How much tax do I pay on equity mutual fund gains?

20% on gains from units held 12 months or less. For units held longer, 12.5% on total long-term gains above ₹1.25 lakh in the year. Add 4% cess.

How are debt mutual funds taxed now?

Gains on debt funds bought on or after 1 April 2023 are added to your income and taxed at your slab rate, however long you hold them.

Do I have to report mutual fund gains below ₹1.25 lakh?

Yes. Tax-free long-term gains must still be reported in your return. ITR-1 and ITR-4 can report them if they're your only capital gains and you have no losses to carry forward.

Capital gains tax on mutual funds in India: rates, examples and Schedule 112A

Updated 23 September 2026

Gains on equity mutual funds are taxed at 20% if you held the units for 12 months or less, and 12.5% above ₹1.25 lakh a year if you held them longer. Gains on debt funds bought from April 2023 are taxed at your slab rate. These rates apply to sales from 23 July 2024, so to all of FY 2025-26 and FY 2026-27.

How are equity mutual funds taxed?

Short-term (held 12 months or less): 20% on the gain (section 111A).
Long-term (held more than 12 months): 12.5% on your total long-term gains above ₹1.25 lakh in the financial year (section 112A).
Add 4% health and education cess.

Equity-oriented funds are those that invest at least 65% in Indian shares, including most flexi-cap, large-cap, small-cap, index and ELSS funds and aggressive hybrid funds.

How are debt funds taxed?

Units of debt funds (and most international funds and funds of funds) bought on or after 1 April 2023 are always taxed at your slab rate, however long you hold them. Units bought before that are long-term after 24 months and taxed at 12.5% without indexation; sold sooner, the gain is taxed at your slab rate.

Which units are sold first?

The oldest first ("first in, first out"). A single redemption from a fund you've invested in by SIP for years can therefore include some long-term units and some short-term ones, each taxed differently. For equity units bought on or before 31 January 2018, the cost is taken as the higher of what you paid and their value on that date (capped at the sale price), so gains made before 2018 aren't taxed. This is called grandfathering.

A worked example

In FY 2025-26 you redeemed equity funds for a long-term gain of ₹2,00,000 and a short-term gain of ₹50,000.

Short-term gain × 20%	₹10,000
Long-term gain above ₹1.25 lakh (₹75,000) × 12.5%	₹9,375
Plus 4% cess	₹775
Total tax	₹20,150

How do I report mutual fund gains in my ITR?

In the capital gains schedule of ITR-2 or ITR-3. Long-term equity gains go in Schedule 112A, which the ITR utility lets you upload as a CSV. If your only gains are long-term equity gains up to ₹1.25 lakh and you have no losses to carry forward, ITR-1 and ITR-4 can report them too.