Capital Gains on Shares

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