The The NSE's main stock index, which tracks 50 large, actively traded companies and weights each by the market value of its publicly tradable shares. Read the full meaning of Nifty 50 closed at 23,146.15 on 16 October 2026, an increase of 0.65% from the previous close of 22,997.35, and many investors are now thinking about LTCG is the profit from selling an asset such as shares, mutual fund units or property after holding it beyond the qualifying period. Read the full meaning of LTCG tax harvesting before March 2027. The index is still well below its 52-week high of 26,373.20, so the gains sitting in portfolios are not the same as they were a year ago.
The 52-week range shows how wide the movement has been. Index had touched a low of 22,179.90 during the trading session on 8 October, and the current level is only a little above that point.
For individuals which hold shares and equity mutual funds, this has a direct effect on the profit that is available to be booked. For the holdings that were bought one or two years ago, the unrealised gain may now be lower than the figure seen earlier, and some of these holdings may now be showing a loss. Many investors are therefore going through their portfolio statements once more, so that they can find the amount of gain that remains in each of the holdings.
The financial year will conclude on 31 March 2027, and the deadline is coming closer with every month. The tax exemption on long term gains from equity is available for each financial year separately. Any part of it that remains unused at the end of the year will lapse, and investors who are aware of this are reviewing their holdings earlier than they normally would.
Families who had invested through the rising market of the previous period are finding that the figures on their portfolio statements look different now. Some of the families had expected to book a large profit before the year end and the amount they are now calculating is smaller than what they had expected. Others, who have investments in several funds and shares, are adding up the gains across all of them to see the total.
What the Rs 1.25 lakh limit covers and what it saves
For FY 2026-27, long term gains on listed shares and equity oriented mutual funds above Rs 1.25 lakh in a year are taxed at 12.5%, and there is no indexation benefit on these gains. A holding is treated as long term when it has been held for more than 12 months. Gains from holdings sold earlier are short term, and these are taxed at 20% with no exemption available.
The present rate and limit came into effect for transfers on or after 23 July 2024. Before that date, the rate had been 10% and the exemption had been Rs 1 lakh, so investors who had planned their sales under the older figures have had to revise their calculations.
The Rs 1.25 lakh limit is one annual cap across all equity holdings of an individual. It will not be applied separately to each share or to each fund and the families holding several folios are adding the gains of all the folios together to find the amount of the limit that remains.
If the limit is not used in a year, it lapses at the year end and cannot be carried forward to the next year.
Taxpayers sometimes assume that the benefit is larger than it is. Gains of Rs 1.25 lakh booked in a year will reduce the tax by up to Rs 15,625 for one person, which is the Rs 1.25 lakh multiplied by the 12.5% rate.
The ten year illustration shows how the saving builds up over a longer period. For an individual with total gains of Rs 12.5 lakh, harvesting Rs 1.25 lakh each year over 10 years will cover Rs 12.5 lakh of gains, so the whole amount stays within the exemption. Without any harvesting, the taxable gain at the time of sale will be Rs 11.25 lakh, and the tax will be Rs 1,40,625 before cess.
This calculation is being referred to by the investors who hold shares for many years, and the practice has become popular among them. However, the saving in any single year remains limited to the amount mentioned earlier, and it depends entirely on there being enough gain in the portfolio to book.
There is also a point about the Section 87A rebate that many taxpayers are not aware of. Under the Income-tax Act, 2025, this rebate is in Section 156. The rebate is not available on equity LTCG, even where the total income of the individual is below Rs 12 lakh. A taxpayer whose salary or business income is fully covered by the rebate will therefore still pay the 12.5% tax on gains above the exemption limit.
For salaried families with a lower income, receiving such a tax demand on investment gains is often unexpected, since the rest of their return is already free of tax. Many of these families are now reading the rule again with more attention, before selling any of their holdings.
Alongside this, individuals who sell units of equity mutual funds are finding that each redemption is counted as a separate transaction, and the gains from all of them are added together for the year. The same applies to shares sold through different brokers, as the limit is applied to the individual and not to the account.
