Capital gains on shares refer to the profit you make when you sell shares at a higher price than what you paid. These gains are taxed based on how long you held the shares—short-term or long-term.
🧠 Think of it as: Buy low, sell high = capital gain. But tax rules depend on how long you wait!
Two Types of Capital Gains
1. Short-Term Capital Gains (STCG)
- When: You sell shares within 12 months
- Tax Rate (from July 2024): 20% (earlier 15%) + surcharge + cess
- Example:
Buy ₹30,000 worth of shares → Sell for ₹45,000
Profit: ₹15,000 → Tax = ₹3,000 (at 20%)
2. Long-Term Capital Gains (LTCG)
- When: You sell shares after 12 months
- Tax Rate: 12.5% (from July 2024) on gains above ₹1 lakh/year
- Example:
Buy shares for ₹1 lakh → Sell for ₹1.5 lakh
Gain = ₹50,000 → Tax = ₹0 (as it’s under ₹1 lakh limit)
How to Calculate Capital Gains
Capital Gain = Sale Price – (Purchase Price + Expenses)- Include: Brokerage, STT (Securities Transaction Tax), and other charges
- Don’t include: Dividend income—it’s taxed separately
Losses and Set-Off
You can adjust losses to reduce tax:
- Short-term loss can be set off against both STCG and LTCG
- Long-term loss can only be set off against LTCG
- You can carry forward losses for 8 years
From FY 2026-27: You’ll be allowed a one-time set-off of long-term capital loss against short-term gains.
Tax Filing Rules
- Report gains under the “Capital Gains” head in your ITR
- Use ITR-2 (if you have capital gains but no business income)
- Provide ISIN-wise detail (if required) and upload trade statements
Quick Summary Table
| Type | Holding Period | Tax Rate (From July 2024) | Exemption |
|---|---|---|---|
| STCG | ≤ 12 months | 20% | None |
| LTCG | > 12 months | 12.5% on gains > ₹1 lakh | ₹1 lakh per year |
Final Thoughts
- If you sell shares within a year, expect 20% tax on gains
- If you sell after a year, your gains are tax-free up to ₹1 lakh/year, and taxed at 12.5% beyond that
- Use losses smartly to lower your tax
- Always keep a record of buy/sell prices and dates
