Capital Gains Tax on Shares, Mutual Funds and Property: Complete Income Tax Guide for FY 2026-27

Every time you sell shares, redeem mutual funds, or sell a property at a profit, the government wants a share of that gain. 

How much? That depends on what you sold and how long you held it.

What is Capital Gains Tax?

Capital gains tax is the tax on profit made from selling a capital asset: shares, mutual funds, property, or gold. Gains are classified as short-term or long-term based on how long you held the asset before selling. 

Equity Gains: Shares and Equity Mutual Funds

Short-term capital gains on listed equity shares and equity mutual funds sold within 12 months are taxed at 20% under Section 111A. Long-term capital gains on the same assets held over 12 months are taxed at 12.5% on gains exceeding ₹1.25 lakh per financial year under Section 112A. No indexation benefit available.

Mutual Fund Gains 

Equity-oriented funds with over 65% equity follow the same rules as shares: 20% STCG and 12.5% LTCG above ₹1.25 lakh.

Debt mutual funds are different. Funds purchased on or after April 1, 2023 are taxed at your income slab rate regardless of holding period; no long-term benefit under Section 50AA.

For SIP investors, each instalment has its own holding period. The FIFO method applies: oldest units are considered sold first when you redeem. 

Property Gains

Residential property held over 24 months qualifies as long-term, taxed at 12.5% without indexation. For property acquired before July 23, 2024, choose between 12.5% without indexation or 20% with indexation, whichever is lower.

Selling within 24 months means short-term gains at your applicable income slab rate.

Exemptions: Sections 54, 54F, and 54EC allow reinvestment of property gains into a new residential property or specified bonds to claim full or partial tax exemption.

Tax Harvesting: A Strategy Worth Knowing

Tax harvesting means selling long-term equity or equity mutual fund units to book gains up to ₹1.25 lakh annually, staying within the tax-free limit, then reinvesting immediately. Done every March, this resets your cost basis and reduces future tax liability legally.

New Rules for FY 2026-27

Budget 2026 made no changes to capital gains rates or holding periods. The Income Tax Act 2025 took effect April 1, 2026, with updated section numbers. One key change: long-term capital losses can now be set off only once against gains, not carried forward repeatedly.

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