Capital Gain on Securities

Profit or loss from selling a capital asset, shares, mutual fund units, bonds, or debentures, gets taxed under the head Capital Gains in the year you transfer it. Whether it’s short-term or long-term depends entirely on how long you held it, and the threshold varies by asset type.

Holding period thresholds

Asset type	Long-term threshold
Listed shares and equity mutual funds	12 months
Business trust units sold on a recognised exchange	12 months
ETFs listed on a recognised exchange, including equity, gold, silver and international ETFs	12 months
Listed bonds and debentures	12 months
Unlisted shares	24 months
Gold and silver mutual funds (unlisted units), physical and digital gold	24 months
Unlisted bonds and debentures, Market Linked Debentures, and units of a Specified Mutual Fund	Always deemed short-term, taxed at slab rates regardless of holding period

Two traps in that table. A listed ETF is not an “unlisted asset” just because it tracks gold or an overseas index, it takes the 12-month threshold like any other listed security, while a gold or silver mutual fund bought as an unlisted unit takes 24. And on gold and silver ETFs specifically, units acquired between 23 July 2024 and 31 March 2025 were caught by the Specified Mutual Fund rule and carried a 24-month threshold; units acquired on or after 1 April 2025 fall outside it and take 12 months. Check the acquisition date before assuming. The full gold picture, including Sovereign Gold Bonds and the Gold Monetisation Scheme, is in Capital Gains on Gold, and the mutual-fund classification detail in Capital Gains on Mutual Funds.

Tax rates: listed equity, sold on or after 23 July 2024

Asset	STCG rate	LTCG rate
Listed equity, equity MFs, business trust units (STT paid)	20%	12.5%, first ₹1.25 lakh exempt, no indexation
All other capital assets	Slab rates	—
Unlisted shares	Slab rates	12.5%, no indexation, no forex benefit
Listed shares, STT not paid (no exception applies)	Slab rates	12.5%, no indexation
Listed/unlisted bonds and debentures	Slab rates (deemed STCG for unlisted)	12.5% for listed, no indexation
Gold and other capital assets	Slab rates	12.5%, no indexation

Grandfathering for pre-2018 holdings: if you acquired listed equity on or before 31 January 2018, gains up to that date’s fair market value are exempt, you only pay tax on appreciation above that FMV, even though indexation itself is no longer available on any capital asset sold on or after 23 July 2024.

Foreign exchange fluctuation benefit

If you invested foreign currency to buy shares or debentures of an Indian company, you can convert your cost, expenses, and sale value into that same foreign currency (at the average buying and selling rate on each relevant date), calculate the gain there, then reconvert to rupees at the transfer date’s rate. This shields you from being taxed on rupee depreciation that has nothing to do with your actual investment performance. It also applies to any future reinvestment and resale of shares bought this way.

One limit worth knowing before you rely on it: this foreign-currency computation is not available alongside the concessional 12.5% long-term rate on unlisted securities held by a non-resident. That is why the rate table above shows no forex benefit against unlisted shares, the two are alternatives, not a stacked benefit.

Unlisted shares: fair market value can override your sale price

If you sell unlisted shares below their prescribed fair market value, the tax rules use the FMV as your sale consideration for computing capital gains, not the actual price received. This matters for family transfers or closely held company shares priced without a formal valuation.

Gifts and inheritance

Gifting shares to a relative or transferring under a will isn’t taxed at the time of transfer, for either the giver or the receiver. Tax only arises when the receiver eventually sells, and their cost of acquisition is the original owner’s cost, with the original holding period carrying over too, so keeping the previous owner’s purchase records is essential.

Losses, exemption limits, and DTAA

• Long-term capital loss can only offset long-term gains, never short-term or any other head of income
• Short-term capital loss can offset both short-term and long-term gains
• Unabsorbed losses carry forward for 8 years, but only if you filed your return on time in the year the loss occurred
• You can only offset your basic exemption limit against short-term gains taxed at slab rates, not against any other type of capital gain
• Chapter VI-A deductions are only available against short-term gains taxed at slab rates, never against other capital gains
• If your country of residence also taxes the same gain, DTAA relief between India and that country can reduce the rate, exempt it, or give credit for tax already paid

TDS deducted on your capital gains is available as credit against your final liability, filing your return is what lets you claim any excess back as a refund.