Short-Term Capital Gains Guide

Short-Term Capital Gains Tax in India : Rates, Rules & Examples

Quick Answer

Short-term capital gains (STCG) tax applies when you sell a capital asset within its short-term holding period and earn a profit. For AY 2026–27, eligible listed equity shares, equity-oriented mutual funds and business-trust units that meet Securities Transaction Tax (STT) conditions are taxed at a special 20% rate. Most other short-term gains — property, gold, unlisted shares and debt funds — get added to your total income and taxed at your applicable income tax slab rate. This guide walks you through the 2026 rates, the calculation method, ITR reporting and the mistakes that trip people up.

Eligible STT-Paid Equity Assets Special 20% STCG Rate

Most Other Short-Term Assets Taxed at Your Applicable Income Tax Slab Rate

Last reviewed: September 2026 | Aligned with the Income-tax Act, 2025 (effective 1 April 2026)

STCG Basics

What Is Short-Term Capital Gains Tax?

A capital gain appears when you sell or transfer a capital asset for more than its eligible cost. That gain becomes "short-term" when you hold the asset for less than the period the law sets for its category.

Common Capital Assets Include:

Shares and securities

Mutual-fund units

Land and buildings

Gold and jewellery

Bonds and debentures

Business-trust units

Other investments or valuable property

Quick Example

Here's a quick example. Say you buy listed shares for ₹4,00,000 and sell them eight months later for ₹5,00,000. Once you subtract eligible transfer expenses, that ₹1,00,000 profit counts as a short-term capital gain.

Short-Term Gain ₹1,00,000 Profit before applicable tax treatment

One thing sets STCG apart from long-term gains: it doesn't qualify for indexation benefits. And the tax you pay depends heavily on which asset you sold.

Holding Period Rules

When Is a Gain Considered Short-Term in 2026?

India works with two main thresholds — 12-month and 24-month holding periods — following the capital-gains changes effective from 23 July 2024. Those thresholds carry straight through to AY 2026–27.

12-Month Threshold Applies to several listed securities and specified market assets.

24-Month Threshold Applies to assets such as unlisted shares, land, buildings, gold and jewellery.

Asset Type	Short-Term If Held For	Tax Treatment
Listed equity shares	12 months or less	20% (if STT conditions met)
Equity-oriented mutual-fund units	12 months or less	20% (if conditions met)
Listed business-trust units	12 months or less	20% (if conditions met)
Listed bonds and debentures	12 months or less	Slab rate
Zero-coupon bonds	12 months or less	Slab rate
Unlisted shares	24 months or less	Slab rate
Land or building	24 months or less	Slab rate
Gold and jewellery	24 months or less	Slab rate
Most other capital assets	24 months or less	Slab rate

Watch out for special rules. Certain mutual funds, market-linked debentures, depreciable assets and specified securities can be deemed short-term no matter how long you held them. When you're unsure, check the classification against the transfer date, not just the purchase date. The Income Tax Department publishes an asset-specific holding-period reference you can lean on.

Equity STCG Rate

What Is the STCG Rate on Shares in 2026?

Sell eligible listed equity shares within 12 months, meet the STT conditions, and your gain is generally taxed at 20%. This special rate climbed from 15% to 20% for transfers taking place on or after 23 July 2024 — a change that catches a lot of active investors off guard.

Under the Income-tax Act, 2025, this special-rate provision sits in Section 196. It's the successor to what taxpayers long knew as Section 111A under the Income-tax Act, 1961.

The Special 20% Treatment Generally Covers:

Equity shares in a company

Units of an equity-oriented mutual fund

Units of a business trust

Here's the catch: owning the shares or fund units isn't enough on its own. The transaction has to satisfy the relevant STT requirement to earn the 20% rate. A listed-equity trade doesn't automatically qualify simply because it ran through a broker.

On top of the calculated tax, a Health and Education Cess of 4% applies, plus any surcharge where it's relevant.

What About Equity-Oriented Mutual Funds?

Units of an eligible equity-oriented mutual fund held for 12 months or less are normally short-term. When the prescribed STT conditions are met, the gain is taxed at 20%.

A word of caution: check the scheme's tax classification, not just its marketing name. A hybrid fund or international fund may not count as an equity-oriented fund for income-tax purposes — and that difference changes how the gain is taxed.

Property & Gold STCG

How Is STCG on Property and Gold Taxed?

This is where plenty of taxpayers slip up. The 20% equity rate does not apply to property or gold.

Property

STCG on Property

Land or a building held for 24 months or less is a short-term capital asset. The resulting gain gets added to your other income and taxed at your applicable income tax slab rate.

