STCG and LTCG Tax on Stocks in India (2026): Rates After the Budget Changes
Note: This is general information, not tax advice, and tax rules change. Verify the current figures against the Income Tax Act, the relevant Finance Act and ICAI guidance, and confirm your own position with a qualified Chartered Accountant.
What the Finance Act 2024 changed
The Union Budget presented on 23 July 2024 revised the capital gains rates on listed equity and equity-oriented mutual funds:
STCG (held 12 months or less): the rate rose from 15% to 20%. LTCG (held more than 12 months): the rate rose from 10% to 12.5%. The LTCG exemption limit moved from ₹1 lakh to ₹1.25 lakh per financial year.
How the ₹1.25 lakh LTCG exemption works
The first ₹1.25 lakh of net LTCG from listed equity and equity mutual funds in a financial year is exempt from tax. Net means after adjusting LTCG losses against LTCG gains. If your net LTCG is ₹2 lakh, you pay 12.5% on the remaining ₹75,000, which is ₹9,375 before cess.
The exemption applies per taxpayer per year, not per scrip or per folio. It is not available to STCG. There is no grandfathering for securities purchased after 31 January 2018; the cost-of-acquisition rule from Finance Act 2018 still applies for computing the gain.
Holding period: what counts as long-term
For listed equity shares and equity-oriented mutual funds, long-term means held for more than 12 months. Below 12 months is short-term. The holding period is calculated from the date of acquisition to the date of sale (exclusive of the sale date in some interpretations; confirm with your CA for the exact count).
For debt mutual funds (equity exposure below 35%), gains are taxed at slab rates regardless of holding period, following the Finance Act 2023 change.
Which ITR form: ITR-2 or ITR-3?
Pure investors with only salary, capital gains (STCG or LTCG), and no business income use ITR-2. The moment you add F&O trading or equity intraday, the income becomes business income and you must use ITR-3.
In ITR-3, your delivery-based equity gains go into Schedule CG (capital gains), and your F&O profit goes into Schedule BP (business and profession). Both sit in the same return. The two heads have separate set-off rules and you cannot combine them.
Set-off rules for capital losses
STCG losses from equity can set off against STCG gains and LTCG gains from any capital asset in the same year. Remaining STCG losses carry forward for 8 assessment years and can set off against future capital gains.
LTCG losses can only set off against other LTCG gains, not against STCG. They also carry forward for 8 years.
Capital losses, whether STCG or LTCG, cannot be set off against business income like F&O or intraday profits. The two heads do not mix for set-off.
How delivery gains interact with F&O in the same return
If you have a ₹5 lakh F&O profit and a ₹2 lakh STCG gain in the same year, both go into ITR-3. Your F&O profit is taxed at slab rates. Your ₹2 lakh STCG is taxed at 20% (flat, regardless of your slab). They are separate: a loss in one does not reduce the tax in the other.
One interaction that does matter: total income for advance tax purposes and for the 87A rebate computation includes both. Read how the advance tax calculation works for traders to plan your installments when both heads are active.
Securities purchased before January 31, 2018
For listed equity acquired before 31 January 2018 (and still held after 31 March 2018), the cost of acquisition for LTCG is the higher of the actual purchase cost and the closing market price on 31 January 2018. This grandfathering rule prevents taxing gains that accrued before LTCG was reintroduced.
The grandfathering applies to the cost-of-acquisition calculation only. The LTCG tax rate still applies at the current 12.5%. Verify the base values for your long-held positions against the exchange records.
Capital gains tax and the two regimes
Capital gains on listed equity are taxed at flat rates (20% STCG, 12.5% LTCG) under both the old and new regimes. The regime choice does not change the capital gains rate. What differs is how these gains interact with the slab calculation and the 87A rebate.
Under the new regime, STCG and LTCG are excluded from the 87A rebate calculation. Under the old regime, the 87A rebate is smaller (₹12,500) and also does not reduce capital gains tax directly.
Aktai Tax produces a tax-ready report covering both your business income and any capital gains you enter. Upload your broker files at Aktai Tax to get the full picture for your filing.
Frequently asked questions
What is the STCG tax rate on listed equity in 2026?
Short-term capital gains on listed equity shares and equity-oriented mutual funds are taxed at 20% (increased from 15% by the Finance Act 2024, effective from 23 July 2024). This applies to shares held for 12 months or less.
What is the LTCG tax rate on listed equity in 2026?
Long-term capital gains on listed equity (held more than 12 months) are taxed at 12.5% without indexation, increased from 10% by the Finance Act 2024. The first ₹1.25 lakh of LTCG per year is exempt (increased from ₹1 lakh).
Do I need ITR-2 or ITR-3 if I have both equity investments and F&O trades?
ITR-3. If you have any business income, including F&O or intraday trading, you cannot use ITR-2 even if your equity investments qualify as capital gains. All income heads are reported together in ITR-3.
Can I set off STCG losses against LTCG or F&O profits?
STCG losses from equity can set off against both STCG and LTCG gains from any capital asset. They cannot set off against F&O business income. LTCG losses can only set off against LTCG gains.