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

By Mohammed S Chokhawala

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Updated on: Jul 17th, 2024

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4 min read

Any profit and gains arising from the transfer of capital assets such as property, shares, bonds, vehicles, etc., shall be chargeable to tax under the head "Income from Capital Gains." Capital assets are classified into short-term and long-term assets. Short-term capital gain/loss arises if a short-term capital asset is transferred. A short-term capital asset is an asset which is held for a period of less than or equal to 36 months, except for certain exceptions where the period is shorter: listed shares and equity-oriented funds qualify if held for less than or equal to 12 months, while immovable property and unlisted shares require a holding period of less than or equal to 24 months to be considered short-term capital assets. In this article, we will discuss short-term capital gains in detail, including the tax rates, calculations, exemptions, and examples. 

Latest Update:

Capital gains arising from transfer of units of a specified mutual fund acquired on or after 1.4.2023 and 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.

What is Short-term Capital Gains(STCG)?

Capital gains arising from the transfer of short-term capital assets are referred to as short-term capital gains (STCG). STCG is taxed at the taxpayer's slab rate. However, for listed equity shares, a unit of an equity-oriented fund, and a unit of a business trust, the concessional rate of 15% is applicable.

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(LTCG) 

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:

  1. Listed equity shares and equity-oriented mutual funds: 
  • Short-Term Capital Gains (STCG) on listed shares and equity-oriented mutual funds are subject to a concessional rate of 15%. 
  1. Other assets ( such as real estate, land, unlisted shares, etc.): 
  • STCG is taxed at normal slab rates applicable to the taxpayer.

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 equity shares are considered short-term capital assets if held for less than 12 months. On the other hand, gains from unlisted equity shares are categorised as short-term only if the holding period is less than 24 months.

Click here to learn more about taxation on the sale of shares.

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.

Click here to learn more about taxation on the sale of property.

Exemption on Short-term Capital Gain

STCG exemptions are provided under Section 54B and Section 54D of the Income Tax Act, allowing taxpayers to reduce their tax liability on short-term capital gains. 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 2022 for Rs. 20,00,000. He sold it in 2023 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

Related Articles:
1. Section 111A - Short Term Capital Gain on Shares
2. LTCG Tax Rates, How to Calculate, Exemptions & Examples
3. Section 54 - Capital Gains Exemption
4. Section 54F - Capital Gains To Buy Residential House Property
5. Capital Gains Tax on the Sale of Property and Jewellery
6. Capital Gains Exemption
7. Capital Gains for Beginners

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Frequently Asked Questions

What is the rate of short-term capital gain 111A?

The short-term capital gain rate u/s 111A is 15% on the STCG.

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.

About the Author

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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