Short-Term Capital Gains(STCG): Tax Rates, Calculation, Exemptions and Examples
Short-term capital gains or STCG arise when assets are transferred within 24 months (12 months for listed equity shares equity mutual funds). They are taxed at applicable income tax slab rates (20% for listed equity shares and equity mutual funds). No indexation benefits available on short term capital gains.
Budget 2026 Update
It is proposed in the Budget 2026 to tax buyback of shares as Capital Gains.
What is Short-Term Capital Gains(STCG)?
Classification of Capital Gains as short-term and long-term depends on the period of holding. Short-Term Capital Gain (STCG) refers to the profit earned from selling capital assets held for a period within 24 months (or 12 months for listed equity shares and equity-oriented mutual funds). Indexation benefits are not available on sort-term capital gains.
Short-Term Capital Gains Tax Rate
- The short-term capital gain tax rate varies depending on the type of asset being sold.
- All the assets held for less than or equal to the period of holding are short term capital assets.
- The tax rates applicable for different types of assets are as follows:
Asset type | Holding period (STCA if held up to the holding period) | STCG tax rate |
| Listed equity shares(STT paid) | 12 months | 20% |
| Equity MF, Units of business trust | 12 months | 20% |
| Real estate Property | 24 months | Slab rate |
| Debt MF | 24 months | Slab rate |
| Gold | 24 months | Slab rate |
| Crypto | Any | 30% |
In simple words, as per Budget 2024, effective from 23 July 2024, short-term capital gains on listed shares in India are taxed at a flat rate of 20%. STCG on other shares and properties are taxed at applicable slab rates.
Note:
- Only listed equity shares, equity oriented mutual funds and units of business trusts are taxable at the special rate of 20% under section 111A.
- All the other capital assets are taxed at the respective slab rates.
- For the rest of the capital assets, since the tax is calculated under the slab rates, choice of regime affects the tax payable on capital gains.
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 |
Exemption on Short-Term Capital Gain
Though the exemptions against short term capital gains are rare, a few provisions allow STCG exemption under specific circumstances. They are listed below.
- 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.
Utilisation of Basic Exemption Limit and Rebate
- For all the short term capital gains taxed under the applicable slab rates, the benefits of rebate and the basic exemption limit applies without any restriction.
- For section 111A capital gains (taxable at flat 20%), rebate is not allowed.
- However, section 111A capital gains are eligible for exhaustion of basic exemption limit. That is, if all your income other than your capital gains fall under the basic exemption limit, the short fall can be used as an exemption against capital gain income.
Short-Term Capital Gain Example
Ravi bought a house in 2025 for Rs. 20 lakhs. He sold it in 2026 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 |
How to report STCG in ITR?
- Taxpayers having short term capital gains should report their income in Form ITR 2.
- If they also have business income, the applicable ITR form is ITR 3.
Comparison of STCG Tax Rates with Preceding Year
The following table compares tax rate, period of holding, and all the other differences related to short term capital gains:
Category | Previous provisions | Current provisions |
| Listed Equity Shares & Equity-Oriented Mutual Funds (STT paid) | STCG taxed at 15% under Section 111A | STCG under Section 111A now taxed at 20% |
| Specified Mutual Funds (acquired after 1 April 2023) | Always considered capital gains, but STCG or LTCG based on holding period | Always STCG regardless of holding period, taxed at slab rates |
| Market Linked Debentures (MLDs) | Taxed as STCG irrespective of holding (introduced in Finance Act 2023) | MLI amendment reinforced classification: Always STCG, taxed at slab rates |
| Definition of Specified Mutual Funds | MF with ≤35% equity exposure under pre-2023 rules | MFs where >65% assets in debt/MMA, or fund-of-funds investing similarly (as per new definition) |
Budget 2026 Expectations
There are no significant changes expected in STCG provisions in Budget 2026. There might be some minimal changes.
STCG Tax Implications on Non-Residents
- The benefit of exhaustion of basic exemption limit under section 111A for short term capital gains of listed shares and equity oriented funds are not available to non-residents.
- TDS needs to be deducted compulsorily for short-term capital gains earned by the non-resident.
- NRIs can claim double taxation benefit, as per applicable DTAAs.
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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