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Tax Intelligence

Taxability of
Investment Instruments

Clear, complete capital gains tax rates for every instrument — covering both the current Income Tax Act, 1961 (FY 2025-26) and the new Income Tax Act, 2025 (FY 2026-27 onwards).

verified SEBI & IT Act compliant
update Updated for FY 2025-26 & 2026-27
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Quick Rate Reference
STCG — Listed Equity / Eq. MF
20%
LTCG — Listed Equity / Eq. MF
12.5%
Debt / Specified MF / Unlisted Bonds
Slab Rate
LTCG Exemption (Listed Equity)
₹1.25 L
Tax Year
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info Equity shares listed on BSE / NSE are subject to Securities Transaction Tax (STT). Unlisted / foreign shares follow a different holding period and rate structure.
Capital Gains — Equity Shares

Tax Rates & Applicable Sections

Income Tax Act, 1961 — FY 2025-26
Instrument Holding Period Nature Section (IT Act 2025) Section (IT Act 1961) Tax Rate Key Remarks
Listed on BSE / NSE ≤ 12 months STCG § 196 § 111A 20%Note 1 —
> 12 months LTCG § 198 § 112A 12.5%Note 1 LTCG up to ₹1.25 lakh per year is exempt from tax.
Unlisted Shares
* includes foreign shares		 ≤ 24 months STCG — — personSlab Rate Taxed as per individual income tax slab.
> 24 months LTCG § 197 § 112 12.5%Note 1 —
Note 1: Surcharge shall not exceed 15%.
info Equity Oriented Fund: Invests ≥ 65% in equity shares listed on BSE/NSE.
Specified MF Scheme: Invests > 65% in debt & money market instruments (units acquired on/after 01 Apr 2023).
Capital Gains — Mutual Funds

Units of Mutual Fund — Tax Rates

Income Tax Act, 1961 — FY 2025-26
Scheme Type Holding Period Nature Section (IT Act 2025) Section (IT Act 1961) Tax Rate Definition / Key Remarks
Equity Oriented Scheme ≤ 12 months STCG § 196 § 111A 20%Note 1 Fund investing ≥ 65% in listed equity shares (BSE/NSE).
> 12 months LTCG § 198 § 112A 12.5%Note 1 LTCG up to ₹1.25 lakh per year is exempt.
Specified MF Scheme
Units acquired on/after 01 Apr 2023		 Irrespective of period * STCG — — personSlab Rate Fund investing > 65% in debt & money market instruments. Always treated as short-term regardless of holding.
Other Schemes ≤ 24 months STCG — — personSlab Rate Hybrid / debt-oriented funds not qualifying as equity-oriented.
> 24 months LTCG § 197 § 112 12.5%Note 1 —
Note 1: Surcharge shall not exceed 15%.
* As per §76 of IT Act 2025 (erstwhile §50AA of IT Act 1961).
info Unlisted Bonds: Always treated as short-term capital asset irrespective of holding period, as per §76 of IT Act 2025 (erstwhile §50AA of IT Act 1961).
Capital Gains — Bonds / Debentures

Tax Rates & Applicable Sections

Income Tax Act, 1961 — FY 2025-26
Instrument Holding Period Nature Section (IT Act 2025) Section (IT Act 1961) Tax Rate Remarks
Listed on BSE / NSE ≤ 12 months STCG — — personSlab Rate —
> 12 months LTCG § 197 § 112 12.5%Note 1 —
Unlisted Bonds / Debentures Irrespective of period * STCG — — personSlab Rate Treated as short-term irrespective of holding. §76, IT Act 2025 / §50AA, IT Act 1961.
Note 1: Surcharge shall not exceed 15%.
info An Exchange Traded Fund (ETF) is mandatorily required to be listed on a recognised stock exchange. Accordingly, both the holding period thresholds and LTCG/STCG classification apply as shown below.
Capital Gains — Exchange Traded Funds

