Stocks, mutual funds, gold, and property... understand the LTCG tax applicable to them..

On October 13, 2026, during an event in New Delhi, Finance Minister Nirmala Sitharaman made a significant statement regarding LTCG (Long-Term Capital Gains) and STT (Securities Transaction Tax). Her remarks caused a stir in the stock market, with many speculating that the government might abolish LTCG and STT; however, the Finance Minister did not actually announce any such move.

There are various ways to invest in the market. Those interested in the stock market invest directly in shares. Meanwhile, individuals who prefer to avoid direct market risk but wish to benefit from the power of compounding often invest in mutual funds. On the other hand, those who want to avoid any market-linked risk entirely tend to invest in gold and real estate. Let us understand why LTCG has become a topic of such discussion and how these taxes apply to different investment avenues.

1. Shares (Stocks)
If you hold listed equity shares for more than 12 months, the profit generated from them is classified as a Long-Term Capital Gain. For stocks, long-term capital gains of up to ₹1.25 lakh in a financial year are completely tax-free. Gains exceeding this limit are taxed at a rate of 12.5%.

For instance, if you make a total profit of ₹2 lakh from shares in a year, no tax is levied on the initial ₹1.25 lakh. However, the remaining ₹75,000 is subject to tax at 12.5%, plus applicable cess and surcharges.

2. Mutual Funds
Taxation rules for mutual funds depend on the fund's category, as different rules apply to different funds. For example, investments in equity-oriented mutual funds attract long-term capital gains tax if held for more than 12 months. Here too, no tax is levied on the initial ₹1.25 lakh of gains; however, you are required to pay 12.5% ​​LTCG tax on earnings exceeding that amount.

Regarding debt mutual funds, if you purchased them on or after April 1, 2023, the entire gain is classified as a short-term capital gain. Regardless of how long you hold them, the profit is taxable according to your applicable income tax slab. No indexation benefit is available in this case. However, for debt funds purchased prior to April 1, 2023, a 12.5% ​​LTCG tax (without indexation) may apply based on transitional provisions.

3. Gold
If you invest in gold, the tax treatment depends on the form of the gold. Different tax rules apply to physical gold versus gold purchased through digital channels. If you purchase physical gold—such as jewelry or bars—and hold it for more than 24 months, Long-Term Capital Gains (LTCG) tax applies. Notably, a flat 12.5% ​​tax is levied without the benefit of indexation.

As for Gold ETFs, since they are listed securities, a holding period exceeding 12 months qualifies as long-term. In contrast, for gold mutual funds, LTCG tax applies after a holding period of 24 months. It is important to note that, unlike with shares, the ₹1.25 lakh exemption limit does not apply to gold profits; gains from gold fall entirely under the purview of long-term capital gains tax. If sold after a shorter holding period, short-term tax applies based on your income tax slab.

4. Property (Real Estate)
Purchasing land or a house falls under the category of immovable property. If these assets are held for more than 24 months, the resulting profit is classified as Long-Term Capital Gain (LTCG). Under the revised rules, long-term capital gains on property are taxed at 12.5% ​​without indexation.

The government has provided relief to individuals selling property purchased before July 23, 2024. Such individuals can compare two tax calculations: 12.5% ​​(without indexation) and 20% (with indexation). They will be required to pay whichever amount is lower.

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