Short Term Capital Gain Tax on Shares
A Practical Guide to STCG Tax on Equity Shares in India
Understand how short-term gains from shares are classified, when the 20% Section 111A rate can apply, how taxable gains are calculated and what you should consider while filing your return. This guide also explains the tax rules for equity trading in simple, practical terms.
Sold listed shares within a year and made a profit? Short term capital gain tax on shares may apply, but the tax treatment depends on factors such as the type of security, holding period, transaction conditions and whether the gain falls under Section 111A.
Why does this matter? Applying the wrong tax rate, holding-period rule or ITR reporting treatment can lead to an incorrect tax calculation and create unnecessary compliance issues later.
This guide explains how STCG tax on shares works in India, when the Section 111A tax rate can apply, how short-term capital gains are calculated and how they should generally be reported in your Income Tax Return. It also covers practical tax-planning points that investors should understand before filing.
Quick Summary: STCG on Shares at a Glance
Short-term capital gain tax on shares generally becomes relevant when shares are sold before they qualify as long-term capital assets. For listed equity shares, a holding period of 12 months or less generally results in short-term classification. The actual tax rate then depends on whether the transaction satisfies the conditions of Section 111A.
For qualifying transfers of specified listed equity securities taking place on or after 23 July 2024, short-term capital gains covered by Section 111A are taxed at 20%. Applicable surcharge and 4% health and education cess may also apply.
STCG Rules at a Glance
Use this as a quick reference. The final tax treatment can depend on the nature of the security, transaction and your complete income profile.
| Topic | General Rule |
|---|---|
| Listed equity shares | Short-term if held 12 months or less |
| Unlisted shares | Short-term if held 24 months or less |
| Section 111A rate for qualifying transfers on or after 23 July 2024 | 20% + applicable surcharge and cess |
| Section 111A rate for qualifying transfers before 23 July 2024 | 15% + applicable surcharge and cess |
| STT condition for Section 111A | STT is generally required on the transfer, subject to specified exceptions |
| Chapter VI-A deductions such as Section 80C | Cannot be deducted from the portion of income consisting of Section 111A gains |
| ITR form | ITR-2 generally applies where there is no business/professional income; ITR-3 applies where such income is present |
| Short-term capital loss | Can generally be set off against both short-term and long-term capital gains |
| Capital-loss carry-forward | Up to 8 assessment years, subject to applicable return-filing conditions |
What You'll Learn in This Guide
Section 111A Conditions
Understand when the special STCG rate can apply to listed equity shares and which transaction conditions matter.
STCG Calculation
Learn how short-term capital gain is calculated using sale consideration, acquisition cost and permitted transfer expenses.
STCG vs LTCG
See how the holding period changes the classification of your share transaction and can affect its tax treatment.
ITR & Loss Reporting
Understand how capital gains and short-term capital losses are generally reported, set off and carried forward.
A short-term capital loss can generally be adjusted against either short-term or long-term capital gains. Unabsorbed capital loss can generally be carried forward for up to eight assessment years, but the return containing the loss should be filed within the applicable due-date requirements if you want to preserve the carry-forward benefit.
What Is Short Term Capital Gain (STCG) on Shares?
A short-term capital gain (STCG) on shares arises when shares treated as capital assets are sold at a profit before they cross the prescribed long-term holding period.
For listed equity shares, the key threshold is generally 12 months. If the shares are held for 12 months or less before transfer, they are generally treated as short-term capital assets. If they are held for more than 12 months, they generally qualify as long-term capital assets.
Buy listed equity shares, hold them for no more than 12 months and sell them at a profit — the resulting gain will generally be classified as a short-term capital gain, assuming the shares are held as investments rather than as trading stock.
How the 12-Month Holding Period Works
Held for 12 Months or Less
Listed equity shares sold within this period are generally classified as short-term capital assets. A profit arising on the transfer is therefore generally a short-term capital gain.
Held for More Than 12 Months
Once the holding period exceeds 12 months, listed equity shares generally qualify as long-term capital assets, so any resulting gain is generally treated as LTCG.
