Short-Term Capital Gains(STCG): Tax Rates, Calculation, Exemptions and Examples

Short-term capital gains or STCG arise when assets are transferred within the specified holding period i.e., within 12 months for listed equity shares and units of equity-oriented mutual funds or 24 months for other assets. Under Section 111A, short-term capital gains tax on listed equity shares and equity-oriented mutual funds is 20%. All other assets like real estate, unlisted shares, gold, etc., are taxed at applicable income tax slab rates.   

What is Short-Term Capital Gains(STCG)?

Short-Term Capital Gain (STCG) refers to the profit earned from selling capital assets held for a period less than 24 months (or 12 months for listed equity shares and equity-oriented mutual funds). These assets include shares, gold, debt mutual funds, bonds, and other movable properties.

As per the Income Tax Act, STCG is taxable under the head "Capital Gains", and the applicable tax rate depends on the asset type. For listed equity shares and equity mutual funds, STCG is taxed at 20% under Section 111A, while other short-term gains are taxed as per the individual’s income tax slab.

Note: Any STCG on equity shares and equity-oriented mutual funds arising before 23rd July 2024 will be taxed at 15%.

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:

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:

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.

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: 

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.

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 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.