Question 1

What are the capital gains tax rates on equity mutual funds in FY 2026-27?

Accepted Answer

Short-Term Capital Gains (holding ≤ 12 months) are taxed at 20% flat under Section 111A. Long-Term Capital Gains (holding > 12 months) are taxed at 12.5% on profits exceeding ₹1.25 Lakhs per financial year under Section 112A.

Question 2

How does the ₹1.25 Lakh LTCG tax harvesting strategy work?

Accepted Answer

Under Section 112A, the first ₹1,25,000 of LTCG in a financial year is 100% tax-free. By selling units with unrealized gains up to ₹1.25L before March 31 and re-buying them, you reset your purchase price higher with ₹0 tax liability.

Question 3

Can Short-Term Capital Losses (STCL) offset Long-Term Capital Gains (LTCG)?

Accepted Answer

Yes, under Section 70(2), Short-Term Capital Losses (STCL) can be set off against both STCG and LTCG. However, Long-Term Capital Losses (LTCL) can only be set off against LTCG.