Tax on selling shares in India

On listed shares where securities transaction tax (STT) was paid, a gain is short-term if you held the shares for 12 months or less, taxed at 20%, and long-term if you held them for more than 12 months, taxed at 12.5% on the gain above ₹1,25,000 a year. These are TaxCare's signed-off rates for the tax year 2025-26, for transfers on or after 23 July 2024.

The rates for the tax year 2026-27 are provisional and carry forward these values, and have not been signed off against the Income-tax Act, 2025. Under that Act, short-term gains on listed shares (section 111A of the 1961 Act) are covered by section 196, and long-term gains above ₹1,25,000 (section 112A of the 1961 Act) by section 198.

Short-term vs long-term

If you sold some shares before 23 July 2024 and some after, each lot uses the rate for its own transfer date. For the full holding-period rules by asset, see holding period rules for each asset.

Worked example

You sell listed shares in the tax year 2025-26, after 23 July 2024:

• Short-term gain: ₹40,000. Tax at 20% = ₹8,000.
• Long-term gain: ₹2,25,000. The first ₹1,25,000 is exempt. The balance ₹1,00,000 is taxed at 12.5% = ₹12,500.
• Total tax before cess: ₹20,500. With 4% cess: ₹21,320.

This assumes your other income already uses up the basic exemption limit; TaxCare's tax engine gives the same ₹21,320 in both regimes.

At higher incomes a surcharge is added to the tax before cess: 10% where income is above ₹50 lakh, 15% above ₹1 crore. On these share gains the surcharge never goes above 15%, even where the rest of your income attracts 25% or 37%. With a salary of ₹60 lakh, the same gains cost ₹23,452 instead of ₹21,320.

Shares bought before 1 February 2018

For equity shares and equity funds acquired before 1 February 2018, the cost for the long-term gain is based on the fair market value on 31 January 2018 where that gives a lower gain. This is called grandfathering.

The cost used is the higher of the actual cost and the lower of the fair market value on 31 January 2018 and the sale value.

Which ITR form

• ITR-1: only if your long-term gains under this section are within ₹1,25,000 and you have no other capital gains.
• ITR-2: for any short-term gains, larger long-term gains, or other capital gains, if you have no business income.
• ITR-3: if you also have trading income such as intraday or F&O.

See ITR-1 vs ITR-2.

Intraday and F&O are not capital gains

• Intraday equity is speculative business income.
• F&O is non-speculative business income.
• Both go in ITR-3, and may need a tax audit if the turnover crosses the limits. In TaxCare's rules, turnover for F&O is the sum of absolute profits and losses plus option premium received.

Losses from speculative business can be set off only against speculative profits, and carried forward for 4 years. Other business losses are carried forward for 8 years.

Under section 44AB of the 1961 Act, a business needs a tax audit when its turnover is above ₹1 crore, or above ₹10 crore where cash receipts and payments are each within 5% of the total. Whether your trading needs an audit also depends on other rules, so check with a Tax Expert.

Losses on shares

To carry a loss forward, file your return on time. A belated return cannot carry forward most losses. A capital loss never crosses into other heads such as salary.

Other rules in brief

• Rebate. The new regime rebate does not apply to tax on special-rate gains such as these. The old regime rebate may be set against short-term gains tax, but not against long-term gains under this section.
• Specified mutual funds. Debt mutual fund units acquired on or after 1 April 2023 are taxed at slab rates as short-term, whatever the holding period.
• Unlisted shares have a different holding period and rate. See holding period rules.
• Advance tax. Capital gains can create a tax liability during the year. In TaxCare's rules, advance tax applies when tax after TDS is ₹10,000 or more.

What to keep

Contract notes or your broker's profit and loss statement, dates and prices of purchase and sale, and the 31 January 2018 value for old holdings.

How TaxCare helps

Upload your broker's P&L or tax statement (Zerodha, Groww or Upstox) and TaxCare sorts the trades into short-term, long-term, intraday and F&O results for the tax year, applies the rate and exemption for each lot, and picks the right ITR form. If your trading is complex, a Tax Expert can help. See Tax Experts and the income tax calculator.

This guide gives general information and is not professional tax advice.