Equity capital gains · tax year 2026-27 (Income-tax Act, 2025)
Equity Capital Gains Tax Calculator 2026-27: LTCG, STCG & Grandfathering
By Pratik Bajoria, Chartered Accountant & NISM-certified Research Analyst · Last reviewed 7 Oct 2026 by Pratik Bajoria, CA · rates per Income-tax Act, 2025 as amended by the Finance Act, 2026
Most capital gains questions I get arrive in March, from someone who has already sold. That's too late to plan. The rules themselves are short. Listed shares and equity fund units held more than 12 months are long-term and taxed at 12.5% above ₹1.25 lakh a year (section 198). Held 12 months or less, gains are taxed at 20% under section 196 (summary: SBI Mutual Fund tax reckoner 2026-27). Tax year 2026-27 is the first under the Income-tax Act, 2025.
Illustration: you redeem equity fund units held three years with a ₹3 lakh gain. Tax is 12.5% of (₹3,00,000 − ₹1,25,000) = ₹21,875, plus cess. If you bought before 1 February 2018, enter the 31 January 2018 price and the grandfathering rule in section 90(7) is applied for you.
Estimated tax incl. 4% cess (before surcharge)
₹36 K
Equity LTCG and STCG tax rates for tax year 2026-27
| Long-term (LTCG) | Short-term (STCG) | |
|---|---|---|
| Holding period | More than 12 months | 12 months or less |
| Tax rate | 12.5% above ₹1.25 lakh a year | 20% from the first rupee |
| Section (Income-tax Act, 2025) | 198 (old 112A) | 196 (old 111A) |
| Indexation | Not allowed | Not applicable |
| Cess / surcharge | 4% cess; surcharge capped at 15% | 4% cess; surcharge capped at 15% |
| Section 156 rebate | Not available against this tax | Not available against this tax |
Equity-oriented fund = at least 65% in domestic listed equity (or a fund of funds meeting the 90%/90% test). Debt funds, gold, international funds and unlisted shares follow different rules.
Tax on equity gains: worked table
| Gain | LTCG tax (held > 12 months) | STCG tax (held ≤ 12 months) | Saved by waiting |
|---|---|---|---|
| ₹50,000 | ₹0 | ₹10,400 | ₹10,400 |
| ₹1,25,000 | ₹0 | ₹26,000 | ₹26,000 |
| ₹2,00,000 | ₹9,750 | ₹41,600 | ₹31,850 |
| ₹5,00,000 | ₹48,750 | ₹1,04,000 | ₹55,250 |
| ₹10,00,000 | ₹1,13,750 | ₹2,08,000 | ₹94,250 |
| ₹25,00,000 | ₹3,08,750 | ₹5,20,000 | ₹2,11,250 |
If a holding is a few weeks short of 12 months, waiting can cut the tax sharply — but only if the price risk of waiting is acceptable. Use the yearly ₹1.25 lakh exemption deliberately: see LTCG tax harvesting.
Grandfathering example: shares bought before 1 February 2018
Cost = max(actual cost, min(FMV on 31 Jan 2018, sale price))
1,000 shares bought in 2016, sold in October 2026 after the 12-month holding period:
| Case | Bought at | FMV 31 Jan 2018 | Sold at | Cost used | Taxable LTCG (before ₹1.25 lakh) |
|---|---|---|---|---|---|
| A · Sold above FMV | ₹400 | ₹600 | ₹1000 | ₹6,00,000 | ₹4,00,000 |
| B · Sold between cost and FMV | ₹400 | ₹600 | ₹500 | ₹5,00,000 | ₹0 |
| C · FMV below your cost | ₹700 | ₹600 | ₹1000 | ₹7,00,000 | ₹3,00,000 |
Case A in full: cost ₹6,00,000, sale ₹10,00,000, gain ₹4,00,000; the first ₹1,25,000 is exempt, ₹2,75,000 is taxed at 12.5% → ₹35,750 including cess. Without grandfathering the gain would have been ₹6,00,000. In case B the gain is nil (and no loss can be claimed against the FMV step-up); in case C your actual cost is higher than FMV, so it is used.
FMV for a listed share is the highest price quoted on the exchange on 31 January 2018 (or the last earlier trading day); for an unlisted mutual fund unit, its NAV on that date. Your broker or CAS tax statement usually shows it.