ETF Tax Rates & Applicable Sections

Income Tax Act, 1961 — FY 2025-26
Instrument Holding Period Nature Section (IT Act 2025) Section (IT Act 1961) Tax Rate Remarks
Exchange Traded Fund (ETF) ≤ 12 months STCG — — personSlab Rate ETF is mandatorily listed on a recognised stock exchange.
> 12 months LTCG § 197 § 112 12.5%Note 1 —
Note 1: Surcharge shall not exceed 15%.
info Income earned by an AIF is credited / allocated / distributed to unit holders. Other than business income, such income is treated as pass-through and is taxable in the hands of the unit holders — retaining the same character and being taxed under the relevant head of income as it was earned by the AIF.
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Category I AIF

Category I AIFs invest in sectors that are considered socially or economically desirable and are encouraged by the Government and regulators.

Typical Investments: Startups, early-stage companies, infrastructure projects.
Examples: Venture Capital Funds (VCFs), Angel Funds, Infrastructure Funds.
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Category II AIF

Category II AIFs is the largest category in terms of AUM. These funds provide long-term risk capital to businesses and infrastructure without engaging in speculative trading.

Typical Investments: Mature unlisted companies, pre-IPO businesses, corporate debt, structured credit.
Examples: Private Equity Funds, Private Credit Funds, Real Estate Funds.
Units of AIF — Category I / Category II

Tax Rates & Applicable Sections

Income Tax Act, 1961 — FY 2025-26
Nature of Income Nature of Gain Section (IT Act 2025) Section (IT Act 1961) Tax Rate Remarks
Capital Gains LTCG § 197 § 112 12.5%Note 1 —
LTCG § 198 § 112A 12.5%Note 1 —
STCG § 196 § 111A 20%Note 1 —
STCG Other than § 196 Other than § 111A personSlab Rate —
Interest Income — — — personSlab Rate Taxable under the head "Income From Other Sources".
Dividend Income — — — personSlab RateNote 1 Taxable under the head "Income From Other Sources".
Rental Income — — — personSlab Rate Taxable under the head "Income From House Property".
Business Income — — — — Taxable in the hands of AIF and exempt in the hands of the unit holder.
Note 1: Surcharge shall not exceed 15%.
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Key Points
  • Income earned by AIF is credited / allocated / distributed to unit holders.
  • Such income, other than business income, is treated as pass-through and is taxable in the hands of the unit holders.
  • Such income retains the same character and is taxed under the relevant head of income in the hands of the unit holders as it was earned by the AIF.
  • AIF issues a mandatorily required certificate to each unit holder in "Form 78" as per the provisions of the Income Tax Act, 2025 (corresponding to the erstwhile "Form 65C" under the Income Tax Act, 1961).
  • The certificate provides a head-wise and nature-wise break-up of the income credited / allocated / distributed by the AIF to the unit holder, enabling the unit holder to correctly report such income under the applicable head of income in the ITR.
  • AIF is required to deduct TDS @ 10% on income taxable in the hands of a Resident unit holder.
info A Real Estate Investment Trust ("REIT") is a Business Trust that is mandatorily required to be listed on a recognized stock exchange. Income earned by the REIT is distributed to its unitholders.
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About REIT

REIT is a pooled investment vehicle, similar to Mutual Funds, that owns and operates completed income-generating real estate assets and distributes the cash flows to unit holders.

Typical Investments: Office Parks, Shopping Malls, Warehouses.
Examples: Embassy REIT, Mindspace REIT, Brookfield REIT, Nexus Select REIT.
Real Estate Investment Trust ("REIT")

