Tax on Shares, Mutual Funds and Crypto
Three things decide most of the tax on your investments: what you held, how long you held it, and who you are. The first two are yours to choose, and both are worth lakhs.
Figures checked · How we calculate
₹31,850the cost of selling at 11 months instead of 13, on a ₹2 lakh gain
Sell equity shares or an equity fund within twelve months and a ₹2 lakh gain is taxed at 20%: ₹41,600 including cess. Hold them a few weeks past the twelve-month mark and the first ₹1.25 lakh of gains each year is tax-free, with 12.5% on the rest: ₹9,750.
Same investment, same gain. The only difference is the date you pressed sell.
The rules for FY 2026-27
| What you sold | Held for | Tax on the gain |
|---|---|---|
| Listed shares, equity funds, equity ETFs | 12 months or less | 20% (short-term) |
| Listed shares, equity funds, equity ETFs | More than 12 months | 12.5% on gains above ₹1.25 lakh a year (long-term) |
| Debt funds bought on or after 1 April 2023 | Any period | Your income-tax slab rate |
| Dividends from shares or funds | — | Your slab rate. 10% TDS once one company or fund pays you more than ₹10,000 in a year |
| Crypto, NFTs and other virtual digital assets | Any period | Flat 30%. No exemption, no deductions except purchase cost, and losses cannot be set off |
Add 4% health and education cess to every figure. The ₹1.25 lakh exemption is per person per year, across all your equity holdings combined. It is not per fund. Equity rates have been unchanged since 23 July 2024, crypto rates since April 2022, and the Budget of 1 February 2026 left both as they were.
Holding a little longer is often the best return available
- Sold at 11 months (short-term, 20%)₹41,600Tax on the whole ₹2 lakh gain.
- Sold at 13 months (long-term, 12.5%)₹9,750The first ₹1.25 lakh is exempt, so tax falls on ₹75,000.
- What waiting two months saves₹31,850
Including 4% cess, and assuming no other long-term gains that year, so the full ₹1.25 lakh exemption is available.
If you are close to the twelve-month line and don't need the money urgently, look up the purchase date before you sell. With a SIP, every instalment has its own twelve-month clock. Units are sold oldest first, so the first units out are usually already long-term.
Use the ₹1.25 lakh every year, or lose it
This is called tax harvesting. Once a year, sell enough long-term units to realise about ₹1.25 lakh of gain, and buy the same fund back the same day. Your holding is unchanged, but your purchase price is now higher, so less of your future gain is taxable. India has no rule against buying back straight away.
- Sold once at the end₹9.7 LOne ₹1.25 lakh exemption, used once.
- ₹1.25 lakh harvested every year₹7.0 LTwenty exemptions used, so the cost price keeps rising.
- Tax saved by harvesting₹2.7 LAbout an hour's work, once a year.
Tax on the final sale, including cess. The harvesting row books up to ₹1.25 lakh of gains at the end of every year and buys straight back. This is an approximation: it treats all harvested gains as long-term and ignores the small STT on each sale.
Use a fund with no exit load after a year, and check that the units you sell are more than twelve months old. Don't let harvested money sit in your bank account for days. The buy-back should happen the same day, or the next.
Every switch is a sale
Plan switches the same way as harvesting: move long-term units first, keep each year's gains inside the ₹1.25 lakh where you can, and let short-term units age before you move them. The direct vs regular guide sets out the order.
Losses reduce your tax, so record them
A loss you book on a sale is not wasted. The set-off rules:
- Short-term losses can reduce short-term or long-term gains.
- Long-term losses can reduce only long-term gains.
- Unused losses carry forward for eight years, but only if you file your return by the due date for the year the loss happened.
If you already have gains this year and also hold a fund showing a loss, selling it and buying back cuts this year's tax. It is the same move as harvesting, in the other direction.
Crypto is taxed at 30%, however long you hold it
₹62,400tax on a ₹2 lakh crypto gain, held for two years
The same ₹2 lakh gain on an equity fund held for two years costs ₹9,750. On crypto, holding for two years changes nothing: every gain on a virtual digital asset is taxed at a flat 30%, plus cess, whatever your income and however long you held it.
Since April 2022, Indian law has treated cryptocurrency, NFTs and similar tokens as virtual digital assets (VDAs), with rules stricter than anything else on this page:
- Flat 30% on every gain, plus 4% cess and any surcharge. There is no long-term rate and no ₹1.25 lakh exemption. If your income is below the taxable limit, you still pay 30% on crypto gains.
