If I sell equity shares for ₹12 lakh, where can I invest it to pay zero or less tax in 2026?

After selling any amount of shares, it is very common for investors to look for options that will help them save tax on capital gains. There are very few such options, and their applicability may vary on a case-by-case basis. This article will give you an idea of all available options.

Let's begin with two important points:

First, since normal income up to ₹12 lakh has become tax-free under the new tax regime from FY 2025-26, several investors have been wondering whether equity income up to ₹12 lakh can also be tax-free. The answer is no. This is not possible because only incomes like salary, pension, and bank interest are treated as normal income, whereas income from equity shares is treated as special income and taxed at special rates.

Second, if you sell equity shares for ₹12 lakh, you must first calculate your capital gains by reducing the purchase price of the shares from the sale proceeds. Your capital gains can be either long-term or short-term, depending on the holding period. If you held the shares for 12 months or more, your gains will be treated as long-term for taxation. If the holding period was less than 12 months, your gains will be short-term.

Now, coming to the main question. There are two options under which you can end up paying zero tax on your capital gains in 2026.

Apart from the above, the following provisions of the Income-tax Act may help you reduce your tax liablity on LTCG from shares:

On long-term capital gains, you can get an exemption of ₹1.25 lakh.

For instance, if your total LTCG is ₹4 lakh, then you have to pay capital gains tax only for ₹2.75 lakh (as the remaining ₹1.25 lakh is exempted). There is no such exemption for short-term capital gains (STCG).

In case your total income, excluding LTCG, is below the basic exemption limit, then you can adjust long-term gains against it. Here's what the income-tax department says:

"A resident individual/HUF can adjust the exemption limit against LTCG; however, first any income other than LTCG is to be adjusted against the exemption limit, and then the remaining limit (if any) can be adjusted against LTCG. Unadjusted LTCG will be taxed at the applicable rate for LTCG. A non-resident individual and non-resident HUF cannot adjust the exemption limit against LTCG."

Please note that STCG can also be adjusted against basic exemption limit.

• You should be a resident individuals and HUFs

• Your income without counting LTCG from equity is below the basic exemption limit

• You can claim a deduction on those gains up to the shortfall.

For example, the basic exemption limit under the new tax regime is ₹4 lakh. Suppose your total income from other sources is ₹2 lakh and your long-term capital gains, after the ₹1.25 lakh exemption, amount to ₹1.4 lakh. Here, the remaining basic exemption limit is ₹2 lakh (₹4 lakh minus ₹2 lakh of other income). Therefore, the taxable LTCG of ₹1.4 lakh can be fully adjusted against the balance ₹2 lakh, and you don’t have to pay any tax.

Here are some key takeaways for you from this article: