Capital Gain | ₹10,000 |
| STCG Tax at 20% | ₹2,000 |
| Health and Education Cess at 4% | ₹80 |
| Total Tax | ₹2,080 |
Since Mr. A sold the shares within 12 months, his profit qualifies as a short-term capital gain.
In this example, he pays ₹2,080 in tax, assuming he cannot use any unused basic exemption limit and has no eligible losses, additional expenses or surcharge.
STCG Tax on Unlisted Shares
Unlisted equity shares follow different taxation rules.
When investors sell ordinary unlisted shares within 24 months, the short-term gain generally attracts tax at the applicable normal income tax rates.
For example, suppose an individual earns ₹80,000 from selling unlisted shares after holding them for 10 months.
In this situation, the individual generally adds the short-term capital gain to income taxable at the applicable normal rates.
Therefore, the investor’s total taxable income and applicable tax regime determine the actual tax liability.
2. Long-Term Capital Gain (LTCG)
Long-Term Capital Gain arises when investors sell shares after holding them beyond the prescribed short-term period.
For listed equity shares, investors must hold the shares for more than 12 months.
Similarly, for ordinary unlisted equity shares, investors must hold them for more than 24 months.
Example of Long-Term Capital Gain
Mr. A purchased 100 listed equity shares of ABC Ltd. on 10 January 2022 at ₹300 per share.
Later, he sold these shares on 11 February 2025 at ₹800 per share.
Let us calculate the capital gain.
| Particulars | Amount |
|---|---|
| Purchase Price (100 × ₹300) | ₹30,000 |
| Sale Price (100 × ₹800) | ₹80,000 |
| Long-Term Capital Gain | ₹50,000 |
Since Mr. A held the shares for more than 12 months, the profit qualifies as a long-term capital gain.
Furthermore, if this ₹50,000 represents his entire qualifying long-term capital gain for the relevant financial year, he generally does not have to pay LTCG tax because the amount falls below the ₹1.25 lakh threshold.
3. Long-Term Capital Gains Tax on Shares
For Tax Year 2026–27, qualifying long-term capital gains from listed equity shares attract tax at 12.5% on the amount exceeding ₹1.25 lakh.
The earlier Income-tax Act, 1961 covered these gains under Section 112A. The corresponding provisions of the Income-tax Act, 2025 apply to Tax Year 2026–27.
LTCG Tax Rate and Exemption Limit
| Particulars | Tax Treatment |
|---|---|
| Holding Period | More than 12 months |
| LTCG Threshold | ₹1,25,000 |
| Tax Rate Above Threshold | 12.5% |
| Indexation Benefit | Not available |
| Health and Education Cess | 4% |
| Surcharge | As applicable |
The ₹1.25 lakh threshold applies to aggregate qualifying gains covered by the relevant provision, including eligible equity-oriented mutual fund units and business trust units.
Therefore, investors cannot claim a separate ₹1.25 lakh threshold for each share, broker or demat account.
Example of LTCG Tax Calculation
Suppose an investor earns ₹3,00,000 in qualifying long-term capital gains from listed equity shares during Tax Year 2026–27.
The calculation will be as follows:
| Particulars | Amount |
|---|---|
| Total Long-Term Capital Gain | ₹3,00,000 |
| Less: LTCG Threshold | ₹1,25,000 |
| Taxable Long-Term Capital Gain | ₹1,75,000 |
| Tax at 12.5% | ₹21,875 |
| Health and Education Cess at 4% | ₹875 |
| Total Tax Payable | ₹22,750 |
Thus, the investor pays ₹22,750 in tax under these assumptions.
However, the actual amount may change if the investor has eligible capital losses, an unused basic exemption limit or an applicable surcharge.
4. Capital Gains Tax on Unlisted Shares
Unlisted shares refer to shares that do not trade on a recognised stock exchange.
Many investors hold unlisted shares in private limited companies, startups and other businesses.
However, their tax treatment differs from the rules for qualifying listed equity shares.