Listed Share Sold Within One Year
Suppose you purchase listed shares for ₹2,00,000 and sell them nine months later for ₹2,50,000. The shares were held for no more than 12 months, so the ₹50,000 gain would generally be classified as a short-term capital gain. The actual tax rate would then depend on whether the transaction satisfies the conditions of Section 111A.
Units of equity-oriented mutual funds also generally use the 12-month holding-period threshold. Units held for 12 months or less are generally short-term, while units held for more than 12 months are generally long-term.
STCG Tax Changes from 23 July 2024
The Finance (No. 2) Act, 2024 increased the special short-term capital-gains tax rate applicable to qualifying equity transactions under Section 111A. The date of transfer is important because transactions before and after 23 July 2024 fall under different rates.
Earlier Section 111A Rate
Qualifying short-term capital gains from transfers completed before 23 July 2024 continue to be taxed at the earlier 15% rate, plus applicable surcharge and cess.
Revised Section 111A Rate
Qualifying short-term capital gains from transfers taking place on or after 23 July 2024 are taxed at 20%, plus applicable surcharge and health and education cess.
What Changed — and What Did Not?
Tax Rate Increased
The special Section 111A rate increased from 15% to 20% for qualifying transfers taking place on or after 23 July 2024.
Transfer Date Matters
A qualifying transfer completed before 23 July 2024 remains subject to the earlier 15% rate. The revised 20% rate applies from 23 July 2024.
12-Month Rule Remains
Listed equity shares are still generally treated as short-term capital assets when held for 12 months or less.
Same Type of Gain, Different Transfer Date
Suppose an investor has a qualifying Section 111A short-term capital gain of ₹1,00,000. If the transfer took place on 22 July 2024, the special rate would be 15%, resulting in ₹15,000 of tax before applicable surcharge and cess. If the qualifying transfer took place on 23 July 2024 or later, the rate would be 20%, resulting in ₹20,000 of tax before applicable surcharge and cess.
The 15% versus 20% distinction is based on when the transfer takes place. The purchase date remains important for determining the holding period, but the transfer date determines which of these Section 111A rates applies.
For current qualifying transfers, the 20% rate is the relevant Section 111A rate. The earlier 15% rate mainly remains relevant when reviewing or filing returns involving transfers completed before 23 July 2024.
When Does the Section 111A / Section 196 Tax Rate Apply?
One of the most common mistakes investors make is assuming that every short-term gain from shares is automatically taxed at a special flat rate.
The special 20% STCG rate applies only to specified short-term capital gains from qualifying equity shares, equity-oriented fund units and business-trust units when the prescribed transaction conditions are satisfied.
Under the Income-tax Act, 1961, this special equity STCG provision was known as Section 111A. From 1 April 2026, the Income-tax Act, 2025 applies and the corresponding provision is Section 196. The applicable special rate for qualifying transactions remains 20%.
When Does the 20% Special STCG Rate Apply?
The Asset Must Qualify
The short-term capital asset must be an equity share in a company, a unit of an equity-oriented fund, or a unit of a business trust.
It Must Be a Short-Term Gain
The transaction must first result in a short-term capital gain. For listed equity shares, this generally means the shares were held for 12 months or less.
STT Condition Must Be Met
For the normal Section 196 framework, the transaction of sale must be chargeable to Securities Transaction Tax (STT), subject to the specific IFSC exception explained below.
Where these conditions are satisfied, the qualifying short-term capital gain is taxed at 20%. Applicable surcharge and 4% health and education cess may be added separately.
When the Special 20% Rate Does Not Normally Apply
If the gain does not satisfy the special equity-STCG conditions, it is generally treated as ordinary short-term capital gain and taxed under the rate otherwise applicable to the taxpayer, unless another specific provision applies.
The normal STT requirement does not apply where the transaction is undertaken on a recognised stock exchange located in an International Financial Services Centre (IFSC) and the consideration is paid or payable in foreign currency.
Simple Way to Check Your Transaction
Listed Share + Short-Term + STT
You sell a qualifying listed equity share within the short-term holding period through the normal exchange mechanism and the sale is chargeable to STT. The special 20% STCG provision can generally apply.
