You bought Tata Motors in January, sold it in August, and made ₹5 lakh. You feel good. Then your CA calls. The tax on that trade just went from ₹75,000 to ₹1,00,000 — because Nirmala Sitharaman changed the rules mid-year in the July 2024 Budget. That ₹25,000 difference is a real cost that most traders discovered only at filing time.
If you're still using pre-July 2024 numbers in your head, you're miscalculating your post-tax returns on every trade.
What Actually Changed on July 23, 2024
The Budget 2024 (presented on July 23) revised capital gains tax rates for listed equity and equity-oriented mutual funds in two places:
- STCG on equity: went from 15% to 20%
- LTCG on equity: went from 10% to 12.5%
- LTCG exemption: increased from ₹1 lakh to ₹1.25 lakh per year
The holding period didn't change. You still need to hold listed equity for more than 12 months to qualify for LTCG. Less than or equal to 12 months — it's STCG, no matter what.
These rates apply to transactions from July 23, 2024 onwards. If you sold shares before that date in FY25, the old rates applied to that portion. For FY26 (April 2025 onwards), every equity transaction falls under the new regime.
The ₹5 Lakh STCG Scenario — Old vs New
Say you're an active trader. You bought ₹20 lakh worth of Infosys in November 2024 and sold it in April 2025 for ₹25 lakh. Profit: ₹5 lakh. Holding period: roughly 5 months. This is STCG.
Old rate (pre-July 23, 2024): 15% flat → Tax = ₹75,000 New rate (FY26): 20% flat → Tax = ₹1,00,000
You're paying ₹25,000 more on the same trade. That's not a rounding error — that's a meaningful drag on your annualised return, especially if you're doing this 4–6 times a year.
STCG has no exemption limit. The full ₹5 lakh is taxable at 20%. There's no threshold, no grandfathering, no basic exemption to offset it (unless you're in the old tax regime and have other adjustments). Plus, STT was already deducted at source. So you're paying STT on the transaction and then 20% on the gain.
The ₹2 Lakh LTCG Scenario — Where the Math Gets Interesting
You bought HDFC Bank shares in March 2024 and sold them in April 2025. Profit: ₹2 lakh. Holding period: 13 months. This qualifies for LTCG.
How the exemption works: First ₹1.25 lakh is tax-free. Taxable gain = ₹2 lakh − ₹1.25 lakh = ₹75,000.
Tax at 12.5%: ₹75,000 × 12.5% = ₹9,375
Under the old rules, the exemption was ₹1 lakh and the rate was 10%. Taxable gain would have been ₹1 lakh. Tax = ₹10,000.
So here, you're actually paying ₹625 less under the new rules. The higher exemption limit more than offsets the rate hike for smaller LTCG amounts. The crossover point — where new rules become more expensive than old — sits somewhere around ₹2.5 lakh in LTCG. Below that, you come out ahead with the new rules.
Above ₹2.5 lakh in LTCG, the 12.5% rate starts hurting more than the ₹25,000 bump in exemption helps.
The Mixed Portfolio — Where Most Investors Actually Live
Real portfolios aren't clean. You have some short-term trades that went well, some long-term holdings you trimmed, maybe an SIP in an equity mutual fund.
Let's say your FY26 P&L looks like this:
- STCG from intraday and short-term trades: ₹3 lakh
- LTCG from direct equity holdings (held 12+ months): ₹2.5 lakh
- LTCG from equity mutual fund redemptions: ₹80,000
STCG tax: ₹3 lakh × 20% = ₹60,000
LTCG from direct equity: Taxable = ₹2.5 lakh − ₹1.25 lakh = ₹1.25 lakh. Tax = ₹1.25 lakh × 12.5% = ₹15,625
LTCG from equity mutual funds: The ₹1.25 lakh exemption is shared across all LTCG — equity, equity MFs, everything in a single financial year. Since you've already used the full ₹1.25 lakh against your direct equity gains, the entire ₹80,000 from mutual funds is taxable. Tax = ₹80,000 × 12.5% = ₹10,000
Total tax: ₹85,625
If you'd done this in FY24 under the old rates, the same portfolio would have generated roughly ₹63,000 in tax — STCG at 15% (₹45,000) and LTCG math working out to about ₹18,000. The FY26 total is about 35% higher.
Debt Mutual Funds — The Change That Already Happened
Don't get confused between the July 2024 equity changes and the earlier debt MF change. The LTCG benefit on debt mutual funds was removed from April 1, 2023 — not in the 2024 Budget.
Before April 2023, if you held a debt fund for 3+ years, you got LTCG at 20% with indexation — a significant benefit. That's gone. Now debt MF gains — regardless of holding period — are taxed at your income tax slab rate.
If you're in the 30% bracket and you made ₹2 lakh from a debt fund redemption, you owe ₹60,000 in tax. No indexation, no 20% cap. This has made debt MFs much less attractive for investors in the higher tax brackets. Many have shifted to direct bonds or RBI Floating Rate Bonds to get cleaner post-tax yields.
How to Not Leave Money on the Table in FY26
The ₹1.25 lakh LTCG exemption resets every April 1. If you have unrealised long-term gains sitting in your portfolio, there's a strategy called tax harvesting — sell and rebuy to book gains within the exemption limit each year, resetting your cost basis.
If your long-term equity gains are under ₹1.25 lakh in a financial year, you pay zero on them. Every year you skip this, you let the exemption go to waste.
A few specifics for FY26:
- LTCG losses can be set off against LTCG gains only — not against STCG
- STCG losses can be set off against both STCG and LTCG gains
- Unabsorbed capital loss can be carried forward for 8 assessment years
- If you're using the new tax regime under Section 115BAC, capital gains tax rates remain unchanged — the STCG and LTCG rates are separate from your slab
One thing many traders miss: if your total income (salary + business + capital gains) is below ₹2.5 lakh, you get to offset STCG with the basic exemption shortfall. That's a niche but real benefit for those starting out.
Run your actual numbers before March 31, 2026. Look at what's sitting in your demat account with gains above ₹1.25 lakh and a holding period crossing 12 months — that's your LTCG harvesting window. And if you've got short-term losers in the same account, book them now to offset the STCG you've already crystallised.
The tax code changed. The calculation has to change with it.