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

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 36 months, except for certain exceptions where the period is shorter: listed shares and equity-oriented funds qualify if held for less than 12 months, while immovable property and unlisted shares require a holding period of less than 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. 

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:

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%. 

2. 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.