Tax Rates on Unlisted Equity Shares
| Type of Gain | Holding Period | General Tax Rate |
|---|---|---|
| Short-Term Capital Gain | 24 months or less | Applicable normal tax rate |
| Long-Term Capital Gain | More than 24 months | Generally 12.5% |
For qualifying transfers under the current rules, investors generally pay 12.5% tax on long-term capital gains from unlisted equity shares without indexation.
However, special provisions may apply to non-residents and certain transactions.
Furthermore, when investors sell unlisted shares below their prescribed fair market value, valuation-related tax provisions may affect the calculation.
Therefore, investors should verify the purchase cost, sale consideration and applicable valuation rules before transferring shares of a private limited company.
5. Difference Between STCG and LTCG on Shares
The following table summarises the main differences between short-term and long-term capital gains.
| Particulars | STCG | LTCG |
|---|---|---|
| Listed Equity Shares | Held for 12 months or less | Held for more than 12 months |
| Qualifying Listed Equity Tax Rate | 20% | 12.5% |
| ₹1.25 Lakh Threshold | Not available | Available for qualifying gains |
| Ordinary Unlisted Shares | Generally normal tax rates | Generally 12.5% |
| Indexation Benefit | Not applicable | Generally unavailable |
These rates exclude Health and Education Cess and applicable surcharge.
6. Important Capital Gains Tax Changes in 2026
The government introduced several changes that investors should understand before calculating their tax liability.
New Income-tax Act from 1 April 2026
The Income-tax Act, 2025 came into effect on 1 April 2026 and replaced the Income-tax Act, 1961 for the new tax framework.
The government introduced the new law to simplify the structure of income tax provisions and make compliance easier.
One important change involves the introduction of the term Tax Year.
For example, income earned between 1 April 2026 and 31 March 2027 belongs to Tax Year 2026–27.
However, taxpayers filing returns for FY 2025–26 must continue to apply the provisions relevant to that earlier financial year.
Although the new law reorganises tax provisions, the main capital gains rates on qualifying listed equity shares remain broadly consistent with the framework introduced in July 2024.
Changes in Share Buyback Taxation
The Finance Act, 2026 introduced changes to the taxation of share buybacks from 1 April 2026.
Under the revised framework, shareholders generally calculate capital gains by comparing the buyback consideration with the relevant cost of acquisition.
Earlier, for buybacks covered by the rules effective from 1 October 2024 to 31 March 2026, the law generally treated buyback consideration as dividend income in the shareholder’s hands and recognised the acquisition cost separately for capital loss purposes.
The revised provisions also introduce additional tax treatment for promoter shareholders.
Therefore, investors should review the applicable rules based on the date of the buyback, their shareholder category and the nature of the shares.
Increase in Securities Transaction Tax on F&O
The government increased Securities Transaction Tax on futures and options transactions from 1 April 2026.
| Transaction | STT Rate |
|---|---|
| Sale of Futures | 0.05% |
| Sale of Options | 0.15% of option premium |
| Exercise of Options | 0.15% of applicable settlement value |
These changes mainly affect traders dealing in derivatives.
However, investors should not confuse STT with capital gains tax. STT is a transaction-based levy, while capital gains tax applies to taxable profits.
Moreover, qualifying futures and options trading generally produces business income rather than capital gains.
Section 87A Rebate and Capital Gains
Under the new tax regime, eligible resident individuals can claim a rebate on qualifying income within the prescribed limit.
However, the rebate generally does not reduce tax on special-rate capital gains.
For example, an individual may have to pay tax on qualifying long-term capital gains exceeding ₹1.25 lakh even if their total income falls within the ordinary rebate threshold.
Nevertheless, eligible resident individuals may adjust an unused basic exemption limit against qualifying capital gains, subject to the applicable provisions.
7. How to Calculate Capital Gains on Shares
Investors can calculate capital gains by deducting the acquisition cost and eligible transfer expenses from the sale consideration.
The general formula is:
Capital Gain = Sale Consideration − Cost of Acquisition − Allowable Transfer Expenses
Example of Capital Gains Calculation
Suppose an investor sells shares for ₹2,00,000.
