Short-Term Capital Gains (STCG) Tax

Introduction

Short-term capital gains are the profits earned from selling or transferring assets that are held for a relatively brief period. As per the Union Budget 2024, the tax rate on short-term capital gains for certain financial assets has been raised from 15% to 20%. This revision underscores the need for investors to clearly understand the tax consequences associated with mutual funds and other financial instruments. Being informed about the applicable capital gains tax rates is essential, as they play a significant role in determining overall investment returns. This guide provides a detailed explanation of short-term capital gains (STCG) to help you navigate these changes effectively.

Budget 2024 STCG Update: Short-Term Capital Gains Tax Raised from 15% to 20%

In the Union Budget 2024–2025 presented on July 23, 2024, Finance Minister Nirmala Sitharaman announced a notable revision to the short-term capital gains (STCG) tax on certain financial assets. The tax rate, previously 15%, has now been increased to 20% for specified financial instruments. However, the existing tax rates for all other financial and non-financial assets remain unchanged.

What is Short-Term Capital Gains (STCG)?

Short-term capital gains refer to the profit earned from selling a capital asset within a short holding period—typically less than one year. The gain is calculated as the difference between the sale price and the purchase price. STCG is generally taxed at higher rates than long-term capital gains (LTCG) due to its potential for quick earnings.

As of July 23, 2024, listed equity shares, equity-oriented mutual funds, and units of business trusts are taxed at a concessional STCG rate of 20%. However, sales made before this date during FY 2024–25 continue to attract the earlier rate of 15%. STCG on other assets is taxed based on an individual’s income tax slab.

Short-Term Capital Gains Tax Rates for FY 2024–25

Asset Type	STCG Tax Rate
Listed equity shares	20%
Equity-oriented mutual fund units	20%
Unlisted equity shares (including foreign shares)	Taxed as per the individual’s income tax slab
Immovable assets (house, land, buildings)	Taxed as per the individual’s income tax slab
Movable assets (gold, silver, paintings, antiques, etc.)	Taxed as per the individual’s income tax slab

STCG Tax on Equity and Non-Equity Assets

Equity-oriented assets—such as listed stocks and equity mutual funds—attract a flat

of 20% if sold within 12 months. Income slabs do not affect this rate. For example, if you earn Rs. 50,000 in profit from selling shares after 9 months, the tax payable will be Rs. 10,000 (20%).

Non-equity assets like debt funds, bonds, and gold are treated differently. The STCG from these assets is added to your total income and taxed according to your slab.

Short-Term Capital Gains Tax on Shares

STCG on shares applies when profits arise from selling shares held for:
- Listed shares: 12 months or less
- Unlisted shares: 24 months or less
Any gains from selling shares within these periods are classified as STCG and taxed accordingly.

STCG Tax on Property

Short-term capital gains from property sales are computed by deducting the acquisition cost, improvement expenses, and transfer charges from the final sale value. A holding period of less than 24 months qualifies as short-term.

These gains are added to an individual’s income and taxed as per their applicable income slab. However, Sections 54 and 54F offer possible exemptions when proceeds from selling a residential property are reinvested in another property within the specified timelines.

Short-Term Capital Gains Tax on Hybrid Funds

Hybrid funds combine equity and debt, and their STCG tax treatment depends on equity exposure:

Equity exposure above 65%: Treated as equity funds; STCG taxed at 20% if held for under 12 months.
Equity exposure below 65%: Treated as debt funds; STCG taxed according to the investor’s income slab.

Understanding the fund’s equity allocation is essential for estimating STCG tax liability.

Short-Term Capital Gains Tax on SIPs

SIP redemptions follow the FIFO (First-In-First-Out) rule. Units held for more than 12 months are taxed as LTCG, while units held for less than 12 months are taxed as STCG at 20%.

Equity mutual fund transactions also attract an STT (Securities Transaction Tax) of 0.001%.

Holding Period Rules for STCG

Asset Type	STCG Holding Period	Example
Listed equity shares	12 months or less	Shares of XXX Industries Ltd.
Equity-oriented mutual funds	12 months or less	Units of XXX Growth Fund
Unlisted equity shares	24 months or less	Shares of a private IT startup
Immovable property	24 months or less	A flat in Mumbai
Movable assets	24 months or less	Diamond necklace

How to Calculate Short-Term Capital Gains Tax

Formula:

Sale Proceeds = Total Sale Value – Expenses (brokerage, stamp duty, etc.)
Cost of Acquisition = Purchase Price + Relevant Expenses
STCG = Sale Proceeds – Cost of Acquisition

Example of STCG Calculation

Purchased 100 shares at Rs. 100 each on Jan 1, 2024
Sold on June 1, 2024 at Rs. 125 each
Transaction costs: Rs. 2,000

Sale Proceeds:
(100 × 125) – 2,000 = Rs. 10,500

Cost of Acquisition:
100 × 100 = Rs. 10,000

STCG:
10,500 – 10,000 = Rs. 500

Tax payable = 20% of Rs. 500 = Rs. 100

Exemptions on STCG

Certain exemptions under the Income Tax Act can help reduce tax liability:

Section 54B: Exemption on STCG from sale of agricultural land if reinvested into new agricultural land.
Section 54D: Exemption on gains from sale of industrial land or buildings when reinvested in similar industrial assets.

Tips to Reduce Short-Term Capital Gains Tax

Extend holding periods: Holding assets for more than a year often reduces tax liability as LTCG rates are lower.
Use tax-efficient investments: ELSS funds provide deductions under Section 80C and offer potential long-term tax benefits.
Diversify: A balanced, diversified portfolio can improve risk-adjusted returns while keeping taxes manageable.

About the Author

Vinod

Vinod is a seasoned legal writer who simplifies complex legal concepts into clear, actionable insights. He empowers entrepreneurs by helping them understand their legal responsibilities, enabling them to build confident, compliant, and sustainable businesses.

February 1, 2026