Short-Term Capital Gains (STCG): Tax Rates, Calculation, Exemptions, and Tax Rules in India

Short-Term Capital Gains (STCG) arise when a capital asset is sold within the specified holding period prescribed under the Income Tax Act. The applicable holding period depends on the type of asset. For example, gains from the sale of listed equity shares, equity-oriented mutual funds, and units of business trusts are treated as short-term if the assets are sold within 12 months, while many other capital assets have different holding period requirements.

The tax on short-term capital gains varies depending on the nature of the asset. Short-term capital gains on listed equity shares and equity-oriented mutual funds that meet the prescribed conditions are taxed at the applicable special rate under the Income Tax Act. For other capital assets, such as gold, real estate, debt instruments, and other investments, the gains are generally taxed according to the taxpayer's applicable income tax slab rates. Understanding the tax treatment, calculation method, and available exemptions can help taxpayers accurately report capital gains while filing their Income Tax Return (ITR).

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Table of Content

What is Short-Term Capital Gains (STCG) in Income Tax?

Key Points About Short-Term Capital Gains (STCG)

Short-Term Capital Gains Tax Rates by Asset Type

How to Calculate Short-Term Capital Gains for ITR Filing

Exemptions Available on Short-Term Capital Gains

Basic Exemption Limit and Tax Relief on Short-Term Capital Gains

Short-Term Capital Gains Example with Tax Treatment

How to Report Short-Term Capital Gains in ITR

Latest Changes in STCG Tax Rates and Holding Period Rules

STCG Tax Rules for NRIs and Non-Resident Taxpayers

Conclusion: Why STCG Tax Planning Matters

FAQs

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What is Short-Term Capital Gains (STCG) in Income Tax?

Short-Term Capital Gains (STCG) refer to the profit earned when a short-term capital asset is sold or transferred. These assets may include listed equity shares, equity mutual fund units, business trust units, gold, silver, land, house property, or other capital assets.

For listed equity shares, units of equity-oriented mutual funds, and units of business trusts, the asset is generally treated as short-term if it is held for up to 12 months. For many other capital assets, such as property, gold, and silver, the short-term holding period is generally up to 24 months.

Key Points About Short-Term Capital Gains (STCG)

• Short-term capital gains arise when eligible capital assets are sold within the prescribed short-term holding period.

• STCG on listed equity shares, equity-oriented mutual funds, and business trust units covered under Section 111A is taxed at 20%.

• STCG on other assets such as property, gold, silver, and other investments is usually taxed as per the taxpayer’s applicable income tax slab rate.

• Indexation benefit is not available for short-term capital gains.

• Short-term capital gains must be reported correctly in the Income Tax Return under Schedule CG.

Short-Term Capital Gains Tax Rates by Asset Type

The tax rate on short-term capital gains depends on the type of asset sold and the applicable holding period. STCG from listed equity shares, equity-oriented mutual funds, and business trust units covered under Section 111A is taxed at 20%. For other assets such as real estate, debt mutual funds, gold, and silver, the gain is generally added to the taxpayer’s income and taxed as per the applicable income tax slab rate.

Capital Asset Category	When It Becomes Short-Term	Tax Treatment
Listed equity shares where STT is paid	Held for 12 months or less	20% under Section 111A
Equity-oriented mutual funds	Held for 12 months or less	20% under Section 111A
Units of business trusts	Held for 12 months or less	20% under Section 111A
Residential or commercial property	Held for 24 months or less	Taxed as per income tax slab
Debt mutual funds	Held for 24 months or less	Taxed as per income tax slab
Gold, silver, or jewellery	Held for 24 months or less	Taxed as per income tax slab
Other capital assets	Based on applicable holding period	Taxed as per relevant provisions

Important Notes:

• The 20% special STCG tax rate applies mainly to listed equity shares, equity-oriented mutual funds, and business trust units covered under Section 111A.

• For most other capital assets, short-term gains are taxed according to the taxpayer’s applicable slab rate.

• Since slab rates depend on the chosen tax regime and total income, the final tax liability may vary from person to person.

• Indexation benefit is not available for short-term capital gains.

