No Tax On Ltcg And Stcg From Equity Mutual Funds And Shares: 4 Situations Explained

Investors successful equity communal costs and shares often look taxation connected superior gains, either short-term (STCG) aliases semipermanent (LTCG). In definite scenarios, investors tin bask complete taxation alleviation connected some semipermanent superior gains (LTCG) and short-term superior gains (STCG) from equity communal costs and shares.

While superior gains are mostly taxable nether nan Income Tax Act, location are circumstantial exemptions and conditions nether which these gains go wholly tax-free. This is peculiarly beneficial for mini investors, retirees, and those pinch little yearly incomes, allowing them to maximise returns without worrying astir taxation liabilities.

LTCG from listed equity shares aliases equity-oriented communal funds, typically taxed astatine 10% beyond Rs 1.25 lakh successful gains, tin beryllium exempt if nan full income stays wrong nan basal exemption limit aliases if nan gains are reinvested successful circumstantial assets for illustration residential spot nether Section 54F. Likewise, STCG—which is taxed astatine 15%—can besides beryllium tax-free if nan individual’s full income, including nan gains, falls beneath nan taxable threshold.

However, location are definite conditions wherever these superior gains whitethorn beryllium wholly tax-free. Here are 4 cardinal situations wherever STCG and LTCG from equity investments pull nary tax:

1. When your full income is beneath nan basal exemption limit

If your full yearly income—including superior gains—is little than nan basal exemption threshold, you don’t person to salary immoderate taxation connected those gains. This applies sloppy of nan quality of nan superior summation (short-term aliases long-term).

2. When nan transaction is not taxable

Some transactions are not considered "transfers" nether nan Income Tax Act and hence, are not taxable to superior gains tax. These include:

Transfers made arsenic a gift, or

Transfers made nether an irrevocable trust,
provided nan transferor is an individual aliases a Hindu Undivided Family (HUF).

Since these don’t suffice arsenic taxable events, nary superior gains taxation is levied astatine nan clip of transfer.

3. When semipermanent superior gains are wrong nan exemption limit

Under Section 112A, semipermanent superior gains (LTCG) from listed equity shares aliases equity-oriented communal costs are tax-free up to ₹1.25 lakh per financial year, provided securities transaction taxation (STT) is paid. Gains supra this period are taxed astatine 10%.

4. When LTCG is reinvested nether Section 54F

You tin declare a afloat aliases partial exemption connected LTCG from equities aliases communal costs by reinvesting nan proceeds successful a residential location property, nether Section 54F, taxable to definite conditions (such arsenic not owning much than 1 residential location different than nan caller 1 astatine nan clip of investment).

Other clauses

> Long-term superior gains up to Rs 1 lakh successful a financial year

As per Section 112A of nan Income Tax Act, semipermanent superior gains (LTCG) from listed equity shares and equity-oriented communal costs are exempt from taxation if nan full LTCG during a financial twelvemonth does not transcend Rs 1 lakh. Any LTCG supra this period is taxed astatine 10% without indexation. So, if your full LTCG from each specified sources is Rs 99,000 successful a year, you salary zero tax.

> Short-term superior gains beneath nan basal exemption limit (for those pinch nary different income)

Under Section 111A, STCG from equity shares and equity communal costs is taxed astatine 15%. However, if your full income—including STCG—is little than nan basal exemption limit (Rs 2.5 lakh for individuals beneath 60), past nary taxation is payable. For instance, if a student aliases non-working individual earns Rs 1.8 lakh done STCG and has nary different income, it is afloat exempt.

> When investing done tax-exempt entities

Capital gains are not taxed if earned done tax-exempt entities for illustration definite charitable trusts, pension funds, aliases different institutions covered nether Section 10 of nan Income Tax Act. If these entities put successful equity shares aliases communal funds, they are not liable to salary taxation connected LTCG aliases STCG, provided their income remains wrong nan prescribed limits and conditions.

> When superior gains are group disconnected against brought guardant losses

If you person carried guardant short-term aliases semipermanent superior losses from earlier years, you tin group them disconnected against existent superior gains. This reduces your taxable gains. For instance, if you person Rs 50,000 LTCG successful FY25 and Rs 50,000 brought guardant LTCL, your nett taxable LTCG is zero.