Eligible deductions from the sale value may include:

Purchase cost
Stamp duty and registration expenses forming part of the acquisition cost
Qualifying improvement expenditure
Brokerage paid on sale
Legal expenses directly connected with the transfer

Hold on to reliable documentation for every expense you claim.

Gold & Jewellery

STCG on Gold and Jewellery

Gold, jewellery and similar assets are generally short-term when held for 24 months or less. The gain joins your taxable income and gets taxed at your slab rate. Keep your purchase invoices, valuation records and sale documents so your figures stand up to scrutiny.

Key distinction: property and gold do not get the special 20% STCG treatment available to qualifying equity transactions. Their short-term gains are generally added to total income and taxed at the applicable slab rate.

Debt Funds & Unlisted Shares

How Is STCG on Debt Funds and Unlisted Shares Taxed?

Mutual Funds

Debt and Non-Equity Mutual Funds

Debt-fund taxation needs a careful eye. The outcome can hinge on:

The fund's tax classification
Its investment composition
The date you acquired the units
The date you transferred them
Whether the fund falls under the specified-mutual-fund provisions

Certain specified mutual-fund gains are treated as short-term regardless of the actual holding period, and they're taxed at your applicable slab rate. Never label a fund using only the name in your investment app — review the scheme's real tax status first.

Unlisted Equity

Unlisted Shares

Unlisted shares usually need a holding period longer than 24 months to count as long-term. A transfer within 24 months generally throws off a short-term gain or loss, taxed at your slab rate rather than the special 20% listed-equity rate. Extra reporting and valuation rules can also apply, and you may need to disclose specific holding details in your return.

Key distinction: the special 20% listed-equity STCG rate does not automatically apply to unlisted shares.

Bottom line: don't assume every fund or share investment follows the listed-equity STCG rules. For debt funds and unlisted shares, classification, acquisition date, holding period and the specific tax provisions can change the result.

STCG Calculation

How Do You Calculate Short-Term Capital Gains?

The core formula is refreshingly simple:

STCG Formula

Full value of consideration − Eligible transfer expenses − Cost of acquisition − Eligible cost of improvement = Short-term capital gain (or loss)

Full value of consideration: Usually the amount you receive from transferring the asset. Special valuation rules can swap in another value in some cases.

Transfer expenses: Costs wholly and exclusively tied to the transfer, such as brokerage or legal fees.

Cost of acquisition: The purchase price plus qualifying acquisition expenses.

Cost of improvement: Qualifying capital expenditure to improve the asset. Routine repairs and personal expenses don't count.

Keep this in mind: indexation isn't available for short-term gains.

Example 1

Listed Equity Shares (20% Rate)

Purchase price: ₹5,00,000
Sale value after 8 months: ₹6,20,000
Eligible transfer expenses: ₹5,000
STT conditions: Satisfied

Gain: ₹6,20,000 − ₹5,000 − ₹5,00,000 = ₹1,15,000

Tax at 20%: ₹23,000

Cess at 4%: ₹920

Indicative tax: ₹23,920

This simplified example assumes no surcharge, loss adjustment or basic-exemption shortfall.

Example 2

Sale of Property (Slab Rate)

Sale consideration: ₹36,00,000
Purchase cost and eligible acquisition expenses: ₹30,00,000
Eligible improvement cost: ₹2,00,000
Transfer expenses: ₹1,00,000

Gain: ₹36,00,000 − ₹30,00,000 − ₹2,00,000 − ₹1,00,000 = ₹3,00,000

That ₹3,00,000 gets added to your other income and taxed at your slab rate.

The exact bill depends on your total income and chosen tax regime.

Example 3

Equity-Oriented Mutual Fund (20% Rate)

Purchase value: ₹2,50,000
Redemption after 10 months: ₹3,10,000
Eligible expenses: ₹1,000
Special-rate conditions: Satisfied

Gain: ₹3,10,000 − ₹1,000 − ₹2,50,000 = ₹59,000

Tax at 20%: ₹11,800

Cess at 4%: ₹472

Indicative tax: ₹12,272

Rebate & STCG

Can the Section 87A Rebate Reduce STCG Tax in 2026?

This is one of the most misunderstood corners of AY 2026–27, so slow down and read it closely.

Under the new tax regime, the Section 87A rebate can reach up to ₹60,000 where the conditions line up. But there's a ceiling: the rebate can't exceed the tax calculated at the normal income tax slab rates under the new regime.

In plain terms, the 87A rebate doesn't automatically erase tax on income taxed at special rates — including your 20% listed equity STCG — just because your total income sits within the general rebate threshold.

