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

Short-term capital gains (STCG) refer to profits earned from the sale of capital assets held for a short duration. A short term capital gain arises when an asset is transferred within 24 months (for listed equity shares, units of equity oriented mutual funds or units of business trusts).

The short term capital gains tax rate is 20% (for listed equity shares and equity mutual funds). For other assets such as gold, silver, house property, or land, the short term capital gains are taxed at the applicable income tax slab rates. 

What is Short-Term Capital Gains (STCG)?

Short-term capital gains or STCG is the capital gains which arises due to the transfer of a short-term capital asset such as equity shares, mutual fund units, gold, silver, property or any such capital asset. Short-term capital assets are those which are held for up to 12 months (for listed equity shares, units of equity oriented mutual funds or units of business trusts) or 24 months in case of other assets. 

Key Highlights of Short Term Capital Gains (STCG)

• Short term capital gain arises when capital assets are sold within 12 months (listed equity shares or equity mutual funds) or 24 months (other assets).
• Short term capital gain on shares is taxed at a flat 20% under Section 111A.
• Short term capital gains tax on other assets (property, gold, etc.) is charged as per income tax slab rates.
• No indexation benefit is allowed, and proper reporting is required in ITR under Schedule CG.

Short-Term Capital Gains Tax Rate

The short-term capital gain tax rate varies depending on the type of capital asset being sold. STCG on equity shares, units of equity oriented mutual funds, or units of business trusts are taxed at a flat fixed rate of 20% under Section 111A. Whereas STCG on capital assets (other than listed equity shares, units of equity oriented mutual funds, or units of business trusts) are taxed at applicable income tax slab rates of the taxpayer. 

Note:

• Only listed equity shares, equity oriented mutual funds and units of business trusts are taxable at the special rate of 20% under section 111A.
• All the other capital assets are taxed at the respective slab rates.
• For the rest of the capital assets, since the tax is calculated under the slab rates, choice of regime affects the tax payable on capital gains.

How to Calculate Short-Term Capital Gain?

Short-term capita gains are calculated by deducting the cost of acquisition or any other costs from the sales consideration received. In simple words, short-term capital gains is the difference between the sales consideration and cost of acquisition of the asset. In case of short-term transfer of a house property or land, the taxpayer is not allowed indexation benefit. 

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

Exemption on Short-Term Capital Gain

Though the exemptions against short term capital gains are rare, a few provisions allow STCG exemption under specific circumstances. They are listed below.

• 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.

Utilisation of Basic Exemption Limit and Rebate

• For all the short term capital gains taxed under the applicable slab rates, the benefits of rebate and the basic exemption limit applies without any restriction. 
• For section 111A capital gains (taxable at flat 20%), rebate is not allowed. 
• Section 111A capital gains are eligible for exhaustion of basic exemption limit. That is, if all your income other than your capital gains fall under the basic exemption limit, the short fall can be used as an exemption against capital gain income. 
• For example, Mr A having a short term capital gain of Rs. 2 lakhs, and has no other income during the financial year. In this case, his entire basic exemption limit is not utilised against any other income. Therefore, his capital gains are offset against basic exemption limit, leading to zero taxable income.

Short-Term Capital Gain Example

Ravi bought a house in April 2025 for Rs. 20 lakhs. He sold it in January 2026 for Rs. 65,00,000. The short-term capital gains will be computed as follows:

Since the capital asset sold is a house property and not equity shares or units of equity oriented mutual funds, the short-term capital gains of Rs. 45,00,000 will be taxed at applicable income tax slab rates and not at 20%. 

How to report STCG in ITR?

Taxpayers having income from capital gains are required to file ITR-2 or ITR-3 as the case may be depending on their other sources of income. While filing ITR-2 or ITR-3, the taxpayer is required to make a disclosure and report capital gains income in Schedule CG (Capital Gains) of the Income Tax Return (ITR) form by classifying the gains as short-term gains. 

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.