How to Calculate Short-Term Capital Gains for ITR Filing

Short-Term Capital Gains are calculated by subtracting the purchase cost, selling-related expenses, and improvement cost from the sale value of the asset. In simple terms, STCG is the profit earned when a short-term capital asset is sold. Indexation benefit is not available while calculating short-term capital gains.

Particulars	Amount
Sale value of asset	₹XXX
Less: Selling expenses	₹XXX
Net sale value	₹XXX
Less: Purchase cost	₹XXX
Less: Improvement cost, if any	₹XXX
Short-Term Capital Gain	₹XXX
Less: Eligible exemption, if any	₹XXX
Taxable Short-Term Capital Gain	₹XXX

Exemptions Available on Short-Term Capital Gains

Exemptions on short-term capital gains are limited and apply only in specific cases. Taxpayers can claim these exemptions only when the conditions mentioned under the Income Tax Act are satisfied.

• Section 54B: Applies to gains from the sale of agricultural land, subject to reinvestment in another agricultural land.

• Section 54D: Applies to gains from compulsory acquisition of land or building used for industrial purposes, subject to reinvestment in eligible industrial land or building.

• These exemptions should be reported correctly while filing the Income Tax Return.

Basic Exemption Limit and Tax Relief on Short-Term Capital Gains

The tax treatment of short-term capital gains depends on the type of asset sold.

If the gain is taxed according to your normal income tax slab, it becomes part of your total income. In such cases, you may be able to use your basic exemption limit and, if eligible, claim the Section 87A rebate.

However, short-term capital gains covered under Section 111A are taxed at a special rate of 20%. Although Section 87A rebate cannot be used to reduce the tax on these gains, resident taxpayers can still adjust any unused portion of the basic exemption limit against such capital gains, provided they satisfy the prescribed conditions.

Example

Suppose Priya earns ₹3,20,000 from salary during the financial year and also makes a short-term capital gain of ₹70,000 by selling listed equity shares.

If the applicable basic exemption limit is ₹4,00,000, Priya has an unused exemption of ₹80,000 (₹4,00,000 − ₹3,20,000). Since her capital gain is only ₹70,000, it can be fully adjusted against the remaining exemption limit.

As a result, no tax is payable on the short-term capital gain. However, the Section 87A rebate cannot be claimed against tax payable on gains covered under Section 111A.

Short-Term Capital Gains Example with Tax Treatment

Let’s understand STCG calculation with a simple example. Suppose Anita purchased a residential plot in May 2025 for ₹30,00,000 and sold it in February 2026 for ₹42,00,000. She also paid ₹50,000 as brokerage at the time of sale. Since the plot was sold within 24 months, the gain will be treated as short-term capital gain.

Particulars	Amount
Sale value of residential plot	₹42,00,000
Less: Selling expenses/brokerage	₹50,000
Net sale value	₹41,50,000
Less: Purchase cost	₹30,00,000
Less: Improvement cost, if any	Nil
Short-Term Capital Gain	₹11,50,000
Less: Eligible exemption, if any	Nil
Taxable Short-Term Capital Gain	₹11,50,000

Since the asset sold is a residential plot and not listed equity shares or equity-oriented mutual funds, the short-term capital gain of ₹11,50,000 will be taxed as per Anita’s applicable income tax slab rate.

How to Report Short-Term Capital Gains in ITR

Taxpayers earning short-term capital gains must report them correctly while filing their Income Tax Return. Capital gains are usually reported in Schedule CG of the applicable ITR form. Depending on the taxpayer’s income sources, they may need to file ITR-2 or ITR-3.

STCG covered under Section 111A and STCG taxable at slab rates should be reported separately in the return to ensure correct tax calculation.

Latest Changes in STCG Tax Rates and Holding Period Rules

Short-term capital gains tax rules may change based on amendments in the Income Tax Act. The comparison below explains how the treatment of different investment categories has changed, especially for listed equity, equity-oriented mutual funds, specified mutual funds, and market-linked debentures.

