Tax & Savings
Contents
LTCG vs STCG on Equity
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Hold for 12 months vs sell early — how the 12.5% vs 20% tax rate gap affects your net profit.
Visual Comparison
Key Differences
| Feature | LTCG (Hold 12+ months) | STCG (Sell < 12 months) |
|---|---|---|
| Applicable when | Equity held > 12 months | Equity held < 12 months |
| Tax rate | 12.5% above ₹1.25L exemption | 20% on entire gain |
| Exemption | ₹1.25 lakh/year tax-free | None |
| Surcharge cap | 15% | 15% |
| Securities | Listed equity, equity MF | Listed equity, equity MF |
When to Choose Which
Choose LTCG (Hold 12+ months)
- Investment horizon > 12 months
- You can plan exit timing
- Building wealth systematically
- STCG tax would significantly erode returns
Choose STCG (Sell < 12 months)
- Need liquidity within 12 months
- Short-term trading strategy
- Booked profits to re-balance portfolio
- Loss harvesting (STCL can offset STCG)
Frequently Asked Questions
LTCG on listed equity and equity mutual funds held 12+ months is taxed at 12.5% on gains above ₹1.25 lakh per year.
STCG on equity held less than 12 months is taxed at 20% flat on the entire gain (no exemption).
You can harvest LTCG up to ₹1.25 lakh annually tax-free by selling and re-buying units. This resets your cost basis and is a legal tax optimization strategy.
Yes. Dividends from equity mutual funds and stocks are added to your income and taxed at slab rate.
For equity purchased before Jan 31, 2018, gains up to that date are grandfathered (not taxed). Cost basis is the higher of actual purchase price or Jan 31, 2018 price.