Unlisted Share or Non-Qualifying Transaction
You realise a short-term gain from an unlisted share or another transaction that does not satisfy the prescribed conditions. The gain is generally outside the special equity-STCG provision.
STCG on Listed Shares vs Unlisted Shares
The tax treatment of short-term capital gains on shares depends significantly on whether the shares are listed or unlisted. The distinction affects both the holding period used to classify the gain and whether the special equity STCG rate can apply.
Short-Term Holding Period
Listed equity shares are generally treated as short-term capital assets when held for 12 months or less. Where the applicable special-rate conditions are satisfied, the resulting STCG can be taxed at 20%.
Short-Term Holding Period
Shares that are not listed on a recognised stock exchange in India are generally short-term when held for 24 months or less. Their STCG does not receive the special listed-equity 20% rate.
Listed vs Unlisted Shares: Tax Comparison
The table below compares the general treatment where the shares are held as capital assets rather than as trading stock.
| Feature | Listed Equity Shares | Unlisted Shares |
|---|---|---|
| Short-Term Holding Period | 12 months or less | 24 months or less |
| STCG Tax Rate | 20% where the special equity-STCG conditions are satisfied | Generally taxed at the normal rate applicable to the taxpayer |
| STT Condition | Sale must generally be chargeable to STT for the special rate, subject to the applicable IFSC exception | Not relevant to special rate |
| Special Equity STCG Rate | Available if conditions are met | Not available |
| Current Provision | Section 196 of the Income-tax Act, 2025 | General short-term capital-gain provisions, subject to any other specific rule that may apply |
Under the earlier Income-tax Act, 1961, the special rate for qualifying listed-equity STCG was commonly referred to as Section 111A. From 1 April 2026, the corresponding provision under the Income-tax Act, 2025 is Section 196.
A short-term gain from qualifying listed equity shares can receive the special 20% rate when the prescribed conditions are satisfied. Short-term gains from unlisted shares do not receive this special treatment and are generally taxed at the normal rate applicable to the taxpayer.
STCG Tax Rate Explained
For qualifying short-term capital gains from specified equity transactions, the current base tax rate is 20%. Under the Income-tax Act, 2025, this special treatment is contained in Section 196; under the earlier Income-tax Act, 1961, investors commonly knew the corresponding provision as Section 111A.
The 20% rate is only the starting point. Depending on your income and taxpayer status, surcharge may also apply, followed by 4% Health and Education Cess.
Qualifying short-term capital gains covered by the special equity-STCG provision are taxed at 20%. This is the base tax rate before adding any applicable surcharge and Health and Education Cess.
What Makes Up Your Final STCG Tax?
Base STCG Tax
Qualifying equity STCG is currently taxed at a 20% base rate.
Surcharge, If Applicable
Surcharge can apply where total income crosses the prescribed thresholds. The applicable rate depends on the taxpayer's status and total income.
4% Health & Education Cess
Cess is calculated at 4% on the income-tax amount after adding any applicable surcharge.
Effective STCG Rate with 4% Cess
The following example assumes the gain qualifies for the 20% special rate and that no surcharge applies.
| Component | Rate | Tax on ₹1,00,000 STCG |
|---|---|---|
| Qualifying STCG Tax | 20% | ₹20,000 |
| Health & Education Cess | 4% of tax | ₹800 |
| Total Tax | Effective 20.8% | ₹20,800 |
A 20% base STCG rate plus 4% cess on that tax produces an effective tax burden of 20.8% of the taxable gain where no surcharge applies.
Surcharge may apply where the taxpayer's total income exceeds the prescribed limits. For individuals, HUFs and certain other taxpayers, the surcharge on income-tax attributable to capital gains under Sections 196, 197 and 198 is capped at 15%. The exact surcharge depends on the taxpayer's total income and applicable provisions.
The earlier special rate was 15% for qualifying transfers completed before 23 July 2024. With 4% cess and no surcharge, that historical rate produced an effective rate of 15.6%. For qualifying transfers from 23 July 2024 onward, the base rate increased to 20%.
