Short-Term Capital Gain Tax - A Guide to STCG Tax Rate in 2025

Short-term Capital Gains (STCG) refer to the profits made from the sale of capital assets held for a short period. Here, capital assets include any kind of movable, immovable, tangible, or intangible asset that you own as an investment. Examples include equity shares, mutual fund units, bonds, debentures, gold, and real estate.

In other words, when you sell a capital asset for a price higher than its acquisition cost, the profit earned is termed a capital gain. And if this sale takes place within a relatively short holding period, the profit is classified as STCG.

The period of holding for a capital gain to qualify as ‘STCG’ depends on the type of asset. For listed equity shares, equity-based mutual funds, and business trust units (REITs, InvITs, etc.), it is 12 months, whereas for unlisted shares and non-financial assets, such as gold, real estate, artwork, etc., it is 24 months. For other assets, it is 36 months. This holding-period rationalisation was introduced in the Union Budget 2024.

Capital Assets and Their Holding Periods for STCG

As mentioned, profits from the sale of capital assets qualify as STCG or LTCG based on the holding period and the type of asset. The following table highlights the holding period criteria for different capital assets, used to classify them as either short-term or long-term:

Also Read: Long-Term Capital Gain Tax (LTCG)

As per the Income Tax Act of 1961, STCG is taxable under the head “Capital Gains”. However, the applicable short-term capital gains tax rate depends on two factors:

• First is the type of asset being sold. For listed equity shares, equity-oriented mutual funds, and certain business trust units, the short-term gains tax rate is a flat 20%, under Section 111A of the Income Tax Act. However, this rate is effective for transactions on or after 23rd July 2024. For assets sold before 23rd July 2024, the applicable STCG tax rate is 15%.
• For other assets such as debt funds, gold, bonds, and immovable property, short-term capital gains are added to the individual’s taxable income and attract a tax as per the applicable income tax slab rate.
• The second is whether Securities Transaction Tax (STT) has been paid. The flat rate for short-term investment tax from equity-oriented assets is applicable only when STT is paid at the time of purchase and sale of eligible listed securities.

The table below depicts the short-term capital gain tax rates for different types of assets:

While the taxation of short-term capital gains is relatively straightforward, certain special provisions under the Income Tax Act provide clarity on when concessional rates apply and where exemptions may be available. Understanding these nuances can significantly influence your investment strategies.

Section 111A - Concessional Tax on Equity Assets

As mentioned, short-term capital gains on the sale of listed equity shares, equity-oriented mutual funds, and units of business trusts (such as REITs and InvITs) are taxed at a flat concessional rate of 20% (applicable to transfers made on or after 23rd July 2024). The concessional rate ensures uniformity and simplifies compliance for the sale of market-linked securities.

However, this rate is applicable only if Securities Transaction Tax (STT) has been paid at the time of sale. In the case of off-market transfers, where STT is not paid, the related STCG will be taxed as per the applicable income tax slab rate.

STCG Tax on Non-Equity Assets

Short-term gains from the sale of assets such as debt mutual funds, gold, jewellery, immovable property, and unlisted shares are taxed as per the taxpayer’s applicable income tax slab rate. For example, if the investor’s annual income exceeds ₹25 lakhs, the applicable STCG tax rate for non-equity assets will be 30%, provided that the holding period is less than 24 months.

Restrictions on Deductions

It is important to note that no deductions under Sections 80C to 80U are available against STCG that falls under Section 111A. However, for short-term gains taxed at slab rates (non-equity assets), the taxpayer can avail of the deductions under Chapter VI-A of the Income Tax Act to reduce their overall taxable income. However, no indexation benefits are available for STCG on the sale of property.

Exemptions on STCG Tax U/S 54B And 54D

Although exemptions are generally more common for long-term gains tax, the Income Tax Act provides specific exemptions for STCG tax under the following sections:

• Section 54B

This exemption is applicable when short-term capital gains arise from the sale of agricultural land used for agricultural purposes. If the proceeds are reinvested in the purchase of another agricultural land within the prescribed time frame, the STCG can be exempted from taxation. This provision is aimed at encouraging continued investment in agricultural activities.