The original purchase cost was ₹1,40,000, and the investor incurred ₹1,000 in allowable transfer expenses.
| Particulars | Amount |
|---|---|
| Sale Value | ₹2,00,000 |
| Purchase Cost | ₹1,40,000 |
| Allowable Transfer Expenses | ₹1,000 |
| Capital Gain | ₹59,000 |
Therefore, the investor earns a capital gain of ₹59,000.
However, the applicable tax depends on the holding period and the nature of the shares.
Investors should also remember that STT generally cannot be deducted while calculating capital gains.
In addition, eligible listed equity shares acquired before 1 February 2018 may require a special grandfathering calculation for long-term capital gains.
8. How to Save Capital Gains Tax on Shares
Investors can use several legal tax-planning methods to manage their capital gains tax liability.
However, they should consider both tax consequences and investment risks before making decisions.
Use the ₹1.25 Lakh LTCG Threshold
Investors can review their qualifying long-term capital gains during the year and plan their share sales accordingly.
For example, suppose an investor earns ₹1,10,000 in qualifying long-term capital gains during Tax Year 2026–27.
If the investor has no other gains covered by the same provision, the amount generally remains below the ₹1.25 lakh threshold.
Therefore, no tax arises under that specific LTCG provision.
However, investors must combine qualifying gains from all brokers and investment accounts.
Adjust Capital Losses Against Gains
Investors can reduce eligible capital gains by adjusting capital losses according to the prescribed rules.
| Type of Loss | Set-Off Allowed Against |
|---|---|
| Short-Term Capital Loss | STCG and LTCG |
| Long-Term Capital Loss | LTCG only |
For example, suppose an investor earns ₹1,00,000 in short-term capital gains and incurs an eligible short-term capital loss of ₹30,000.
After adjustment, the net capital gain becomes ₹70,000.
Furthermore, taxpayers can generally carry forward eligible unadjusted capital losses for eight subsequent tax years, provided they satisfy the applicable filing conditions.
Review the Holding Period Before Selling
Investors should check how long they have held their shares before selling them.
For instance, shares held for more than 12 months may qualify for long-term capital gains treatment.
However, investors should not delay a sale only to save tax without considering market conditions and potential investment losses.
Understand Tax Rules Before Gifting Shares
Investors sometimes transfer shares to family members as part of financial planning.
Gifts to specified relatives may qualify for favourable tax treatment under the applicable provisions.
However, the recipient may inherit the original acquisition cost and holding-period history.
Moreover, clubbing provisions may apply when an individual gifts shares to a spouse or minor child.
Therefore, investors should review the tax implications before transferring shares.
Consider HUF Investments Carefully
A Hindu Undivided Family (HUF) may qualify as a separate taxpayer and may have its own eligible capital gains threshold.
However, transferring personal investments to an HUF does not automatically shift the related tax liability.
The clubbing provisions and other applicable rules may continue to apply.
Consequently, investors should obtain professional advice before using an HUF for tax planning.
9. How to File ITR for Share Trading
Investors must report their share-related income correctly while filing their income tax returns.
However, the reporting method depends on whether the income qualifies as capital gains or business income.
Step 1: Identify the Type of Share Income
| Type of Trading | General Tax Treatment |
|---|---|
| Delivery-Based Share Investments | Capital Gains |
| Intraday Equity Trading | Speculative Business Income |
| Eligible Futures and Options Trading | Non-Speculative Business Income |
Therefore, taxpayers should separate investment transactions from business trading transactions before preparing their returns.
Step 2: Choose the Correct ITR Form
The appropriate ITR form depends on the taxpayer’s income sources and the forms notified for the relevant tax year.
Under the earlier return-filing framework, the following forms commonly applied:
| Type of Income | Common ITR Form |
|---|---|
| Capital Gains Without Business Income | ITR-2 |
| Intraday or F&O Business Income | ITR-3 |
Certain eligible taxpayers with limited specified capital gains may qualify for a simpler return form, subject to the notified conditions.
For Tax Year 2026–27, taxpayers should follow the return forms and instructions notified under the Income-tax Act, 2025.
Step 3: Collect the Required Documents
Before filing the return, investors should collect their trading and investment records.