The Role of Securities Transaction Tax (STT)
Securities Transaction Tax (STT) is an important part of the special tax treatment available for certain short-term capital gains from equity shares, equity-oriented funds and business-trust units.
Under the current Income-tax Act, 2025, the relevant special equity-STCG provision is Section 196. Investors may still recognise the earlier Section 111A terminology from the Income-tax Act, 1961.
For the normal special-rate framework, the sale of the qualifying equity share or unit must generally be chargeable to STT. Where the prescribed conditions are satisfied, qualifying short-term capital gains can be taxed at the special 20% rate.
Three Things to Understand About STT
STT Applies to Specified Transactions
STT is levied on specified taxable securities transactions. The applicable rate and whether the purchaser or seller pays it depend on the type of transaction.
STT Helps Determine Special-Rate Eligibility
For ordinary qualifying listed-equity transactions, the sale generally needs to be chargeable to STT for the special equity-STCG provision to apply.
STT Is Not Deductible from Capital Gains
When shares are held as capital assets, STT is not allowed as a deduction while computing capital gains, even though certain other eligible transfer expenses may be deductible.
How This Works in Practice
Listed Equity Sale Chargeable to STT
You sell a qualifying listed equity share within the short-term holding period through a transaction that is chargeable to STT. Subject to the other prescribed conditions, the gain can generally qualify for the special 20% STCG rate.
Ordinary Off-Market Sale Without STT
If an ordinary share transfer is not chargeable to STT, the gain will generally fall outside the special equity STCG provision and may instead be taxed at the rate otherwise applicable to the taxpayer.
No. Where the securities are held as capital assets, Securities Transaction Tax itself is not allowed as a deduction when computing the capital gain. This is different from eligible expenses such as certain brokerage or transfer-related charges that may form part of the capital-gain computation.
For a normal listed-equity transaction, first confirm that the asset is short-term and then check whether the sale is chargeable to STT. If the other special-rate conditions are also satisfied, the gain can generally qualify for the 20% equity STCG rate. If those conditions are not met, do not automatically apply the special rate.
How to Calculate Short Term Capital Gain on Shares
Calculating a short-term capital gain becomes easier once you separate the sale consideration, eligible transfer expenses and cost of acquisition. The resulting amount is the capital gain on which the applicable tax treatment is determined.
Cost of improvement can also be relevant where applicable, although it is generally not a practical component in an ordinary equity-share transaction.
Calculate STCG in Four Steps
Find the Sale Consideration
Start with the full value received or receivable from transferring the shares.
Deduct Eligible Transfer Expenses
Deduct expenditure incurred wholly and exclusively in connection with the transfer, such as eligible sale brokerage.
Deduct Cost of Acquisition
Subtract the amount recognised as the cost of acquiring the shares under the applicable capital-gains rules.
Arrive at the Capital Gain
The balance is your short-term capital gain where the shares qualify as short-term capital assets.
Securities Transaction Tax (STT) is specifically excluded from deductions while computing capital gains. Do not subtract STT from the sale value when calculating your taxable STCG.
Short-Term Gain on Listed Equity Shares
| Particulars | Amount |
|---|---|
| Sale consideration (1,000 shares × ₹150) | ₹1,50,000 |
| Less: Eligible brokerage / transfer expense | (₹600) |
| Net consideration after transfer expense | ₹1,49,400 |
| Less: Cost of acquisition (1,000 shares × ₹100) | (₹1,00,000) |
| Short-Term Capital Gain | ₹49,400 |
Tax on ₹49,400 Qualifying STCG
This example assumes the gain qualifies for the special 20% equity STCG rate and that no surcharge applies. The effective rate after 4% cess is 20.8%.
What If the Gain Is from Unlisted Shares?
Suppose the same ₹49,400 short-term gain arises from unlisted shares. The special 20% equity-STCG rate does not normally apply. Instead, the gain is generally taxed at the normal rate applicable to the taxpayer based on their total income and applicable tax regime.
For illustration only, if this ₹49,400 is effectively taxed at a 30% marginal rate, the calculation would look like this:
This 30% example is not a universal rate for unlisted-share STCG. Your actual tax depends on your total taxable income, taxpayer category, applicable tax regime and other relevant provisions.
