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:
After Budget 2024 Update
| Asset Type | Short-Term Capital Gains Taxation | Tax Rate |
| Listed Equity Shares & Equity-Oriented Mutual Funds Listed Equity Shares & Equity-Oriented Mutual Funds Listed Equity Shares & Equity-Oriented Mutual Funds | Taxed under Section 111A (if STT is paid) | 20% |
| 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 |
Before Budget 2024 Update
| Asset Type | Short-Term Capital Gains Taxation | Tax Rate |
| Listed Equity Shares & Equity-Oriented Mutual Funds Listed Equity Shares & Equity-Oriented Mutual Funds Listed Equity Shares & Equity-Oriented Mutual Funds | Taxed under Section 111A (if STT is paid) | 15% |
| 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 |
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.
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 |
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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
- 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.
| 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 |
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) |
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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About the Author
CA Mohammed S Chokhawala
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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