Capital Gains Rules (Post-Budget 2024-25)

Understanding how capital gains are taxed prevents unpleasant surprises when you redeem investments:

1. Listed Equity & Equity Mutual Funds

  • Short-Term Capital Gains (STCG - Held < 12 Months): Flat 20% tax.
  • Long-Term Capital Gains (LTCG - Held > 12 Months): Flat 12.5% tax on gains exceeding ₹1,25,000 per financial year.

2. Debt Mutual Funds

  • Gains on pure debt mutual funds (purchased after April 1, 2023) are added to your total income and taxed at your applicable income tax slab rate, regardless of holding period.

The Tax-Gain Harvesting Hack

Every year before March 31st:

1. Identify equity funds with unrealized gains up to ₹1.25 Lakh.

2. Sell the units to lock in the ₹1.25 Lakh gain (paying ₹0 tax due to the annual exemption).

3. Re-invest the money the very next day.

4. You have successfully raised your purchase price benchmark without paying a single rupee of tax!