Need Help Filing a Capital Gains ITR?
Easy Return can help you prepare and file your Capital Gains ITR through a qualified CA, including review of share transactions, gain calculations and applicable tax treatment.
STCG vs LTCG: What's the Difference?
The holding period helps determine whether your gain from listed equity shares is classified as a short-term capital gain (STCG) or long-term capital gain (LTCG). That classification matters because qualifying equity STCG and LTCG are taxed at different rates and the LTCG rules include a separate annual threshold.
Listed Shares Held for 12 Months or Less
Where listed equity shares qualify for the special equity-STCG provision, the gain is currently taxed at 20%, plus applicable surcharge and Health and Education Cess.
Listed Shares Held for More Than 12 Months
Qualifying equity LTCG is currently taxed at 12.5% on the aggregate qualifying gain exceeding ₹1.25 lakh for the tax year.
STCG vs LTCG on Listed Equity Shares
This comparison assumes the shares are held as capital assets and the transaction satisfies the relevant special equity capital-gains conditions.
| Feature | STCG | LTCG |
|---|---|---|
| Holding Period | 12 months or less | More than 12 months |
| Current Special Tax Rate | 20% | 12.5% |
| Annual Special Threshold | No ₹1.25 lakh LTCG-style threshold | Tax at 12.5% applies to aggregate qualifying LTCG exceeding ₹1.25 lakh |
| STT Condition | Sale must generally be chargeable to STT, subject to the applicable IFSC exception | For equity shares, STT is generally required on acquisition and transfer, subject to prescribed exceptions |
| Current Provision | Section 196 | Section 198 |
| Earlier Act Reference | Section 111A | Section 112A |
| Health & Education Cess | 4% on income-tax plus applicable surcharge | 4% on income-tax plus applicable surcharge |
For qualifying listed equity investments, holding the shares for more than 12 months can shift the gain from STCG to LTCG. LTCG currently carries a 12.5% rate on qualifying gains above the ₹1.25 lakh annual threshold, compared with the 20% special rate applicable to qualifying STCG. Tax should still be only one factor when deciding when to sell an investment.
Grandfathering for Shares Acquired Before 1 February 2018
Special cost-of-acquisition rules continue to apply to qualifying equity shares and units acquired before 1 February 2018. Broadly, these rules use the actual cost together with the relevant 31 January 2018 fair market value calculation to determine the recognised cost for LTCG purposes. This can protect gains that accrued before the equity-LTCG tax regime was introduced.
Is Income From Selling Shares Always a Capital Gain?
No. Shares can be held either as investments / capital assets or as stock-in-trade of a trading business. This distinction determines whether the profit is generally taxed under the head Capital Gains or Profits and Gains of Business or Profession.
Frequency, volume, holding period and the taxpayer's treatment of the shares can all be relevant, but there is no simple rule saying that a particular number of trades automatically converts investment gains into business income. The overall facts and the way the shares are held matter.
Capital Gains Treatment
Business Income Treatment
How Different Share-Market Activities Are Typically Reported
This is a general classification guide. The actual treatment depends on the facts of the taxpayer's activity and the return requirements applicable for the relevant year.
| Activity | General Tax Treatment | Typical Return Form |
|---|---|---|
| Delivery-Based Shares Held as Investment | Capital Gains STCG or LTCG depending on the holding period | ITR-2 where there is no business/professional income |
| Delivery-Based Shares Held as Stock-in-Trade | Business Income | Generally ITR-3 for an individual / HUF |
| Intraday Equity Trading | Speculative Business Income where the transaction is settled without actual delivery and no statutory exception applies | Generally ITR-3 |
| Eligible F&O / Derivative Trading | Non-Speculative Business Income where the qualifying recognised-exchange conditions are satisfied | Generally ITR-3 |
High transaction volume or short holding periods can be relevant indicators, but they are not the only factors. The classification should reflect whether the shares were actually held as investments or as trading stock and should be supported by the taxpayer's records and consistent treatment.
