Capital Gains Tax: The Basics

beginner7 min read

Short-term vs long-term, and why how long you hold changes what you owe.

When you sell a stock or equity fund for a profit, that profit (the capital gain) is taxed — and how long you held it changes the rate dramatically.

Short-Term Capital Gains (STCG) — held ≤ 1 year (for listed equity). Taxed at a higher flat rate.
Long-Term Capital Gains (LTCG) — held > 1 year. Taxed at a lower rate, with an annual exemption on the first slice of gains.

The tax code literally pays you to be patient: hold equity past one year and your gains are taxed far more gently, with an exemption on top. Selling a winner at 11 months instead of 13 can needlessly hand a big chunk to the tax office. Let the clock work for you.

Rates and exemption thresholds change with budgets, so always check the current year’s numbers — but the structure (short-term taxed harder than long-term) is durable. Use our capital-gains and tax calculators for exact figures.

Common mistake“Tax is tax, holding period doesn’t matter.” It matters a lot for equity — the long-term rate is materially lower, and there’s an annual LTCG exemption you can harvest deliberately.

Key takeawayEquity gains held ≤1 year (STCG) are taxed harder than those held >1 year (LTCG), which also get an annual exemption — holding period directly changes your tax.

FAQs

What are the current LTCG/STCG rates?

Rates and the LTCG exemption limit are set by the annual Union Budget and change periodically, so verify the current FY figures (or use the PlanMyInvesting capital-gains calculator). The key principle — long-term is taxed more favourably than short-term — stays constant.