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).

Key Highlights

• No indexation benefits are available for STCG.
• Capital gain exemptions for STCG is limited.
• Except for NRIs, no TDS implications on short-term 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. The tax rates applicable for different types of assets are as follows:

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.

How to Calculate Short-Term Capital Gain?

The Short-Term Capital Gain can be calculated as follows:

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 lakhs. He sold it in 2025 for Rs. 65,00,000. Calculate the taxable capital gain.

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:

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.

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 Specified Mutual Funds

The following are the tax rates for Short-Term Capital Gains on mutual funds:

• 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: 

1. Whose more than 65% of assets have been invested in debt and money market instruments; and
2. Whose 65% or more assets are invested in funds mentioned in (1) above. 

This change is applicable from FY 2025-26 (AY 2026-27).

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 shall always be Short-Term 
• The aforesaid assets are taxable at slab rates, irrespective of the holding period.

Short-Term Capital Gain Tax on ULIP 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. 

Short-Term Capital Gain on Crypto Assets

• Crypto currencies are taxed at 30%, irrespective of period of holding.
• Therefore, though you hold the crypto asset for a shorter period, there are no special tax rate or benefits available.

STCG on Gifts or Inherited Assets

• On capital gains calculation of gifts and inheritance, the period for which the asset is held by the previous owner is also considered for taxation purposes.
• Therefore, usually the occurrence of short term capital gains for inherited assets do not arise. 
• Anyway, for gifts, short-term capital gains may arise, and previous owners holding period should also be considered to determine whether the asset is short term or long term.

STCG on Depreciable Assets

• Capital gains arising on sale of depreciable assets, is always short-term irrrespective of the holding period.