Tax Rates & Applicable Sections

Income Tax Act, 1961 — FY 2025-26
Particulars Nature of Income Section (IT Act 2025) Section (IT Act 1961) Tax Rate Remarks
Income distributed by Business Trust Interest Income — — personSlab Rate Taxable under the head "Income From Other Sources".
Dividend Income(Note 2) — — — Exempt in the hands of the unitholder.
Rental Income — — personSlab Rate Taxable under the head "Income From House Property".
Other Income — — — Exempt in the hands of unitholder; taxable in the hands of the Business Trust.
Repayment of Capital(Note 3) — — — personSlab Rate Taxable under the head "Income From Other Sources".
Income earned on transfer of units
≤ 12 months		 STCG § 196 § 111A 20%Note 1 —
> 12 months LTCG § 198 § 112A 12.5%Note 1 LTCG up to ₹1.25 lakh per year is exempt from tax.
Note 1: Surcharge shall not exceed 15%.
Note 2: Dividend is taxable in the hands of the unitholder at applicable slab rates if the SPV in which the Business Trust has invested has opted for taxation under section 200 of the Income-tax Act, 2025 (corresponding to erstwhile section 115BAA of the Income-tax Act, 1961).
Note 3: Where a Business Trust distributes any amount to unitholders by way of repayment of capital or debt, such repayment (net of issue price and earlier distributions of capital and income) is taxable in the hands of the unitholder under section 92(2)(k) of the Income-tax Act, 2025 (corresponding to erstwhile section 56(2)(xii) of the Income-tax Act, 1961).
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Key Points
  • A Business Trust (REIT / InvIT) is mandatorily required to be listed on a recognized stock exchange.
  • Income earned by the Business Trust is distributed to its unitholders.
  • The Business Trust issues a mandatorily required certificate to each unitholder in "Form 77" as per the Income Tax Act, 2025 (corresponding to erstwhile "Form 64B" under the Income Tax Act, 1961).
  • The certificate provides a nature-wise break-up of the income (and capital / debt repayment) distributed, enabling the unitholder to correctly report it under the applicable head of income in the ITR.
  • The Business Trust is required to deduct TDS @ 10% on interest / dividend / rental income taxable in the hands of a Resident unitholder.
info An Infrastructure Investment Trust ("InvIT") is a Business Trust that is mandatorily required to be listed on a recognized stock exchange. Income earned by the InvIT is distributed to its unitholders.
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About InvIT

InvIT is a pooled investment vehicle, similar to Mutual Funds, that owns and operates completed income-generating infrastructure assets and distributes the cash flows to unit holders.

Typical Investments: Toll Roads, Transmission Lines, Renewable Energy Assets, Pipelines, Telecom Towers.
Examples: IndiGrid InvIT, PowerGrid InvIT, IRB InvIT.
Infrastructure Investment Trust ("InvIT")

Tax Rates & Applicable Sections

Income Tax Act, 1961 — FY 2025-26
Particulars Nature of Income Section (IT Act 2025) Section (IT Act 1961) Tax Rate Remarks
Income distributed by Business Trust Interest Income — — personSlab Rate Taxable under the head "Income From Other Sources".
Dividend Income(Note 2) — — — Exempt in the hands of the unitholder.
Other Income — — — Exempt in the hands of unitholder; taxable in the hands of the Business Trust.
Repayment of Capital(Note 3) — — — personSlab Rate Taxable under the head "Income From Other Sources".
Income earned on transfer of units
≤ 12 months		 STCG § 196 § 111A 20%Note 1 —
> 12 months LTCG § 198 § 112A 12.5%Note 1 LTCG up to ₹1.25 lakh per year is exempt from tax.
Note 1: Surcharge shall not exceed 15%.
Note 2: Dividend is taxable in the hands of the unitholder at applicable slab rates if the SPV in which the Business Trust has invested has opted for taxation under section 200 of the Income-tax Act, 2025 (corresponding to erstwhile section 115BAA of the Income-tax Act, 1961).
Note 3: Where a Business Trust distributes any amount to unitholders by way of repayment of capital or debt, such repayment (net of issue price and earlier distributions of capital and income) is taxable in the hands of the unitholder under section 92(2)(k) of the Income-tax Act, 2025 (corresponding to erstwhile section 56(2)(xii) of the Income-tax Act, 1961).
checklist
Key Points
  • A Business Trust (REIT / InvIT) is mandatorily required to be listed on a recognized stock exchange.
  • Income earned by the Business Trust is distributed to its unitholders.
  • The Business Trust issues a mandatorily required certificate to each unitholder in "Form 77" as per the Income Tax Act, 2025 (corresponding to erstwhile "Form 64B" under the Income Tax Act, 1961).
  • The certificate provides a nature-wise break-up of the income (and capital / debt repayment) distributed, enabling the unitholder to correctly report it under the applicable head of income in the ITR.
  • The Business Trust is required to deduct TDS @ 10% on interest / dividend income taxable in the hands of a Resident unitholder.
At a Glance

Holding Period Thresholds

Know how long to hold each instrument to qualify for the lower LTCG rate.