Investment Category	Earlier Tax Treatment	Updated Tax Treatment
Listed equity shares and equity-oriented mutual funds where STT is paid	STCG was taxed at 15% under Section 111A	STCG is taxed at 20% under Section 111A
Specified mutual funds acquired after 1 April 2023	Tax treatment depended on whether the gain was short-term or long-term	Gains are treated as short-term and taxed as per slab rates
Market-linked debentures	Treated as short-term capital gains irrespective of holding period	Continue to be treated as short-term and taxed as per slab rates
Debt-heavy mutual funds	Earlier classification depended on equity exposure rules	Funds with major exposure to debt, money market instruments, or similar fund-of-fund structures are generally taxed as specified mutual funds

STCG Tax Rules for NRIs and Non-Resident Taxpayers

Short-term capital gains rules can be different for non-resident taxpayers. NRIs should check the applicable tax rate, TDS rules, and DTAA benefit before reporting capital gains in India.

• The benefit of adjusting the unused basic exemption limit against Section 111A gains is not available to non-residents.

• TDS may apply on short-term capital gains earned by a non-resident.

• NRIs may claim relief under the applicable Double Taxation Avoidance Agreement, subject to eligibility and documentation.

Conclusion: Why STCG Tax Planning Matters

Short-term capital gains should be reported carefully while filing the Income Tax Return. The tax rate depends on the asset type, holding period, residential status, and applicable provisions of the Income Tax Act. Keeping track of updated STCG tax rules helps taxpayers calculate tax correctly, avoid filing errors, and stay compliant.

FAQs

Q1. What is the STCG tax rate under Section 111A?

Short-term capital gains covered under Section 111A are taxed at 20%. This usually applies to listed equity shares, equity-oriented mutual funds, and units of business trusts where STT conditions are met.

Q2. How is short-term capital gain on real estate taxed?

If a house property, land, or building is sold within 24 months, the gain is treated as short-term capital gain. The profit is added to the taxpayer’s total income and taxed as per the applicable income tax slab rate.

Q3. Is crypto taxed as short-term capital gain?

Crypto gains are not taxed under normal STCG rules. Income from virtual digital assets is taxed at 30%, irrespective of the holding period.

Q4. Are debt mutual fund gains always treated as short-term?

For specified debt mutual funds acquired on or after 1 April 2023, gains are generally taxed as short-term capital gains, irrespective of the holding period. Debt mutual funds bought before this date may follow different rules based on the holding period.

Q5. How do I report STCG in ITR?

Short-term capital gains should be reported in Schedule CG of the applicable ITR form. Taxpayers usually need to file ITR-2 or ITR-3, depending on their other sources of income.

Q6. Do NRIs have to pay STCG tax in India?

Yes. NRIs are required to pay tax on short-term capital gains earned from Indian assets. TDS may also apply, and eligible NRIs can check whether DTAA relief is available.

Q7. Is indexation available on short-term capital gains?

No. Indexation benefit is not available for short-term capital gains. It is generally available only for eligible long-term capital gains, subject to applicable rules.

Q8. Can STCG be adjusted against the basic exemption limit?

Resident individuals can adjust unused basic exemption limit against short-term capital gains, including gains covered under Section 111A. However, this benefit is not available to non-residents for Section 111A gains.

Q9. Can I claim deductions under Chapter VI-A against STCG?

Deductions such as Section 80C, 80D, and other Chapter VI-A deductions cannot be claimed against STCG covered under Section 111A. However, these deductions may be available against other eligible income, subject to the Income Tax Act.

Q10. Which ITR form is used for short-term capital gains?

Individuals with capital gains usually file ITR-2 if they do not have business or professional income. If the taxpayer has business or professional income along with capital gains, ITR-3 may be applicable.

Q11. Is STCG on equity mutual funds taxed at slab rate?

No. Short-term capital gains on equity-oriented mutual funds covered under Section 111A are taxed at 20%, subject to applicable conditions. Other mutual fund categories may be taxed differently.

Q12. Can losses from short-term capital assets be adjusted?

Yes. Short-term capital loss can generally be adjusted against both short-term and long-term capital gains. If it cannot be fully adjusted in the same year, it may be carried forward as per applicable income tax rules.