How losses change the arithmetic
The tax on long term gains is not calculated on each sale separately. Losses are set off against gains first, and the exemption limit is applied only to the net long term gain that remains after this adjustment, as per the TaxGarden explanation of the rules.
A long term capital loss (LTCL) can be set off only against long term capital gains. It cannot be used to reduce short term gains or any other income, and investors who sold a loss making holding after more than 12 months are checking whether they have gains of same kind to match it with.
TaxGarden gives an example with round numbers. If an individual has long term gains of Rs 3 lakh and a long term loss of Rs 1.5 lakh, the net gain will be Rs 1.5 lakh. After the exemption of Rs 1.25 lakh is applied, only Rs 25,000 remains taxable, and the tax on it will be Rs 3,125.
For investors which had booked a large gain earlier in the year, a loss booked later in the same financial year will reduce the net figure on which the tax is charged. Many families are therefore looking at both sides of their portfolio together, and not only at the holdings that are showing a profit.
The level of market has a bearing on this. The Nifty 50 is still well below its 52-week high of 26,373.20, and holdings bought when the index was close to that level may now be showing a loss. Some of these holdings are being reviewed by their owners, since a loss on one holding can be adjusted against the gain on another.
Individuals holding equity mutual funds along with direct shares are finding that the same rule will be applicable to both types of holdings. A loss on units of one fund and a gain on shares of a company are brought together, and the net amount is what the tax is worked out on.
There is also a practical side to this for those who keep records. The statements from brokers and fund houses show gains and losses separately, and investors who file returns on their own are collecting these statements to add up the totals for the year.
Where the losses are more than the gains in a year, there will be no long term gain left on which the exemption can be used. In such a case, the Rs 1.25 lakh limit for that year has no gain to apply to, and it lapses at the year end along with any other unused part.
A smaller pool of gains to work with
Investors who still have a gain in their portfolio are deciding whether to book it before the financial year concludes. Where a holding shows a profit that fits within the annual exemption, some investors sell that portion and buy the same shares or units again, which resets the purchase price at the current level.
Those whose gains are now smaller are finding that the benefit of this exercise has also become smaller. The saving is worked out only on the gain that is actually booked, so a portfolio with a profit of Rs 60,000 will save much less tax than the maximum amount mentioned earlier. Families who had planned around a larger figure are revising what they are expecting to save.
The lapse of the unused exemption is also being weighed. Investors who did not book any gain in the earlier months of the year have the whole limit available, and they are spreading their sales over the remaining months. Some of the investors are waiting for market to move before taking a decision, while others are choosing to sell at an earlier time, as the limit cannot be used after the financial year has concluded.
There is also an additional cost for the individuals who buy same holding again after selling it. There will be brokerage charges and securities transaction tax on these transactions and the difference between the selling price and the buying price will also add to the cost of the exercise. The investors having a very small gain are comparing these costs with the amount of tax that will be saved, before placing any order with their brokers.
Alongside this, the Government told the Lok Sabha on 20 July 2026 that there is no proposal under consideration to scrap the tax on equity long term gains. The reply confirmed the 12.5% rate on equity long term gains, and Budget 2026 on 1 February 2026 left the 12.5% rate and the Rs 1.25 lakh exemption unchanged for FY 2026-27. Individuals who were worried about a sudden change in the rules before March are therefore working with same figures as at the start of the year.
The Nifty 50 closed at 23,146.15 on 16 October and the movement in the coming months will decide how many holdings carry a gain by the end of the year. For salaried families with a few mutual fund folios, the amount available to book may turn out to be well below the cap. For those with older holdings bought several years ago, the gains may still be large enough to use the whole limit.
It is only for FY 2026-27 that the 12.5% rate and the Rs 1.25 lakh limit are confirmed. The rate, the exemption and the figures for the years after March 2027 will depend on future Budgets.