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Equity Shares (Listed)
12M
Minimum holding for LTCG
STCG: 20%  ·  LTCG: 12.5%
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Equity Mutual Funds
12M
Minimum holding for LTCG
STCG: 20%  ·  LTCG: 12.5%
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Listed Bonds / ETF
12M
Minimum holding for LTCG
STCG: Slab  ·  LTCG: 12.5%
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Unlisted Equity Shares
24M
Minimum holding for LTCG
STCG: Slab  ·  LTCG: 12.5%
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Unlisted Bonds/Debentures/Specified MF
Always STCG
Taxable as Short-Term Capital Gains irrespective of holding period
STCG: Slab Rate  ·  LTCG: Not Applicable
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REIT Units
12M
Minimum holding for LTCG
STCG: 20%  ·  LTCG: 12.5%
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InvIT Units
12M
Minimum holding for LTCG
STCG: 20%  ·  LTCG: 12.5%
Act Comparison

Section Mapping: IT Act 1961 vs IT Act 2025

The new Income Tax Act 2025 renumbers sections. Here's the direct mapping for capital gains provisions.

Provision Section — IT Act 1961 (FY 2025-26) Section — IT Act 2025 (FY 2026-27+) Applicable To
STCG — Listed Equity & Eq. MF § 111A § 196 Listed equity + equity-oriented MF (≤ 12 months)
LTCG — Listed Equity & Eq. MF § 112A § 198 Listed equity + equity-oriented MF (> 12 months)
LTCG — Other assets § 112 § 197 Unlisted equity, other MF, listed bonds, ETF (> holding threshold)
Specified MF / Unlisted Bonds / Debentures § 50AA § 76 Specified MF (units acquired on or after 01 Apr 2023) & unlisted bonds — always STCG at slab rate
Glossary

Key Terms Explained

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Short-Term Capital Gain (STCG)

Gain from selling a capital asset held for less than the prescribed holding period. Taxed at a flat rate or at slab rate, depending on the asset class.

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Long-Term Capital Gain (LTCG)

Gain from selling a capital asset held beyond the prescribed period. Typically taxed at a lower concessional rate of 12.5%. LTCG up to ₹1.25 lakh per year is exempt for listed equity & equity-oriented MF.

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Slab Rate

Tax applied as per the investor's individual income tax slab — 5%, 10%, 15%, 20%, or 30% depending on total taxable income. Applicable to debt instruments and certain MF categories.

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LTCG Exemption (₹1.25 Lakh)

For listed equity shares and equity-oriented mutual funds, long-term capital gains up to ₹1,25,000 per financial year are fully exempt from tax. Only gains above this threshold attract 12.5% tax.

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Surcharge Cap (15%)

For capital gains taxed under §111A,§112A, §112A (old act) or §196, §197, §198 (new act), the applicable surcharge rate is capped at 15% on said capital gains regardless of the investor's income level.

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Equity Oriented MF (≥ 65%)

A mutual fund scheme that invests at least 65% of its total proceeds in equity shares listed on BSE or NSE. These funds are treated the same as direct equity for capital gains taxation.

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Specified Mutual Funds

Mutual Fund Scheme that invests > 65% of its total proceeds in debt & money market instruments (units acquired on/after 01/04/2023)

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Disclaimer This tax guide is prepared for general information purposes and is based on the Income Tax Act, 1961 (applicable FY 2025-26) and the Income Tax Act, 2025 (applicable FY 2026-27 onwards). Tax laws are subject to change. For personalized tax planning, investment structuring, and financial guidance, users are encouraged to consult the tax and financial experts associated with PaisaGraph.
Investments in mutual funds, equities, IPOs, private equity, and other market-linked products are subject to market risks, including the possible loss of principal. Tax outcomes and investment returns are not guaranteed and may vary based on prevailing laws, market conditions, and individual circumstances.
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