How Capital Gains Tax Works in India
Under the Income-tax Act, profits from selling shares or mutual funds are taxed as capital gains:
- Short-Term Capital Gains (STCG): Shares sold within 12 months — taxed at 15%
- Long-Term Capital Gains (LTCG): Shares sold after 12 months — taxed at 10% if gains exceed ₹1 lakh
Zero Tax on Small Capital Gains
👉 Under the new tax regime, you still enjoy the basic exemption limit:
- For individuals below 60 years: ₹3 lakh
- Add ₹1 lakh LTCG exemption on equity
So, up to ₹4 lakh in LTCG can be tax-free for an individual.
✅ Example:
- Total LTCG = ₹4.25 lakh
- Less: LTCG exemption = ₹1 lakh
- Remaining = ₹3.25 lakh
- Less: Basic exemption limit = ₹3 lakh
- Taxable LTCG = ₹25,000 (only this part taxed at 10%)
When You Pay Zero Tax
If your total income (including LTCG) is within ₹4 lakh to ₹4.25 lakh, the extra LTCG gets absorbed into the basic exemption. So no tax!
| Scenario | Total LTCG | LTCG Exempt | Basic Limit Used | Taxable LTCG |
|---|---|---|---|---|
| Case A | ₹4,00,000 | ₹1,00,000 | ₹3,00,000 | Nil |
| Case B | ₹4,25,000 | ₹1,00,000 | ₹3,00,000 | ₹25,000 |
Note: No deductions under Chapter VI-A are available in the new regime.
How To Calculate Tax If Capital Gains Are Sole Income
Step-by-Step:
1️⃣ Find your total LTCG from equity shares/mutual funds.
2️⃣ Subtract ₹1 lakh (statutory exemption).
3️⃣ Use the basic exemption limit to further reduce taxable gains.
4️⃣ Pay 10% tax on any remaining LTCG.
Official Reference: CBDT FAQ on LTCG
Expert Tip
💡 If you have no other income, you can plan your investments to keep gains within this limit — legally paying zero tax.
FAQs
Q1. Is the exemption available under old regime too?
Yes — but in the old regime, you can claim Chapter VI-A deductions too.
Q2. Do I need to file ITR if no tax is payable?
Yes — if your LTCG exceeds ₹2.5 lakh (old regime) or ₹3 lakh (new regime), you must file an ITR.
Key Takeaway
Keeping your capital gains below ₹4.25 lakh under the new regime means zero tax liability if you have no other income. Smart planning helps save tax legally.
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Summary
If your total equity capital gains are up to ₹4.25 lakh under India’s new tax regime, you pay zero tax — thanks to the basic exemption limit and LTCG exemption.