Equity investments are powerful tools for wealth creation, but maximizing your returns requires a sharp understanding of the capital gains tax landscape. With the latest taxation regime effective from July 2024 (FY 2025-26), the rules have been streamlined, yet the nuances across different asset classes remain critical.
This guide simplifies the current tax structure, helping you position your portfolio for optimal post-tax returns.
The Four Pillars of Indian Equity Investment
Your investment choices, from public markets to private deals, determine your capital gains tax liability.
| Investment Option | Description | Typical Liquidity |
| Listed Domestic Equity Shares | Stocks traded on Indian exchanges (NSE/BSE), offering transparency and regulatory oversight. | High |
| Equity-Oriented Mutual Funds (EOMFs) | Professionally managed funds investing primarily in equities, offering diversification and expert selection. | High |
| Unlisted Domestic Equity Shares | Shares of private companies not listed on exchanges, offering high growth potential but with reduced liquidity. | Low |
| Foreign Equity Shares | International stocks accessible via the Liberalised Remittance Scheme (LRS), enabling global portfolio diversification. | Medium |
The New Capital Gains Tax Landscape (FY 2025-26)
The duration you hold an investment dictates whether the gain is Short-Term Capital Gain (STCG) or Long-Term Capital Gain (LTCG), significantly impacting your tax bill.
Listed Securities (Domestic & EOMFs)
The holding period remains favorable for tax efficiency.
| Classification | Holding Period | Tax Rate (FY 2025-26) |
| Short-Term Capital Gain (STCG) | Held =< 12months | 20% (Up from the previous 15%) |
| Long-Term Capital Gain (LTCG) | Held > 12months | 12.5% on gains exceeding ₹1.25 Lakh per financial year (without indexation) |
Key Insight: While the LTCG rate increased slightly, the annual exemption of ₹1.25 Lakh under Section 112A continues to make these assets highly tax-efficient for long-term investors.
Unlisted and Foreign Securities
The rules governing private equity and global stocks have seen the most significant update.
| Classification | Holding Period | Tax Rate (FY 2025-26) |
| Short-Term Capital Gain (STCG) | Held =< 24 months | Taxed at your normal income tax Slab Rate |
| Long-Term Capital Gain (LTCG) | Held > 24 months | 12.5% (Flat Rate) |
Crucial Tax Correction: The older regime allowed a tax rate of 20% with indexation benefit for long-term gains on unlisted and foreign equity shares. Under the latest taxation laws (effective July 23, 2024), this indexation benefit has been removed. The rate is now a simplified 12.5% flat for all capital assets, computed without adjusting the cost for inflation.
Advanced Tax Strategies for Your Portfolio
Informed wealth management means actively leveraging all available provisions:
- Optimize Holding Periods: Ensure you hold listed securities for over 12 months and unlisted/foreign securities for over 24 months to qualify for the preferential LTCG rates.
- Implement Tax Loss Harvesting: Strategically sell underperforming investments to offset capital gains, effectively reducing your overall taxable income before the year-end.
- Non-Resident Indian (NRI) Relief: NRIs who invest in unlisted Indian company shares using foreign currency can now compute their capital gains by adjusting the acquisition cost for currency fluctuation. This key relief ensures you are taxed on your actual economic gain (in foreign currency terms), rather than on notional gains caused by a depreciating Rupee.
Expert Guidance Matters
Understanding holding periods and the updated tax rates is fundamental to optimizing your post-tax returns. Given the significant change in tax treatment for unlisted and foreign equities, consulting with wealth management experts is helpful. Professional advice can help you develop tailored investment and tax strategies aligned with your specific financial goals and risk profile.