How much tax should an investor pay on ₹3 lakh profit from shares or mutual funds? Check calculations
People invest in stocks and mutual funds to make profits from short-term price movements or to build wealth over time, depending on the type of assets. The gains earned from these investments may also attract capital gains tax, if the amount exceeds a certain threshold set by the government.
The new Income-tax Act, 2025, applies to tax years beginning April 1, 2026. Even as the capital-gains framework remains broadly unchanged, the provisions have been renumbered. Listed shares and equity-oriented mutual funds qualify for long-term treatment after a 12-month holding period.
The tax liability depends on factors such as the type of investment, how long it was held and the applicable tax rules. Here’s how much tax an investor may have to pay on a ₹3 lakh profit from either stocks or mutual funds, using hypothetical examples to explain the calculations for short-term and long-term gains.
Made ₹3L from stocks? Here’s how much tax you pay
Before calculating capital gains tax on the money earned by selling shares of a company, the investor must distinguish between the profit and the total sale value. The taxable capital gain is the difference between the purchase cost and the sale price, not the entire amount received from the sale.
Let’s say, you bought shares for ₹10 lakh and then sold them for ₹13 lakh after a certain period. In this case, your capital gain is ₹3 lakh, which is the amount to be considered when calculating the capital gains tax.
For listed equity shares, where the applicable Securities Transaction Tax (STT) conditions are met, long-term capital gains are taxed at 12.5%. However, the first ₹1.25 lakh of LTCG in a financial year is exempt from tax.
For example, if an investor bought shares for ₹10 lakh and sold them for ₹13 lakh after holding them for more than 12 months, the capital gain would be ₹3 lakh. Assuming no surcharge, the tax calculation would be as follows:
| Particulars | Amount |
|---|---|
| Capital gain | ₹3,00,000 |
| Exemption | ₹1,25,000 |
| Taxable LTCG | ₹1,75,000 |
| Tax at 12.5% | ₹21,857 |
| 4% cess | ₹874 |
| Total tax payable | ₹22,750 |
However, if the same ₹3 lakh capital gain arises after selling listed equity shares after holding them for less than 12 months, it would be treated as a short-term capital gain. STCG on such shares is taxed at a flat rate of 20%.
Unlike long-term capital gains, the ₹1.25 lakh annual tax exemption does not apply to short-term capital gains.
For example, if an investor bought shares for ₹10 lakh and sold them for ₹13 lakh after holding them for less than 12 months, the tax calculation would be as follows, assuming no surcharge.
| Particulars | Amount |
|---|---|
| Capital gain | ₹3,00,000 |
| Exemption | Nil |
| Taxable STCG | ₹3,00,000 |
| Tax at 20% | ₹60,000 |
| 4% cess | ₹2,400 |
| Total tax payable | ₹62,400 |
In conclusion, the same ₹3 lakh profit can attract roughly ₹22,750 or ₹62,400 of tax depending on whether it is long-term or short-term gains.
How are mutual fund gains taxed?
The tax treatment of mutual fund gains depends on the type of fund, the holding period and the applicable capital gains rules. Equity-oriented mutual funds and other mutual fund schemes may be taxed differently, so investors must first identify the category of fund before calculating their tax liability.
For equity-oriented mutual funds, the rules are broadly similar to those for listed equity shares. Profits on units held for more than 12 months are treated as long-term capital gains, while gains on units held for 12 months or less are treated as short-term capital gains.
The ₹1.25 lakh exemption on long-term capital gains also applies to equity-oriented mutual funds. A scheme is classified as an equity MF if it invests more than 60% of its total assets in the equity shares of different companies.
