Definition
Capital Gains Tax (Equity)
Capital gains tax is the tax on profit from selling shares, with different rates for short-term and long-term holdings in India.
For listed equity in India, gains on shares held up to 12 months are short-term (STCG), taxed at 20% (post-July 2024), while gains on shares held over 12 months are long-term (LTCG), taxed at 12.5% beyond an annual exemption of ₹1.25 lakh.
These concessional rates apply only where STT has been paid (i.e., normal exchange trades). Tracking your holding period and using the LTCG exemption (sometimes called tax harvesting) are important for after-tax returns. Rates and limits are revised in Union Budgets, so verify the current year.
Related terms
- Contract NoteA contract note is the legal document your broker issues confirming the details of trades executed on your behalf each day.
- Buy and HoldBuy and hold is a long-term strategy of purchasing quality stocks and holding them for years, ignoring short-term price swings.
- Securities Transaction Tax (STT)Securities Transaction Tax is a small tax levied on the purchase and sale of securities like listed shares and derivatives on Indian stock exchanges, collected at the time of trade.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.