Short-Term Capital Gains Tax in India: Meaning, Tax Rates, Calculation and Exemptions

Investing in shares, mutual funds, property, or other assets can be a good way to grow wealth. However, when you sell an investment at a profit, you may have to pay capital gains tax. The amount of tax depends on how long you have held the investment before selling it. One important category is the short-term capital gains (STCG) Tax. It applies when an investor sells a capital asset within a specified holding period and earns a profit. This article explains the meaning of short-term capital gains, the latest applicable tax rates, calculation methods, exemptions, and frequently asked questions in simple language.

What Is Short-Term Capital Gains Tax?

Short-Term Capital Gains (STCG) refer to the profit earned when you sell a capital asset within the prescribed holding period. In India, the rules for short-term capital gains have changed in recent years, particularly after the Union Budget 2024. Understanding these rules is important for investors who want to plan their investments, calculate their tax liability, and avoid surprises when filing their Income Tax Returns (ITR).

The important point is that tax is charged on the profit, not on the entire sale value. In India, the holding period depends on the type of asset:

These holding-period rules apply to transfers made on or after 23 July 2024. Certain assets, such as specified debt mutual funds and market-linked debentures, have special tax treatment.

Latest Short-Term Capital Gains Tax Rates in India (2026–27)

The tax rate depends on the type of investment you sell. Here are the applicable rates for FY 2026–27 (Assessment Year 2027–28):

Important: The 20% rate applies to eligible transactions where Securities Transaction Tax (STT) conditions are satisfied. Other short-term capital gains are generally added to your taxable income and taxed according to your applicable income-tax slab.

The 20% rate for eligible equity transactions came into effect on 23 July 2024, increasing from the earlier 15%. Additionally, any applicable surcharge and a 4% Health and Education Cess can increase your final tax liability.

How to Calculate Short-Term Capital Gains Tax?

Calculating STCG is relatively simple. You need to identify the purchase price, selling price, and expenses directly related to the sale. The basic formula is:

STCG=Sale Value−Purchase Cost−Eligible Transfer Expenses\text{STCG} = \text{Sale Value} - \text{Purchase Cost} - \text{Eligible Transfer Expenses}

Example: Suppose you purchase listed shares for ₹1,00,000 and sell them for ₹1,40,000 within six months. Assume the transaction qualifies under Section 111A.

• Purchase value: ₹1,00,000
• Sale value: ₹1,40,000
• Capital gain: ₹40,000
• Applicable tax rate: 20%
• Tax amount: ₹8,000

Therefore, your basic STCG tax liability will be ₹8,000, excluding applicable cess and surcharge. This calculation assumes that the entire gain is taxable at the special rate and no other adjustments apply.

Is There Any Exemption on Short-Term Capital Gains?

Many investors believe that all capital gains are taxable without any relief. However, certain benefits may be available depending on the nature of the income and the taxpayer's circumstances. Some important points to understand are:

• Basic exemption limit: Resident individuals and Hindu Undivided Families may adjust an unused portion of their basic exemption limit against eligible capital gains, subject to applicable conditions. This benefit also applies to qualifying Section 111A gains.
• Transfer expenses: Eligible expenses directly connected with the sale can reduce the taxable capital gain.
• Capital loss adjustment: Short-term capital losses can generally be adjusted against both short-term and long-term capital gains, subject to tax rules.
• Loss carry-forward: Eligible capital losses can be carried forward for up to eight assessment years if the income-tax return is filed within the prescribed deadline.

FAQs

What is the short-term capital gains tax rate in India in 2026–27?

Eligible short-term capital gains from listed equity shares, equity-oriented mutual funds and business trusts are taxed at 20%, subject to applicable STT conditions. Gains from other short-term capital assets are generally taxed according to the taxpayer's income-tax slab.

Is short-term capital gains tax applicable to intraday trading?

Intraday equity trading is generally treated as speculative business income rather than capital gains. Therefore, profits from intraday trading are taxed according to the applicable business-income provisions.

Can I save tax on short-term capital gains?

Yes, certain benefits may be available, such as adjustment of the unused basic exemption limit for eligible resident individuals and set-off of eligible capital losses. However, ordinary deductions such as Section 80C cannot be claimed against gains taxed at the special rate.

Is STCG applicable to mutual funds?

Yes. Short-term capital gains tax applies to mutual funds. Equity-oriented mutual funds held for 12 months or less generally attract a 20% tax if the conditions for the special rate are met. Debt mutual funds and other categories may have different tax treatments.