Short-Term Capital Gains Tax: Rates, Calculation and Rules

In summary

Short-term capital gains (STCG) arise when you sell or transfer a capital asset within its applicable short-term holding period at a profit. The tax treatment depends on the asset, transaction, and applicable Income Tax provisions.

• Eligible Section 111A STCG is generally taxed at 20% for transfers covered by current rules.
• Listed equity shares and equity-oriented mutual funds generally have a 12-month short-term holding period.
• Many other capital assets have a 24-month short-term holding period.
• Certain assets are subject to specific rules that can override the usual holding-period test.
• Short-term capital losses can generally be set off against both short-term and long-term capital gains.
• STCG must be reported in the appropriate Income Tax return.

The Bajaj Broking website provides investment-related information, while your actual tax liability depends on the applicable Income Tax provisions and your circumstances.

Short-term capital gain is the profit earned when you sell or transfer a capital asset that qualifies as a short-term capital asset under the applicable Income Tax rules.

The holding period used to classify an asset as short-term varies by asset type. Listed equity shares, equity-oriented mutual fund units, and certain business trust units generally have a 12-month threshold. Many other capital assets have a 24-month threshold. Specific provisions can apply to particular assets, so the classification should be checked before calculating tax.

STCG is calculated on the taxable gain rather than simply applying a tax rate to the entire sale value.

The applicable tax rate depends on the type of capital asset and the provision under which the gain is taxed.

The 20% Section 111A rate applies to eligible transfers on or after 23 July 2024, subject to the conditions prescribed under the law. The applicable surcharge and health and education cess may also increase the final tax payable.

Last updated: September 2026

For a straightforward transaction, the taxable capital gain can generally be worked out as:

Capital gain = Sale consideration − Cost of acquisition − Eligible transfer expenses

The applicable rules can require additional adjustments depending on the asset and transaction.

Example of STCG calculation

Suppose Neha buys 500 listed shares at Rs. 400 each and sells them within 12 months at Rs. 460 each. Assume she incurs Rs. 2,000 in eligible transfer-related expenses.

Her calculation would be:

• Purchase cost = 500 × Rs. 400 = Rs. 2,00,000.
• Sale value = 500 × Rs. 460 = Rs. 2,30,000.
• Gain before eligible expenses = Rs. 30,000.
• STCG after eligible expenses = Rs. 28,000.

If the transaction qualifies for Section 111A, the basic tax at 20% would be Rs. 5,600, before applicable surcharge and cess.

This is an illustration only. Your actual tax liability can differ based on your total income, losses, residential status, and other applicable provisions.

The tax treatment is not the same across asset classes.

Equity shares and equity-oriented mutual funds

Eligible STCG from listed equity shares and equity-oriented mutual funds covered by Section 111A is generally taxed at 20%, provided the statutory conditions are met. These include conditions relating to Securities Transaction Tax in applicable cases.

Property and other assets

STCG from assets that are not covered by a special rate is generally added to taxable income and taxed at the applicable slab rate.

Therefore, the tax payable can differ substantially between taxpayers even when they earn the same amount of STCG.

Specified mutual funds

Certain mutual funds acquired on or after 1 April 2023 can be subject to Section 50AA. Where that provision applies, the gains are treated as short-term capital gains regardless of the actual holding period and are taxed under the applicable provisions.

This means you should not assume that every mutual fund follows the same 12-month rule.

Yes. Subject to the applicable rules, a short-term capital loss can generally be set off against both short-term and long-term capital gains.

If an eligible loss cannot be fully adjusted in the same year, it may generally be carried forward for up to eight assessment years, subject to conditions such as timely filing of the relevant Income Tax return.

Keeping accurate purchase and sale records is therefore important, particularly if you have transactions across multiple asset classes.

For a resident individual or HUF, the unused portion of the basic exemption limit may, subject to applicable conditions, be adjusted against certain capital gains, including eligible gains covered by special-rate provisions.

This should not be confused with the Rs. 1.25 lakh annual threshold applicable to certain long-term capital gains under Section 112A. That threshold does not make eligible Section 111A STCG tax-free.

The treatment also depends on the taxpayer's residential status and the nature of the gain.

Most STCG does not qualify for the broad reinvestment exemptions available for certain long-term gains. However, specific provisions can provide relief in limited circumstances.

For example, Sections 54B and 54D can provide relief for qualifying gains from agricultural land and certain industrial land or buildings, respectively, when the prescribed conditions and reinvestment requirements are satisfied.

These provisions are asset-specific. You should therefore check the exact conditions before assuming that a particular exemption applies.

Taxable capital gains must be reported in the appropriate Income Tax return and relevant capital-gains schedules.

For AY 2026–27, ITR-1 cannot be used by an individual who has short-term capital gains. ITR-2 is generally applicable to individuals and HUFs who do not have income from business or profession and are not eligible for ITR-1. ITR-3 applies where business or professional income is involved, subject to the applicable conditions.

Capital gains are reported through the relevant capital-gains schedules, with transaction details classified according to the applicable rules.

Keep contract notes, purchase records, sale records, transaction statements, and details of eligible expenses to support your calculation.

You cannot simply eliminate a tax liability when the law requires tax to be paid. However, legitimate tax planning can help you calculate and manage the liability correctly.

Track your holding periods

The acquisition and transfer dates can determine whether a gain is short-term or long-term. Before selling, check the holding-period rule applicable to that particular asset.

Use eligible capital losses

Where appropriate, eligible capital losses can offset capital gains under the applicable set-off provisions. Tax-loss harvesting should not be treated as a reason to sell an investment that otherwise remains suitable for your objectives.

Check specific exemptions

If your transaction involves an asset covered by a specific exemption, check the qualifying conditions, reinvestment requirement, and prescribed timelines before relying on the relief.

STCG and long-term capital gains (LTCG) are classifications based on the applicable holding period. The distinction can affect the tax rate, available exemptions, and treatment of losses.

For example, eligible equity-oriented investments generally become long-term after more than 12 months. The applicable LTCG rules are then different from those for Section 111A STCG.

The tax outcome should not be the only consideration when deciding when to sell. Your investment objective, liquidity needs, risk exposure, and financial circumstances also matter.

Short-term capital gains tax depends on the asset, holding period, applicable tax provision, and your overall tax position. Eligible Section 111A gains are generally taxed at 20%, while many other STCGs are taxed at applicable slab rates. Accurate classification, transaction records, loss adjustments, and correct Income Tax return reporting can help you calculate your liability properly.

Last reviewed: September 2026

Mutual funds are subject to market risk. Please read the scheme-related documents carefully before investing.