Investors in Indian equities and equity-oriented mutual funds face capital gains tax that varies with the holding period and instrument. Here is a concise, practical guide to calculate tax on a profit of ₹3,00,000.
When the gains are short-term
- Short-term capital gains (STCG) apply to equity shares and equity mutual funds held for 12 months or less.
- The applicable tax rate is 15% plus the health and education cess and any surcharge that applies to your income.
When the gains are long-term
- Long-term capital gains (LTCG) on these assets arise if you hold for more than 12 months.
- Gains above ₹1,00,000 in a financial year are taxed at 10% with a 4% cess, while the first ₹1,00,000 of LTCG in a year remains tax-free.
Practical calculations for ₹3,00,000 profit
- If the ₹3,00,000 is STCG: tax is ₹3,00,000 × 15% = ₹45,000. Add 4% cess on this tax: ₹1,800. Total ≈ ₹46,800.
- If the ₹3,00,000 is LTCG: taxable amount above ₹1,00,000 is ₹2,00,000. Tax is ₹2,00,000 × 10% = ₹20,000. Add 4% cess: ₹800. Total ≈ ₹20,800.
Notes and caveats
- Surcharges may apply based on total income, which can modify the final tax amount.
- Debt funds and other asset classes have different holding-period thresholds and tax rates; consult a tax advisor for instruments outside equity.