• Section 54D

This exemption applies to short-term capital gains from the compulsory acquisition of land or buildings used for industrial purposes. If the compensation received is reinvested in purchasing or constructing another industrial property within the stipulated time, the STCG tax is exempted. The intent here is to promote reinvestment in industrial infrastructure.

The best way to calculate STCG tax is using a short-term capital gains tax calculator. These calculators are available online and are easy to use. All you have to do is enter the purchase value, sale value, the type of asset, and the holding period. The calculator will instantly display the payable STCG tax amount.

For manual calculation, you can follow these steps:

Step 1 - Subtract the cost of investment (if any) from the sale price of an asset to arrive at the net sale value.

Step 2 - Subtract the purchase value from the net sale value to arrive at the capital gain.

Step 3 - Claim exemption under section 54B or 54D (if applicable).

Step 4 - In the case of an equity-based asset, the STCG tax will be 20% of the capital gain. In the case of a non-equity asset, the capital gain will be added to the taxpayer’s taxable income, and the applicable slab rate will be levied.

Let’s understand this calculation with the help of illustrations.

Case 1 - An investor buys stocks worth ₹4 lakhs in January 2024. He incurred a brokerage fee of ₹4000 for the same. In December 2024, he sold the shares for ₹6 lakhs. He also paid the STT and a brokerage fee of ₹6,000.

Since the holding period is less than 12 months, the profit will be categorised as “STCG” and will be subject to a short-term stock tax at a flat rate of 20%.

Net sale value = ₹5,90,000 (6,00,000 - 4,000 - 6,000)

STCG = ₹1,90,000 (5,90,000 - 4,00,000)

STCG Tax = ₹38,000 (20% of 1,90,000)

Case 2 - A real estate investor with an annual income of more than ₹1 crore buys a housing property worth ₹50 lakhs in January 2024. He sold it in July 2025 for ₹65 lakhs. The total cost of acquisition was ₹2 lakhs.

Since the holding period is less than 24 months, the profit will be categorised as “STCG”. Here’s the tax calculation:

Net sale value = ₹63 lakhs (65,00,000 - 2,00,000)

STCG = ₹13 lakhs (63,00,000 - 50,00,000)

Exemption = Not applicable

Since the investor’s annual income is ₹1 crore, the applicable income tax slab rate is 30%.
STCG Tax = ₹3.9 lakhs (30% of 13 lakhs)

While STCG tax is inevitable in certain scenarios, here are a few practical tips that can help you reduce the burden:

Optimise Your Holding period

If possible, consider holding your equity for investments for more than 12 months and other assets for more than 24 months. By doing so, you can benefit from lower tax rates for long-term capital gains. For instance, the applicable LTCG tax rate effective from 23rd July 2024 is 12.5%, whereas the STCG tax rate is 20%.

Adjust Capital Losses

When calculating your STCG tax, do not forget to offset capital losses against short-term capital gains. This strategy is known as tax-loss harvesting and can help you significantly lower your tax outgo.

Invest In Appropriate Assets

Select assets based on your risk appetite and long-term investment goals. Doing so reduces the need for frequent short-term exits, thereby minimising exposure to an inflated STCG tax rate. You can also consider investing in tax-saving instruments that qualify under Section 80C of the Income Tax Act.

Seek Professional Advice

For high-value or complex transactions, consulting a tax advisor ensures proper use of exemptions and accurate compliance. For example, a tax expert may help you make full use of deductions and exemptions available under various sections of the Income Tax Act, optimising your after-tax returns.

Short-term capital gains tax is an unavoidable reality for investors who buy and sell assets within a short time frame. With the revised tax rules introduced in the Union Budget 2024, understanding how STCG is classified and taxed has become even more important.

By optimising holding periods, using loss set-offs, and making use of available exemptions under the Income Tax Act, investors can reduce their STCG tax burden and protect their profits.

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