How are stock market gains taxed in India? A simple guide
The rate depends on how long you held the shares. Here's how that works.
This article is for educational purposes only and is not tax advice. Rates and rules change, so verify the prevailing provisions and consult a tax professional.
Picture an investor who sold some shares at a profit in March. The money felt like a win until filing season, when a question turned up: how much of this is taxable? Many people who bought their first stock only recently learn about tax at exactly that point.
The answer depends mostly on how long the shares were held. Platforms such as Chola Securities keep trades, contract notes, and holdings in one place, making the figures easier to find when that question comes up.
What are the two kinds of gain on shares?
Gains on listed shares fall into two groups based on the holding period. The table sets them side by side.
| Parameter |
Short-term capital gain |
Long-term capital gain |
| Holding period |
12 months or less |
More than 12 months |
| Tax name |
Short-term capital gains tax (STCG) |
Long-term capital gains tax (LTCG) |
| Rate (as of 2026) |
20% |
12.5% |
| Exemption |
None |
Gains up to Rs 1,25,000 in a financial year |
What are the current rates?
As of 2026, the Income Tax Department states these rates for transfers on or after 23 July 2024.
- Short-term gains on listed equity shares are taxed at 20%, where Securities Transaction Tax (STT) is paid.
- Long-term gains are taxed at 12.5% on the amount above Rs 1,25,000 in a financial year.
The department adds that the concessional rates apply if STT is paid, and that for shares STT should also generally have been paid at the time of acquisition, subject to certain exceptions. Rates change over time, so verify the prevailing provisions before you file.
How does the Rs 1,25,000 limit work?
The limit applies to your total long-term gains in a financial year. Only the amount above it is taxed.
Here's an illustrative example, using made-up figures. Tax is shown before any surcharge or cess.
| Scenario |
Gain |
Taxable amount |
Tax |
| Long-term gain of Rs 1,00,000 |
Rs 1,00,000 |
Nil, as it is within Rs 1,25,000 |
Rs 0 |
| Long-term gain of Rs 1,75,000 |
Rs 1,75,000 |
Rs 1,75,000 minus Rs 1,25,000 = Rs 50,000 |
12.5% of Rs 50,000 = Rs 6,250 |
| Short-term gain of Rs 40,000 |
Rs 40,000 |
Rs 40,000, with no exemption |
20% of Rs 40,000 = Rs 8,000 |
These figures are for illustration only and do not represent any actual investment.
What else affects the tax?
Losses can reduce the tax. According to the Income Tax Department's guidance on set-off and carry forward of losses, you can set off a short-term capital loss against short-term or long-term gains. You can set off a long-term capital loss only against long-term gains. Unused capital losses can be carried forward for eight assessment years, but only if the return is filed by the due date.
Intraday and futures and options profits aren't taxed under the delivery rules above. They're generally treated under separate provisions, so check the current rules or ask a tax professional. This article gives no rates for them.
Securities Transaction Tax and other broking charges are also separate from capital gains tax. STT is paid when you trade, and the Income Tax Department says no deduction is allowed for it when computing capital gains.
Does a demat account give tax benefits?
No. A demat account holds your shares electronically. It doesn't reduce your tax, and what you owe depends on your gains, the holding period and the rules above.
Its practical value is record-keeping. When all your trades and holdings sit in one account, it's easier to gather figures at filing time.
How can your records help at filing time?
As of October 2026, the Chola Securities platform provides a digital contract note (daily), a statement of accounts (weekly) and a holdings view. Together they help you match your sale prices and dates with your own calculations.
Before you file, check your figures against your broker's statements, and consult a tax professional for advice on your own situation.
Final thoughts
Tax on share gains depends on the holding period, the rate, and the Rs 1,25,000 limit. Knowing these before you sell makes the numbers less surprising later. Tax is one of the things beginners learn the hard way, and first-time investors often make other mistakes, too.
Keep your records tidy and review them before filing. If you're ready to start investing, you can open an account through the Chola Securities KYC portal.
Disclaimer: Cholamandalam Securities Limited (CSEC) is a SEBI-registered stock broker and depository participant. CSEC does not provide investment advisory services. Investors are advised to consult an independent financial advisor before taking any investment decisions.