Capital Gains Tax in 2026: What Equity Investors Need to Know

What changed and when

For specified listed equity and equity-oriented investments, the Finance (No. 2) Act, 2024 increased the short-term rate from 15% to 20% and the long-term rate from 10% to 12.5% for transfers on or after 23 July 2024.

At the same time, the annual threshold for eligible Section 112A-style long-term gains increased from Rs 1 lakh to Rs 1.25 lakh.

These rates continue into 2026. The Income Tax Act, 2025 applies from 1 April 2026 and reorganises section numbers and terminology, but the department describes the new Act as simplification rather than a general rate-policy rewrite.

Which equity investments get the special rates?

The special equity rules generally cover listed equity shares, units of equity-oriented mutual funds and units of business trusts when the applicable Securities Transaction Tax conditions are satisfied.

They should not be applied automatically to unlisted shares, international funds, debt mutual funds, market-linked debentures, crypto assets, gold, property or bonds. Each category has its own holding period and rate.

A fund marketed as equity-like can still fail the statutory equity-oriented-fund definition. Use the scheme tax classification and broker or AMC statement.

Short-term equity gains: 20%

Specified equity held for 12 months or less is generally short-term. The gain is broadly sale value minus cost and eligible transfer expenses, after applying the tax rules.

For transfers on or after 23 July 2024, the special short-term rate is 20%. Health and education cess and applicable surcharge are added after the base tax.

The gain is not taxed at the investor's normal slab merely because the investor selected the old or new tax regime. Special-rate income is calculated separately, subject to limited basic-exemption adjustment for eligible resident individuals and HUFs.

Long-term equity gains: 12.5% above Rs 1.25 lakh

Specified equity held for more than 12 months is generally long-term. The first Rs 1.25 lakh of aggregate eligible long-term gains for the year is not charged under the special rate.

The excess is taxed at 12.5% for relevant post-23 July 2024 transfers. The Rs 1.25 lakh amount is an annual aggregate threshold across brokers and eligible assets, not a separate exemption for every mutual fund or demat account.

Indexation is not available for this specified equity calculation. Grandfathering rules can still affect the cost of listed equity acquired before 1 February 2018.

The new Act does not mean a new 2026 purchase-date rule

Some investors assume that all holdings reset on 1 April 2026 because the Income Tax Act, 2025 commenced. They do not. Original acquisition dates and holding periods continue to matter.

A share bought in 2025 and sold in 2026 retains its actual purchase date. The new Act changes the governing statute and references, not the economic history of the asset.

For FY 2025-26 returns filed as AY 2026-27, the old Act forms still apply. For income earned in Tax Year 2026-27, use the new Act and forms notified for filing in 2027.

Set off capital losses before calculating tax

A short-term capital loss can generally be set off against both short-term and long-term capital gains. A long-term capital loss can generally be set off only against long-term capital gains.

Unabsorbed capital loss can generally be carried forward for eight years, but timely return filing is important. The new Act retains the core distinction between short-term and long-term loss set-off.

Aggregate statements across brokers. One app showing Rs 2 lakh profit and another showing Rs 80,000 loss should not be taxed independently.

Tax harvesting: useful but not free money

An investor can consider realising eligible LTCG up to the unused Rs 1.25 lakh annual threshold and, where appropriate, repurchasing the investment. This is commonly called tax-gain harvesting.

The decision involves brokerage, STT, bid-ask spread, market movement, exit load and portfolio suitability. Selling only to save tax can create a worse investment outcome.

Avoid artificial or circular transactions. Maintain contract notes and a genuine investment rationale.

Advance tax and capital-gain timing

Capital gains can create advance-tax liability when total estimated tax after TDS reaches the statutory level. Because gains may arise unpredictably, the law provides timing relief in certain cases when tax is paid in the remaining advance-tax instalments.

Track the date on which each gain arose. The return's capital-gain schedule can ask for period-wise accrual information for advance-tax interest calculations.

Do not wait until the July return filing season to calculate a large gain realised during the year.

Investor checklist

Download capital-gains statements from every broker, AMC and registrar.

Separate listed equity, equity funds, debt funds, unlisted assets and other securities.

Verify holding period and transfer date.

Apply the Rs 1.25 lakh threshold once across aggregate eligible LTCG.

Set off eligible losses and file on time if carrying loss forward.

Use the RupeeKit Capital Gains Tax Calculator for an educational estimate, then reconcile with the official return utility.