What Did CBDT Circular No. 6/2016 Clarify?
Under the earlier Income-tax Act, 1961, CBDT clarified that where a taxpayer itself treats listed shares and securities as stock-in-trade, income arising from their transfer is to be treated as business income.
It also provided that where listed shares or securities were held for more than 12 months and the taxpayer chose capital-gains treatment, that position should generally not be disputed by the Assessing Officer. However, once such a position was adopted, consistency was expected in subsequent assessment years.
For other situations, the capital-gain-versus-business-income question remained dependent on the relevant facts and existing guidance. Therefore, the circular should not be read as giving every taxpayer an unrestricted year-by-year choice.
The classification affects the applicable tax computation, treatment of expenses and losses, possible special capital-gains rates, reporting schedules and the return form you use. If your portfolio contains both investments and trading activity, keep the records for each clearly identifiable and use a consistent basis for classification.
ITR forms and eligibility conditions can change between assessment years. Under the current notified return structure, ITR-2 is for individuals and HUFs without income from business or profession, while ITR-3 covers individuals and HUFs having business or professional income.
How to Report STCG in Your Income Tax Return
If you have short-term capital gains from shares held as investments, the gains generally need to be reported in the capital-gains section of your Income Tax Return. The return form you use depends mainly on whether your income also includes business or professional income.
For an individual or HUF with capital gains but no income from business or profession, ITR-2 is generally the relevant return. If business or professional income is also present, ITR-3 is generally required.
ITR-2 or ITR-3: Which One Applies?
Capital Gains Without Business Income
Generally used by individuals and HUFs who have short-term or long-term capital gains but do not have income chargeable under the head Profits and Gains of Business or Profession. This commonly includes salaried investors who sell shares held as investments.
Capital Gains With Business Income
Generally used by individuals and HUFs where the return also includes business or professional income. This can include taxpayers carrying on share-trading, intraday or F&O business activity where the applicable income is reported as business income.
What Do You Report in Schedule CG?
Schedule CG is used to report capital gains arising from the transfer of capital assets. The exact fields can vary depending on the asset and the return form for the relevant year.
Reconcile These Records Before Filing
Broker Reports
Review contract notes, transaction statements, capital-gain reports and broker ledgers supporting your actual purchase and sale transactions.
Annual Information Statement
Compare relevant information appearing in AIS with your own transaction records and identify unexplained differences before filing.
Tax & Payment Records
Review TDS/TCS information where relevant, advance-tax payments, self-assessment tax and other tax records used in the final return computation.
AIS provides a consolidated view of information reported to the Income Tax Department from different information sources and allows taxpayers to review and provide feedback. Your final capital-gain computation should still be supported by your actual broker statements, contract notes and other relevant records.
What If Broker Records and AIS Do Not Match?
A difference does not automatically mean that your broker calculation is wrong or that a tax notice will be issued. First identify why the figures differ — for example, reporting timing, duplicate information, cost data or classification. Use the correct transaction records for your return and address material discrepancies before filing wherever possible.
ITR schedules, validation rules and reporting fields can change between tax / assessment years. Always use the notified return form and latest e-filing utility applicable to the year being filed.
STCG Tax Planning, Loss Set-Off & Common Mistakes
Short-term capital gains can interact with your basic exemption limit, capital losses, advance-tax liability and ITR requirements. Understanding these rules helps you calculate your liability and avoid common filing errors.
Can the Basic Exemption Limit Reduce Your STCG Tax?
In eligible cases, resident individuals and resident HUFs may use an unused portion of the applicable basic exemption limit against qualifying special-rate equity STCG before calculating tax at 20%.
If your other taxable income already uses the entire basic exemption limit, no unused amount remains for this adjustment. The relevant amount depends on the tax regime and taxpayer category.
Resident Individuals and HUFs
The qualifying adjustment is available to resident individuals and HUFs subject to the prescribed conditions.
Non-Resident Taxpayers
The specific basic exemption adjustment for special-rate equity STCG is not generally available to non-residents.
Deductions Against Special-Rate Gains
Eligible deductions under the applicable framework do not directly reduce the qualifying special-rate equity gain.