These generally include:
- Broker capital gains or Tax P&L statement
- Contract notes
- Demat account statement
- Bank statements
- Form 26AS and Annual Information Statement (AIS)
- Details of previous capital losses
These records help taxpayers calculate gains correctly and avoid reporting errors.
Step 4: Calculate and Pay Advance Tax
Taxpayers generally need to pay advance tax when their estimated advance tax liability reaches ₹10,000 or more, subject to statutory exceptions.
However, special rules may apply when capital gains arise after an advance tax instalment date.
Therefore, investors should review their tax liability during the year rather than waiting until they file their returns.
Step 5: File the Income Tax Return Online
Taxpayers can file their income tax returns through the official Income Tax e-filing portal.
Follow these steps:
- Visit https://www.incometax.gov.in/iec/foportal/.
- Log in using your PAN and password.
- Select the applicable tax year.
- Choose the correct ITR form.
- Enter the capital gains and other income details.
- Adjust eligible capital losses.
- Review the tax calculation.
- Pay any outstanding tax.
- Submit and e-verify the return.
After completing the process, taxpayers should download and retain the acknowledgement.
10. How to Download a Capital Gains Statement
Most stockbrokers provide capital gains reports through their online platforms.
These reports usually show the purchase value, sale value, realised gains and relevant transaction details.
Download Capital Gains Statement from Zerodha
Investors using Zerodha can follow these steps:
- Log in to Zerodha Console.
- Open the Reports section.
- Select Tax P&L.
- Choose the relevant financial year.
- Download the report.
Similarly, brokers such as Upstox, Angel One and ICICI Direct provide transaction and tax reports.
Investors can also review their demat account statements through CDSL or NSDL.
However, a Consolidated Account Statement may not contain every detail required for tax calculations. Therefore, investors should compare it with their broker reports and contract notes.
11. Common Mistakes While Calculating Capital Gains Tax
Investors often make mistakes when calculating capital gains or filing income tax returns.
Applying the Wrong Tax Rate
Some taxpayers apply the 20% STCG rate to every share transaction.
However, the special rate applies only to qualifying transactions. Other short-term capital gains may attract normal tax rates.
Claiming Multiple LTCG Thresholds
Some investors maintain accounts with different stockbrokers and claim the ₹1.25 lakh threshold separately for each account.
However, the law applies the threshold to aggregate qualifying gains.
Ignoring Capital Losses
Investors sometimes report profits but forget to adjust eligible capital losses.
As a result, they may calculate a higher tax liability than necessary.
Treating F&O Income as Capital Gains
Futures and options trading generally falls under business income.
Therefore, taxpayers should not automatically report these profits under capital gains.
Ignoring Brokerage and Transaction Records
Investors should review allowable expenses and maintain supporting records.
However, they cannot deduct every charge shown in a broker statement. For example, STT generally does not qualify as a deduction when computing capital gains.
Forgetting Cess and Surcharge
The basic capital gains tax rate does not always represent the final tax liability.
Investors must also calculate the applicable cess and surcharge.
12. Capital Gains Tax Assistance in Greater Noida
Many salaried professionals, business owners and investors in Greater Noida invest in shares, mutual funds and other securities.
However, capital gains tax calculations can become complicated when investors use multiple trading accounts, hold unlisted shares or trade in futures and options.
For example, a salaried professional in Greater Noida may earn income from employment, listed equity shares and F&O trading during the same year.
In this situation, the taxpayer must classify each income source correctly and calculate the applicable tax separately.
Similarly, a director selling unlisted shares of a private limited company may need to consider valuation rules, acquisition costs and other tax provisions.
Therefore, investors in Greater Noida and nearby areas can seek assistance from a Chartered Accountant for capital gains calculations, tax planning and income tax return filing.
13. Capital Gains Tax Compliance Checklist
Before filing an income tax return, investors should complete the following checks:
- Verify the purchase and sale dates of shares.
- Identify whether the shares are listed or unlisted.
- Classify the gains as short-term or long-term.
- Check whether the special STT conditions apply.
- Download capital gains statements from all brokers.
- Combine qualifying long-term gains across accounts.
- Adjust eligible short-term and long-term capital losses.
- Verify the applicable tax rates and exemptions.
