₹2L equity gains, ₹2L FD interest. Tax bills: ~₹9,500 vs ~₹62,400. Same profit, 6.5× different tax — India taxes how you earn more than how much you earn. Equity LTCG at 12.5% above a ₹1.25L annual exemption vs FD interest at full slab rates rewrites every “which is better” comparison that ignores tax. This guide runs the FIFO holding rules, exemption math, cess layering and post-tax keep-rates so comparisons use net numbers.
Part of the India wealth & tax guide. Compute liabilities in capital gains tax; model FD legs in FD calculator.
Holding rules: 12 months vs 24 months, FIFO always
| Asset | Long-term after | LTCG rate | Short-term rate |
|---|---|---|---|
| Listed equity | 12 months | 12.5% above ₹1.25L/yr | 20% |
| Property, gold | 24 months | 12.5% (no indexation) | Slab rate |
| FD interest | N/A (always income) | — | Slab rate |
FIFO ordering decides which units sell first — and therefore which rate applies. Partial profit-booking across financial years splits gains under the ₹1.25L annual exemption repeatedly (see exemption play below). Debt fund taxation follows its own post-2026 treatment; verify current classification before assuming equity-like rates.
The ₹1.25L exemption play (plus 4% cess)
Equity LTCG exempts ₹1.25L per year — harvest gains annually up to the line and reset cost basis, legally compounding tax-free slices. Example: ₹2L gain → taxable ₹75,000 → 12.5% = ₹9,375 + 4% cess ≈ ₹9,750 total. Same ₹2L as FD interest at 30% slab: ₹60,000 + cess ≈ ₹62,400. Then layer cess mentally last: 4% on computed tax, small but never zero, and the line most hand-math forgets. Use the capital gains tool with exemption-used tracking across the year.
Post-tax keep-rate: the only comparison that counts
- Equity 3-year hold, 30% slab investor: ~13% gross → ~12%+ net after exemption-efficient harvesting. Winner for horizons past 3 years.
- FD 3-year hold, same investor: 7% gross → ~4.8% net. Certainty costs ~7 points vs equity — acceptable for goals, fatal for retirement.
- 1-year horizon: equity STCG 20% vs FD slab — FD often wins net; match instrument to horizon, not headlines.
- Gold/property: 24-month clock + 12.5% LTCG; illiquidity and transaction costs dominate the tax story — model all-in, not rates alone.
Revisit every budget: exemption limits, holding periods and surcharge slabs move. Pair with regime planning — salary slab determines which keep-rate table row you live in.
Informational purposes only — not tax advice. Rates, exemptions and classifications change; verify current law and consult a qualified professional. See /terms.