Short-Term Capital Loss Set-Off and Carry Forward
Capital losses are subject to separate adjustment and carry-forward rules. Correct reporting may preserve eligible tax benefits for future years.
To preserve the normal right to carry forward an eligible capital loss, the return generally needs to be filed within the relevant prescribed deadline. For Tax Year 2026–27, the Income-tax Act, 2025 includes the applicable loss-return provisions under Section 121.
Common STCG Tax Mistakes to Avoid
Many errors arise from using outdated rates, incorrectly claiming expenses or failing to reconcile transaction details.
Do All Short-Term Capital Gains Have the Same Tax Rate?
No. The applicable short-term capital gains tax rate depends on the asset type, relevant holding period and applicable tax provisions.
For qualifying listed equity shares and equity-oriented mutual funds, the special STCG rate is generally 20% for transfers made on or after 23 July 2024, subject to the prescribed Securities Transaction Tax (STT) conditions.
Qualifying Equity STCG
Special rate for eligible listed equity shares and equity-oriented mutual fund transactions, subject to the applicable conditions.
Many Other Short-Term Gains
Many other short-term capital gains are taxed at the applicable normal income-tax rates, unless another special provision applies.
For a broader asset-wise comparison, explore our guide to short-term capital gains tax rates in India to understand how tax treatment differs across investments and other capital assets.
ध्यान दें: सभी short-term capital gains पर एक ही tax rate लागू नहीं होता। सही rate के लिए asset type और applicable tax rules जांचें।
Practical Tax Planning for STCG on Shares
Tax implications should be considered alongside investment objectives, transaction costs and market risks.
Review the Holding Period Before Selling
Listed equity shares held as investments generally move from short-term to long-term classification after 12 months. Consider tax effects together with market risk.
Use Capital Losses Correctly
Review genuinely realised eligible capital losses and whether they can be set off against gains under applicable rules.
Consider Timing of Asset Sales
Significant sales can affect total income, surcharge and applicable annual thresholds. Review the consequences before selling.
Maintain Transaction-Level Records
Preserve purchase and sale dates, acquisition costs, contract notes and supporting capital gains statements.
A substantial taxable capital gain may create an advance-tax obligation. Review overall liability, applicable instalments and payments. For Tax Year 2026–27, Sections 424 and 425 of the Income-tax Act, 2025 address specified advance-tax interest matters.
Frequently Asked Questions About STCG on Shares
These answers cover common questions about the short-term capital gains tax on shares, including tax rates, losses, ITR filing, STT, advance tax and equity mutual funds.
01 Is short-term capital gain tax on shares always 15%?
No. The 15% rate is historical for qualifying transfers completed before 23 July 2024. Qualifying short-term capital gains on specified equity transactions are currently taxed at a base rate of 20%.
Under the current Income-tax Act, 2025, this special rate is contained in Section 196. Under the earlier Income-tax Act, 1961, the comparable provision was commonly known as Section 111A. Short-term gains that do not qualify for the special equity provision are generally taxed at the rate otherwise applicable to the taxpayer.
02 Can I claim Section 80C deductions against my equity STCG?
Not against the qualifying special-rate STCG itself. Under the earlier Act, Chapter VI-A deductions such as Section 80C were not allowed from Section 111A gains. Under the current Income-tax Act, 2025, deductions under Chapter VIII are similarly allowed from gross total income only after reducing it by the qualifying Section 196 STCG.
03 Which ITR form should I use to report STCG?
For an individual or HUF, ITR-2 is generally used where capital gains are present but there is no income from business or profession. ITR-3 is generally relevant where business or professional income is also present.
For example, a salaried investor who holds shares as investments may commonly use ITR-2, while a taxpayer who also has reportable share-trading, intraday or F&O business income may need ITR-3.
04 Can I set off a short-term capital loss against salary?
No. A capital loss cannot generally be set off against salary or income under other heads. A short-term capital loss can generally be set off against both short-term and long-term capital gains.
Any eligible unabsorbed capital loss can generally be carried forward for up to 8 succeeding tax years, subject to the applicable return-of-loss filing requirements.