- Calculate cess and surcharge, where applicable.
- Reconcile transaction details with AIS and other records.
- Select the appropriate ITR form.
- File and e-verify the income tax return within the prescribed time.
Following these steps can help investors reduce errors and comply with income tax requirements.
14. Important Official Reference Links
Investors can refer to the following official websites for capital gains tax rules and income tax compliance.
- Income Tax Department – Sale of Shares
https://www.incometaxindia.gov.in/en/sale-of-shares - Income Tax Department – Capital Gains
https://www.incometaxindia.gov.in/ - Income-tax Act, 2025 and applicable amendments
https://www.incometaxindia.gov.in/ - Income Tax e-Filing Portal
https://www.incometax.gov.in/iec/foportal/ - Union Budget 2026–27
https://www.indiabudget.gov.in/
Investors should refer to the applicable legislation, notifications and official instructions when calculating tax for a particular transaction.
Conclusion
Capital gains tax is an important consideration for everyone investing in shares in India. The tax liability mainly depends on the holding period, type of shares, nature of transaction and applicable tax provisions.
For Tax Year 2026–27, qualifying short-term capital gains on listed equity shares generally attract 20% tax. Meanwhile, qualifying long-term capital gains attract 12.5% tax on the amount exceeding ₹1.25 lakh.
However, unlisted shares follow different rules, and investors must also consider capital losses, exemptions, cess and surcharge.
Furthermore, the Income-tax Act, 2025 and Finance Act, 2026 have introduced changes that investors should understand, particularly in relation to share buybacks and derivatives transactions.
Therefore, investors should maintain accurate transaction records, review their tax calculations and file their income tax returns correctly.
With proper planning and a clear understanding of the rules, investors can manage their tax liability efficiently while complying with Indian income tax laws.
Frequently Asked Questions (FAQs)
1. What is the capital gains tax on shares in India in 2026?
For qualifying listed equity share transactions, short-term capital gains generally attract 20% tax. Long-term capital gains generally attract 12.5% tax on aggregate qualifying gains exceeding ₹1.25 lakh. Applicable cess and surcharge increase the final tax amount.
2. Is capital gain up to ₹1.25 lakh tax-free?
The ₹1.25 lakh threshold applies to aggregate qualifying long-term capital gains under the relevant provision. It does not apply to all capital gains or separately to each trading account.
3. What is the holding period for STCG and LTCG on shares?
Listed equity shares generally qualify as short-term when investors hold them for 12 months or less and long-term when they hold them for more than 12 months. For ordinary unlisted equity shares, the corresponding holding period is 24 months.
4. Do I have to pay tax if I sell shares at a loss?
A loss-making sale does not create taxable profit on that transaction. However, investors should report eligible capital losses correctly to claim available set-off or carry-forward benefits.
5. Is STCG taxable if my total income is below ₹12 lakh?
Special-rate short-term capital gains may still attract tax even when the taxpayer’s total income falls within the ordinary rebate threshold. However, eligible resident individuals may adjust an unused basic exemption limit, subject to applicable conditions.
6. Can I adjust share trading losses against salary income?
No. Investors cannot set off capital losses against salary income. However, they can adjust eligible capital losses against qualifying capital gains according to the applicable rules.
7. Is F&O trading income treated as capital gains?
Generally, no. Eligible futures and options trading on recognised exchanges usually generates non-speculative business income. Therefore, taxpayers must report it under the appropriate business income provisions.
8. Which ITR form should I file for capital gains from shares?
The correct form depends on the taxpayer’s complete income profile and the forms notified for the relevant tax year. Under the earlier filing framework, individuals with capital gains commonly used ITR-2, while individuals with trading business income commonly used ITR-3.
9. Can I avoid capital gains tax by reinvesting in shares?
Generally, reinvesting the sale proceeds in new shares does not automatically exempt the original capital gain. Investors must satisfy the conditions of a specific exemption provision to claim any available benefit.
10. Can I carry forward capital losses to the next year?
Yes. Investors can generally carry forward eligible unadjusted capital losses for eight subsequent tax years. However, they must satisfy the applicable return-filing deadlines and other statutory conditions.