India Rules Out LTCG Tax Abolition on Equities; Key Rules for FY2025-26

The tax treatment of listed shares and equity-oriented mutual funds depends entirely on the holding period. Gains from sales within 12 months are classified as short-term and taxed at 20%, plus surcharges and cess. Holdings beyond 12 months qualify as long-term. The first ₹1.25 lakh of LTCG in a financial year is tax-free; gains above that are taxed at 12.5%.

For systematic investment plans, each instalment is treated as a separate investment with its own purchase date. Mutual funds typically use the first-in, first-out method for redemptions, meaning a single withdrawal can include both short- and long-term gains.

The tax structure offers a lower rate for longer holdings and an annual exemption of ₹1.25 lakh. Tax savings should not drive redemption decisions alone; asset allocation, long-term goals, and risk profile also matter.