05 Can the basic exemption limit reduce my STCG tax?
Yes, in specified cases. Where a resident individual or resident HUF has other income below the applicable maximum amount not chargeable to tax, the unused portion can reduce the qualifying special-rate STCG before the 20% rate is applied.
This particular adjustment is not available to a non-resident.
06 How is short-term capital gain on equity mutual funds taxed?
Units of an equity-oriented mutual fund held for 12 months or less are generally treated as short-term. Where the applicable special-rate conditions are satisfied, the resulting STCG is currently taxed at a base rate of 20%, plus applicable surcharge and Health and Education Cess.
The earlier 15% rate remains relevant only for qualifying transfers completed before 23 July 2024.
07 Is brokerage deductible when calculating STCG?
Eligible expenditure incurred wholly and exclusively in connection with the transfer can generally be considered in the capital-gain computation. This can include eligible sale-related brokerage.
However, Securities Transaction Tax (STT) itself is not deductible while computing capital gains.
08 Is advance tax payable on short-term capital gains?
Yes, advance-tax provisions can apply when your estimated advance-tax liability for the year is ₹10,000 or more, after considering the applicable tax computation and eligible tax deducted or collected at source.
Under the current Income-tax Act, 2025, Sections 424 and 425 deal with interest for default and deferment of advance tax. These correspond broadly to the earlier Sections 234B and 234C.
09 Is intraday equity trading treated as STCG?
Generally, no. Equity transactions settled without actual delivery can fall within speculative business treatment, subject to the statutory rules and exceptions. They are therefore not normally reported as STCG merely because the position was opened and closed on the same day.
For an individual or HUF with such business income, ITR-3 is generally the relevant return rather than ITR-2.
10 What happens if I don't report STCG in my ITR?
Securities transaction information can be reported to the Income Tax Department by reporting entities and may appear in your Annual Information Statement (AIS). If taxable gains are omitted or your return materially differs from available information, the mismatch may require clarification and can lead to additional tax, interest or other compliance action, depending on the facts.
If you have received communication relating to share transactions, see our guide to a tax notice for capital gains.
Many taxpayers still know the equity-STCG rules by their earlier Income-tax Act, 1961 references such as Section 111A. Under the Income-tax Act, 2025 applicable from 1 April 2026, the corresponding qualifying equity-STCG provision is Section 196. Older section numbers remain relevant when dealing with tax years governed by the earlier Act.
Conclusion
Understanding short-term capital gain tax on shares requires more than simply knowing the tax rate. You need to identify the correct holding period, determine whether the transaction qualifies for the special equity-STCG rate, calculate the gain correctly and report it in the appropriate Income Tax Return.
Your final tax position can also be affected by capital-loss set-off, the basic exemption limit, surcharge, advance tax and the way your share activity is classified. Keeping accurate broker records and reconciling them with available tax information before filing can make the process much easier.
Before You File, Remember These Four Points
Check the Holding Period
Listed equity held for 12 months or less is generally short-term; more than 12 months is generally long-term.
Check Special-Rate Eligibility
Do not automatically apply the 20% rate. Confirm the asset and transaction satisfy the required conditions.
Reconcile Your Records
Review broker statements, contract notes, AIS and tax records before finalising the capital-gain figures.
Use the Correct ITR
ITR-2 or ITR-3 may apply depending on whether your return also contains business or professional income.
Maintaining purchase dates, acquisition costs, sale values, eligible transfer expenses and supporting statements makes it easier to calculate the correct gain and explain the figures reported in your return if questions arise later.
Need Help Filing Your Capital Gains ITR?
Easy Return can help you prepare and file your Capital Gains ITR through a qualified CA, including review of your share transactions, capital-gain computation and applicable return reporting.
Capital Gains ITR Filing from ₹1,000
CA Sagar Batra
ICAI Registered Chartered Accountant · 10+ Years of Professional Experience · 12,000+ Tax Filings
Chartered Accountant with experience in taxation, compliance and business advisory. His work covers Income Tax, GST, TDS, tax notices, business compliance and financial documentation for individuals and businesses across India.