Capital gains tax when your income is below ₹12 lakh
The new-regime rebate under section 156 makes income up to ₹12 lakh tax-free — but section 198(7) allows that rebate only on tax computed after excluding equity LTCG. (Total income for the ₹12 lakh test includes the gains.) So a salaried person with ₹8 lakh of salary (₹7.25 lakh after the standard deduction) and ₹3 lakh of equity LTCG — total income ₹10.25 lakh — pays nothing on the salary but 12.5% on ₹1.75 lakh of LTCG: about ₹22,750 including cess. If your other income is below the basic exemption limit (₹4 lakh in the new regime), section 198(3) lets you use the shortfall against LTCG first.
Compare regimes with the old vs new tax regime calculator and estimate slab tax with the income tax calculator.
Losses, set-off and what this calculator leaves out
- Short-term capital losses can be set off against both short- and long-term gains; long-term losses only against long-term gains. Unused losses can be carried forward for 8 years if you file on time.
- Surcharge (above ₹50 lakh income) and transfer expenses such as brokerage are not modelled. STT itself is not deductible.
- Bonus shares, rights, mergers and IPO offer-for-sale shares have special cost rules.
Educational estimate, not a tax return computation. Check your broker's capital gains statement and the Income Tax Department's pre-filled data before filing.
A costly mistake: switching plans without checking the tax
Moving from a regular plan to a direct plan feels like an admin task. It isn't. The switch is a sale. Units held under 12 months get taxed at 20% on the gain. I've seen people lose more to STCG on a hurried switch than the extra expense ratio would have cost them in a year. Switch the long-term units first, and let the rest age past 12 months. The direct vs regular calculator shows what the cost gap is actually worth.
Frequently asked questions
What is the LTCG tax rate on equity shares and equity mutual funds for 2026-27?
12.5% on long-term capital gains above ₹1.25 lakh in a tax year, plus 4% cess, for listed equity shares (STT paid on purchase and sale) and units of equity-oriented funds (STT paid on sale) held for more than 12 months. This is section 198 of the Income-tax Act, 2025 (the old section 112A). No indexation is allowed.
What is the STCG tax rate on shares sold within 12 months?
20% plus 4% cess on short-term gains from STT-paid listed equity shares and equity-oriented fund units held for 12 months or less (section 196 of the Income-tax Act, 2025, the old section 111A). There is no ₹1.25 lakh exemption for short-term gains.
How does grandfathering work for shares bought before 1 February 2018?
For equity shares and equity fund units acquired before 1 February 2018, the cost used for LTCG is the higher of (a) the actual cost and (b) the lower of the fair market value on 31 January 2018 and the sale price — section 90(7) of the Income-tax Act, 2025. For a listed share, FMV is the highest price quoted on the exchange on 31 January 2018. Example: bought at ₹400, FMV ₹600, sold at ₹1,000 → cost is ₹600, so only ₹400 a share is taxable gain.
Is LTCG up to ₹1.25 lakh tax-free even if my income is low?
Yes, the first ₹1.25 lakh of equity LTCG in a tax year is not taxed. But note: the section 156 rebate (which makes income up to ₹12 lakh tax-free in the new regime) is allowed only on tax computed after excluding these gains, so LTCG above ₹1.25 lakh is taxed even if your total income is under ₹12 lakh. A resident individual whose other income is below the basic exemption limit can use the unused limit against LTCG.
Is surcharge capped on equity capital gains?
Yes. The enhanced 25% and 37% surcharge rates do not apply to gains taxed under sections 196 and 198, so the maximum surcharge on these gains is 15%. This calculator ignores surcharge; add it if your income exceeds ₹50 lakh.
What were the rates before July 2024?
For transfers before 23 July 2024, equity LTCG was taxed at 10% above ₹1 lakh and STCG at 15%. The Finance (No. 2) Act, 2024 raised them to 12.5% (above ₹1.25 lakh) and 20%, and the Income-tax Act, 2025 carries those rates into tax year 2026-27.
Educational tool only — not investment, tax or legal advice. Figures are formula-based illustrations using the stated assumptions; actual outcomes depend on notified rates, rules and your specific facts. Verify with official sources or a qualified professional before acting. Findost (findost.io) and PaisaGuru by Findost are not affiliated with Findoc, FinDost, or other similarly named brands. PaisaGuru is the AI wealth concierge of Findost.