- Only the purchase price is deductible. Exchange fees, GST on those fees, and the cost of your internet connection or mining equipment are not.
- Every swap is a sale. Trading Bitcoin for Ethereum, or any token for a stablecoin, is taxable, even though no rupees reached your bank.
- Tokens you did not buy are income first. Crypto received as a gift worth more than ₹50,000 from someone who is not a relative, or through staking, mining or an airdrop, is taxed at your slab rate on its value when you receive it. Selling it later is taxed again at 30% on any rise.
- 1% TDS on sales. Indian exchanges deduct 1% of the sale value, not of the gain, once your sales in the year pass ₹50,000 (₹10,000 for some people with business income). It appears in your AIS and counts towards your final tax, but on ₹10 lakh of trading it holds back ₹10,000 of your cash until you file.
- Equity fund, held two years₹9,75012.5% on the ₹75,000 above the exemption.
- Equity fund, sold within 12 months₹41,60020% on the whole gain.
- Crypto, held for any length of time₹62,40030% on the whole gain. Holding longer does not help, and no exemption applies.
Tax including 4% cess, with no other gains in the year, so the equity fund's ₹1.25 lakh exemption is fully available. Surcharge ignored.
Report crypto in Schedule VDA of your return: ITR-2 if it is your only capital-market activity, ITR-3 if you trade as a business or have business income. From April 2026, exchanges must file statements of their users' transactions with the tax department, so crypto sales are visible to it whether or not you report them.
ELSS saves tax only under the old regime
Debt funds lost their tax advantage in 2023
Units of debt funds bought on or after 1 April 2023 are taxed at your slab rate however long you hold them, the same as fixed deposit interest. A ₹1 lakh gain costs ₹31,200 in the 30% bracket. Debt funds can still make sense for liquidity or to spread money across issuers, but a lower tax rate is no longer one of the reasons.
Old regime or new: the new regime wins unless your deductions are large
The new regime has been the default since FY 2023-24. Its slab rates are lower and it offers a ₹75,000 standard deduction for salaried people, but almost no other deductions. The old regime keeps deductions such as 80C (₹1.5 lakh), health insurance, home-loan interest (up to ₹2 lakh) and HRA, but charges higher rates.
Deductions the old regime needs before it charges less than the new one, beyond its own ₹50,000 standard deduction:
| Salary before deductions | Tax, new regime | Old regime wins only if your deductions exceed |
|---|---|---|
| ₹12.75 lakh | ₹0 | ₹7.25 lakh |
| ₹15 lakh | ₹97,500 | ₹5.44 lakh |
| ₹20 lakh | ₹1,92,400 | ₹7.08 lakh |
| ₹25 lakh and above | ₹3,19,800 at ₹25 lakh | ₹8.00 lakh |
Few people have ₹5–8 lakh of deductions without a home loan and a large HRA claim. If you don't have both, the new regime almost certainly costs you less. Capital gains are taxed at the same special rates under both regimes.
What to do, depending on who you are
Most tax rules don't apply to most readers. Pick the description closest to yours and the rough size of your taxable income, not counting investment gains:
What applies to you
You are
Taxable income, before capital gains
- Compare regimes with your real deductionsThe new regime wins unless your deductions beyond the standard deduction are more than roughly ₹5.4–8 lakh, which usually takes a home loan and a large HRA claim. Run both before your employer's April declaration, not at filing time.
- Ask for employer NPS contributionsYour employer's NPS contribution of up to 14% of basic salary is still deductible under the new regime. It is one of the few deductions left, and many companies offer it only if you ask.
- Your salary TDS doesn't cover your gainsIf a large sale leaves you owing more than ₹10,000 of tax after TDS, pay advance tax by the next quarterly due date. Otherwise interest is added when you file.
- Your salary may be tax-free. Your gains are not.The rebate that makes income up to ₹12 lakh tax-free doesn't cover equity capital gains or crypto. They are taxed at their own rates even when your total income is below ₹12 lakh.
- Don't buy products for tax reasonsAt a 0–10% slab, FD interest and debt-fund gains are lightly taxed already. Choose investments on return, cost and liquidity.
These are starting points, not advice for your specific situation. If your income comes from more than one of these descriptions, read both. For business income, F&O trading or anything involving a foreign country, one meeting with a chartered accountant usually pays for itself.