Any profit and gains arising from the transfer of capital assets held for a short period such as property, shares, bonds, vehicles, etc., shall be treated as Short Term Capital Gains. On budget speech 23rd July, 2024, the tax rate of Short-Term Capital Gains on specified financial assets was increased from 15% to 20% under section 111A.
What are Short-Term Capital Assets?
Capital Assets are classified as short term or long term based on holding period. The table below shows the holding period for different types of capital assets, which determines whether they are categorized as short-term or long-term.
Asset Type
Period of Holding for Determination of Short Term and Long Term
However, for listed equity shares, a unit of an equity-oriented fund, and a unit of a business trust, the concessional rate of 20% is applicable from 23rd July, 2024. Any sale of such assets made till 22nd July, 2024 will attract tax rate of 15% only.
How to Calculate Short-Term Capital Gain?
The Short-Term Capital Gain can be calculated as follows:
Particulars
Amount
Amount
Full value of consideration
xxx
Less: Expenses incurred wholly and exclusively for such transfer
(xxx)
Net sale consideration
xxx
Less: Cost of acquisition
xxx
Less: Cost of improvement
xxx
Short-term Capital Gains(STCG)
xxx
Less: Exemptions under section 54B/54D
xxx
Short-Term Capital Gains chargeable to tax
xxx
Short-Term Capital Gains Tax Rate
The short-term capital gain tax rate varies depending on the type of asset being sold. The tax rates applicable for different types of assets are as follows:
Other Assets (e.g., Real Estate, Land, Unlisted Shares)Other Assets (e.g., Real Estate, Land, Unlisted Shares)
Taxed at normal income tax slab rates applicable to the taxpayer
Slab rates
Slab rates
Exemption on Short-Term Capital Gain
STCG exemptions are provided under Section 54B and Section 54D of the Income Tax Act,
Section 54B applies to gains from the sale of agricultural land used for agricultural purposes, provided the proceeds are reinvested in another agricultural land.
Similarly, Section 54D applies to gains from the sale of industrial land or buildings used for industrial purposes, allowing reinvestment in another industrial property to avail of tax exemptions.
These provisions are designed to encourage reinvestment in specific asset categories, thereby minimizing the tax impact on capital gains.
Short-Term Capital Gain Example
Ravi bought a house in 2024 for Rs. 20,00,000. He sold it in 2025 for Rs. 65,00,000. Calculate the taxable capital gain.
Particulars
Amount
Amount
Full value of consideration
65,00,000
Less: Expenses incurred wholly and exclusively for such transfer
Nil
Net sale consideration
65,00,000
Less: Cost of acquisition
20,00,000
Less: Cost of improvement
Nil
Short-term Capital Gains(LTCG)
45,00,000
Less: Exemptions under section 54B/54D
Nil
Short-Term Capital Gains chargeable to tax
45,00,000
STCG Tax Implications on Specified Assets
Short-Term Capital Gain Tax on Shares
Short-Term Capital Gains occur when shares or assets are held for less than a specified duration, usually less than 12 months.
Listed securities are considered Short-Term Capital Assets if held for less than 12 months.
On the other hand, gains from unlisted equity shares are categorized as Short-Term only if the holding period is less than 24 months.
Short-Term Capital Gain Tax on Property
A short-term capital gain (STCG) arises from selling property held for less than 24 months.
The STCG is taxed at the taxpayer's applicable slab rates, similar to regular income tax rates.
There are no indexation benefits available for STCG on the property.
Short-Term Capital Gain Tax on Mutual Funds
The following are the tax rates for Short-Term Capital Gains on mutual funds:
Transfer Before 23rd July 2024:
Units of Specified Mutual Funds were taxed as short term and long term based on the holding period (36 months).
Short-Term Capital Gains (STCG): Taxed as per the slab rates of the taxpayer.
Transfer on or After 23rd July 2024:
Units of Specified Mutual Funds will be taxed as Short-Term Capital Gains (STCG) regardless of the holding period.
