Long-term capital gains (LTCG) tax rules for stocks, mutual funds, gold, and property remain a key topic as Budget 2027 approaches. This article explains how these assets are taxed, the holding periods that define long-term status, and recent government discussions on possible changes.
- LTCG tax on listed equity shares and equity-oriented mutual funds is 12.5% on gains exceeding ₹1.25 lakh per year.
- Holding periods vary: 12 months for equities, 24 months for property and physical gold.
- Physical gold gains are taxed at 12.5% without indexation after 24 months.
- Digital gold and gold ETFs have specific holding period and tax rules.
- Recent proposals suggest scrapping LTCG tax on equities and extending holding periods, but no changes have been made yet.
What are the LTCG tax rates for stocks and mutual funds?
Under Section 198 of the Income-tax Act, 2025, long-term capital gains from eligible listed equity shares and equity-oriented mutual fund units are taxed at 12.5% on gains exceeding ₹1.25 lakh in a financial year. This exemption limit means that if your gains are below ₹1.25 lakh, you do not pay LTCG tax on those gains.
Short-term capital gains on equities are taxed at 20%. The government raised the LTCG tax rate from 10% to 12.5% in July 2024 and increased the exemption threshold from ₹1 lakh to ₹1.25 lakh.
How long must I hold stocks or mutual funds to qualify for LTCG tax?
Listed equity shares and equity-oriented mutual funds qualify as long-term capital assets if held for more than 12 months. For other securities and mutual funds, the holding period depends on their classification.
How is property taxed under LTCG rules?
A house or other immovable property is considered a long-term capital asset if held for more than 24 months. The tax treatment depends on the nature of the property and the holding period, as outlined in Section 197 of the Income-tax Act, 2025.
What about gold and its LTCG tax treatment?
Physical gold such as jewellery, coins, or bars is treated as a capital asset for tax purposes. If held for more than 24 months, gains from selling physical gold are taxed at 12.5% without indexation, plus applicable surcharge and cess.
Listed gold ETFs held for more than 12 months qualify as long-term assets with gains taxed at 12.5% without indexation. Unlisted gold mutual fund units require a holding period of more than 24 months to qualify.
Digital gold is also treated as a capital asset, and its gains are taxed accordingly.
Are there any exemptions or special rules for Sovereign Gold Bonds (SGBs)?
From April 1, 2026, capital gains exemption on redemption at maturity applies only to individual investors who subscribe to SGBs at original issuance and hold them until maturity. Investors buying SGBs on the secondary market do not qualify for this exemption and must pay capital gains tax on their gains.
What recent government proposals affect LTCG tax?
SBI Research has proposed scrapping LTCG tax on equities and extending the holding period to two or three years to encourage longer-term investments. Finance Minister Nirmala Sitharaman has welcomed debate on securities transaction tax and equity taxation but has not announced any changes yet.
The government increased STT on equity derivatives in Budget 2026, effective April 1, 2026. The LTCG tax rules currently remain unchanged, but the renewed debate highlights the importance of understanding how different asset classes are taxed.
