Tax on Selling Shares in India — FY 2025-26
How stock market profits are taxed in India. Short-term vs long-term gains. STCG at 20%, LTCG at 12.5% with ₹1.25 lakh exemption. Updated for Budget 2024 & 2025.
The basics — how are stock profits taxed?
When you sell shares listed on Indian stock exchanges (NSE, BSE), the profit is called a capital gain. The tax rate depends on how long you held the shares before selling.
| Type | Holding Period | Tax Rate (FY 2025-26) | Exemption |
|---|---|---|---|
| Short-Term Gain (sold within 12 months) | Less than 12 months | 20% | None |
| Long-Term Gain (held 12+ months) | 12 months or more | 12.5% | First ₹1.25 lakh per year is tax-free |
The ₹1.25 lakh LTCG exemption — how it works
The first ₹1.25 lakh of long-term profits from stocks and equity mutual funds combined is tax-free every financial year.
- You held a stock for 2 years and sold at a profit of ₹2 lakh
- First ₹1.25 lakh → completely tax-free
- Remaining ₹75,000 → taxed at 12.5% = ₹9,375 tax
Section 87A rebate — does it apply to stock gains?
No. The Section 87A rebate (which makes income up to ₹12 lakh tax-free under the new regime) does NOT apply to capital gains tax. Even if your total income is below ₹12 lakh, your STCG or LTCG is taxed at 20% or 12.5% separately.
Which ITR form do you file?
Anyone who sold stocks — even at a loss — must file ITR-2. Using ITR-1 when you have stock gains is one of the most common filing mistakes in India and can result in a defective return notice.
Documents you need
- AIS (Annual Information Statement) — download from incometax.gov.in. Shows all your transactions from all brokers.
- Broker Tax P&L statement — available in your broker app under Reports → Tax P&L (Zerodha, Groww, Upstox, Angel One, ICICI Direct etc.)
What about losses?
| Loss Type | Can be set off against | Carry forward period |
|---|---|---|
| Short-term capital loss (STCL) | STCG or LTCG from any asset | 8 years |
| Long-term capital loss (LTCL) | LTCG only (not STCG) | 8 years |
US stocks and foreign shares
| Type | Holding Period | Tax Rate |
|---|---|---|
| Short-term (US/foreign) | Less than 24 months | Slab rate (5%–30%) |
| Long-term (US/foreign) | 24 months or more | Slab rate (not 12.5%) |
Foreign stocks are taxed at your income slab rate — not the flat 12.5% that applies to Indian equity. Report gains in INR using the RBI reference rate on the transaction date.
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