STCG will be taxed at the slab rates applicable to the taxpayer.
This change will only apply to units acquired after 1st April 2023. Units acquired before 1st April, 2023, will still be taxed as short term and long term based on period of holdings.
Specified Mutual Funds has been defined as those mutual funds:
Whose more than 65% of assets have been invested in debt and money market instruments; and
Whose 65% or more assets are invested in funds mentioned in (1) above.
Short-Term Capital Gain Tax on Debentures and Bonds
Capital gains arising from transfer of market linked debentures would always be deemed as arising from transfer of Short Term Capital Assets irrespective of the period of holding of such assets.
Capital gains on the sale of unlisted debentures and unlisted bonds transferred from 23rd July 2024 shall always be Short-Term
The aforesaid assets are taxable at slab rates, irrespective of the holding period.
Short-Term Capital Gain Tax onULIP and Others
It is proposed to include ULIPs with premiums exceeding 10% of the policy’s sum assured, alongside those with annual premiums above Rs. 2.5 lakh as capital assets, and the income arising from redemption as capital gains.
It is proposed to amend Section 2(14) to clarify that securities held by investment funds under Section 115UB, will be treated as capital assets.
Conclusion
As the landscape of capital gains taxation is ever dynamic, given the market movements and government policies and plans, it is important to stay updated related to recent tax rates for error-free compliance and to avoid adverse consequences.
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The short-term capital gain rate u/s 111A is 15% on the STCG till 22nd July, 2024. From 23rd July, 2024, the rate has been increased to 20%.
What is short-term capital gains tax on us stocks?
If you own US stocks for less than 24 months, they qualify as Short-Term Capital Gains and are taxed at your applicable income tax rate based on the chosen tax regime.
How to avoid short term capital gains tax?
Investing for over a year qualifies you for the lower long-term capital gains tax rate, helping you avoid the higher short-term capital gains tax. Alternatively, balancing gains with losses from other investments in the same tax year can also mitigate your tax liability.
How is short-term capital gains taxed in India for NRI?
Short-term capital gains tax in India for NRIs (Non-Resident Indians) is levied at 15% on gains from the sale of equity shares or equity-oriented mutual funds, as per Section 111A of the Income Tax Act. Short-term capital gains are taxed at the applicable slab rates based on the NRI's income bracket for other assets such as real estate or unlisted shares.
What is short-term capital gains tax for real estate?
The short-term capital gains (STCG) tax on real estate refers to the tax levied on profits earned from the sale of property held for less than 24 months. The gains are added to the taxpayer's total income and taxed at their applicable slab rates.
What is short-term capital gains tax for crypto?
The tax rate for crypto is 30%, irrespective of its classification.
Are capital gains from Depreciable assets classified into long-term and short-term?
No, capital gains from depreciable assets are always considered as short-term capital gains irrespective of their holding period.
Are capital gains from debt-mutual fund classified into long-term and short-term?
No, capital gains from debt mutual fund purchased on or after 1st April, 2023 will be classified as short-term capital irrespective of the holding period. However, capital gains from debt mutual fund purchased before 1st April, 2023 will be classified into short-term and long-term depending on their holding period.
Is there any change in Short Term Capital Gain Tax Rate in Budget 2024?
Yes, For transfers taking place on or after July 23rd, 2024 taxation of STCG for listed equity shares, a unit of an equity-oriented fund, and a unit of a business trust has been increased to 20% from 15%.
Is there any change in holding period for asset qualifying as short term?
Yes, the period for listed securities has been kept at 12 months and for other assets at 24 months, to qualify as short term assets.
About the Author
CA Mohammed S Chokhawala
Content Writer
I'm a chartered accountant, well-versed in the ins and outs of income tax, GST, and keeping the books balanced. Numbers are my thing, I can sift through financial statements and tax codes with the best of them. But there's another side to me – a side that thrives on words, not figures. Read more
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