Equity Capital Gains

For listed equity shares held more than 12 months, you have long-term capital gains taxed under Section 112A. From 23 July 2024 onwards, the rate is 12.5% on gains above Rs 1.25 lakh in a financial year. Take sale value, deduct brokerage and STT-related charges, deduct cost of acquisition, and the result is your gain. No indexation is allowed. For shares bought before 1 February 2018, use grandfathering: cost is the higher of actual cost or the lower of fair market value on 31 January 2018 and sale value. STT must have been paid both ways for the concessional rate to apply.

For equity-oriented mutual funds (where 65% or more is invested in Indian equities), units held for over 12 months qualify as long-term. Sell within 12 months and it's short-term. STCG on equity funds is taxed at 20% under Section 111A from 23 July 2024 onwards (it was 15% before that date), and LTCG is 12.5% above the Rs 1.25 lakh annual exemption. Debt-heavy hybrids and international funds follow different rules. Always check the scheme document or AMFI category, because a fund labelled hybrid may not actually qualify as equity-oriented for tax.

The Rs 1.25 lakh exemption applies once per financial year to combined long-term gains from listed equity shares, equity mutual funds and business trust units under Section 112A. So if your total LTCG across all such instruments is Rs 1,80,000, the first Rs 1,25,000 escapes tax and only Rs 55,000 is taxable at 12.5%, working out to Rs 6,875 plus 4% cess. The exemption isn't applied per scrip or per fund; it's pooled. Smart investors use this every year by harvesting gains up to Rs 1.25 lakh and reinvesting, resetting their cost basis tax-free.

Brokerage, exchange transaction charges, GST on brokerage, SEBI fees and stamp duty are all allowed as transfer expenses and reduce your sale consideration. STT, however, is specifically not deductible under Section 48 when you're claiming the concessional rate under 111A or 112A; the concessional rate itself is the trade-off. If you're computing gains where STT wasn't paid (off-market deal, for instance), the position differs and STT generally won't apply at all. Most retail investors get the broker's contract note showing the net realisation; that net figure, after permissible charges, is what flows into the capital gains computation.

Each SIP instalment is treated as a separate purchase with its own date, so when you redeem, FIFO (first-in-first-out) is used to match units. Instalments older than 12 months on the redemption date are long-term; the rest are short-term. So if you started a SIP in January 2024 and redeem all units in November 2026, the January-October 2024 chunks qualify as LTCG, while later instalments may still be STCG depending on the gap. AMC capital gains statements break this down for you. Plan partial redemptions carefully, otherwise you may unintentionally trigger STCG at 20% on recent instalments.

Yes, short-term capital loss is the more flexible of the two. STCL on equity (or anything else) can be set off against both STCG and LTCG in the same year, including LTCG taxable at 12.5%. Long-term capital loss, on the other hand, can only be set off against long-term gains, not short-term. Any unadjusted loss can be carried forward for up to 8 assessment years, but only if the ITR is filed by the due date under Section 139(1). Year-end tax-loss harvesting on stocks in loss can be a useful planning strategy for active investors, subject to due-date filing and anti-abuse considerations.

Largely yes for listed equity routed through stock exchanges with STT paid. NRIs pay 20% STCG and 12.5% LTCG above Rs 1.25 lakh, identical to residents. The bigger differences are operational: brokers deduct TDS at these rates on each transaction (no waiting till year-end), and NRIs cannot claim the basic exemption limit against these special-rate gains. DTAA benefits may sometimes give a lower rate, depending on the country of residence. Unlisted shares and equity transactions outside the exchange are taxed differently. Repatriation requires Form 15CA/15CB. NRIs should usually file ITR-2 and reconcile TDS carefully, otherwise refunds may get delayed.