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Tax Architecture: Understanding STCG and LTCG for Indian Investors

FL
Lab Architect
Research Lead

A veteran research lead in Indian personal finance with a focus on client-side financial modeling and the FIRE movement. Dedicated to translating complex economic data into actionable investment strategies for long-term wealth accumulation.

2026-03-27
11 min read

Tax Architecture: Understanding STCG and LTCG for Indian Investors

The Indian government classifies investment profits into two categories based on holding period.

1. Equity Taxation

  • STCG (Short-Term): Holding less than 12 months. Taxed at 20%.
  • LTCG (Long-Term): Holding more than 12 months. Taxed at 12.5% on gains exceeding ₹1.25 Lakh per year.

2. Debt and Other Assets

  • For debt mutual funds, the benefit of indexation has been removed, and gains are now taxed at your slab rate regardless of tenure.
  • For Real Estate, the holding period is 24 months, with unique indexation rules depending on the purchase year.

3. The Strategy: Arbitrage

By holding equity for just 1 day over 12 months, you can reduce your tax liability significantly. Our Net Worth calculator accounts for these "Imputed Tax Liabilities" to give you a real-world picture of your spending power.