Before You Work Out the Rebate, Split Your Gains Into Two Buckets

Normal-Rate STCG

Taxed at Applicable Slab Rates

Normal-rate STCG (property, gold, unlisted shares, debt funds)

Special-Rate STCG

Separate Special Tax Treatment

Special-rate STCG (eligible listed equity, equity funds, business trusts)

A note on the current position: the application of the Section 87A rebate to special-rate capital gains has drawn interpretational debate and litigation in practice. Always check the treatment against the latest filing utility, or ask a qualified tax advisor, before you file.

What About Other Deductions?

Chapter VI-A deductions (such as Section 80C) generally can't be applied directly against special-rate STCG. Under the new tax regime, most conventional deductions across Sections 80C to 80U are off the table, subject to specified exceptions.

The Basic Exemption Limit

A resident individual or HUF whose income — excluding special-rate STCG — falls below the basic exemption limit may, subject to conditions, adjust the unused portion of that limit against the special-rate gain. Whether you qualify depends on your residency, taxpayer category and chosen regime.

Capital Loss Set-Off

Can You Set Off a Short-Term Capital Loss?

Yes. A short-term capital loss (STCL) can generally be set off against:

Short-Term Capital Loss

STCL Can Offset Both Types of Gains

Short-term capital gains
Long-term capital gains

Long-Term Capital Loss

LTCL Has a Narrower Set-Off Rule

A long-term capital loss, on the other hand, can only offset long-term gains — never short-term ones.

8 Years

If you can't fully absorb an eligible loss in the same year, you can carry it forward for up to eight years.

The condition: file your original return by the applicable due date. Miss that deadline and you can forfeit the carry-forward benefit entirely.

STCG Filing

Which ITR Form Should You Use for STCG?

Capital gains belong in the capital-gains schedule of the correct return form.

ITR-2

Capital Gains Without Business Income

ITR-2 generally fits individuals and HUFs with capital gains who don't have income from business or profession.

ITR-3

Capital Gains With Business Income

ITR-3 comes into play if you also have business or professional income.

Line Up These Documents Before You File

Broker capital-gains statement and contract notes
Mutual-fund statements
Property purchase and sale deeds
Evidence of acquisition and improvement costs
Details of transfer expenses
Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) data
Previous-year capital-loss records
Tax-payment challans

Reconcile your transactions against your AIS and TIS so mismatches don't spark an unwelcome notice. And remember: frequent, organised share trading can be treated as business income rather than capital gains, depending on the facts — so keep your classification consistent with your actual conduct and records.

For seamless filing, you can e-file your income tax return and ensure proper reporting of your short-term capital gains.

STCG Tax Payment

How Do You Pay Tax on Short-Term Capital Gains?

STCG can trigger an advance-tax liability during the year. Miss those deadlines and interest can pile on. Here's a clean sequence to follow before filing:

STCG can trigger an advance-tax liability during the year. Miss those deadlines and interest can pile on.

Calculate gains asset by asset.

Separate special-rate STCG from normal-rate STCG.

Adjust eligible capital losses.

Reconcile transactions with AIS, broker and mutual-fund statements.

Calculate tax, surcharge and cess.

Reduce eligible TDS, TCS and advance tax.

Pay any remaining self-assessment tax.

Report the challan correctly in your return.

Follow the sequence in order so your gain calculation, tax payment and return reporting stay aligned.

Avoid These Errors

Common STCG Tax Mistakes to Avoid

01 Using the outdated 15% rate. The eligible listed-equity STCG rate is now 20% for transfers on or after 23 July 2024. The transfer date decides the rate — not your original purchase date.

02 Applying the 20% rate to everything. Property, gold, unlisted shares and debt funds usually face slab rates, not 20%.

03 Using the wrong holding period. Listed securities (12 months) and other assets (24 months) diverge. Special deeming rules can override the normal period completely.

04 Ignoring STT conditions. A listed-equity trade doesn't earn the special rate just because it went through a broker. Check the statutory STT requirement.

05 Forgetting eligible expenses. Brokerage and directly connected transfer costs shrink your taxable gain. Keep the paperwork.

06 Failing to report a loss. Reporting an eligible loss can offset other gains or roll forward — a benefit too many taxpayers overlook.

07 Missing the filing deadline. File late and you can lose your loss carry-forward.

08 Treating trading income as capital gains. Business-like trading may call for different treatment. Facts and consistency matter.

Best practice: classify the asset correctly, use the right holding period and rate, reconcile your records, and file on time.

Common Questions

Frequently Asked Questions

01 What is the short-term capital gains tax rate in India for 2026?

Eligible STCG on listed equity shares, equity-oriented mutual-fund units and business-trust units meeting the STT conditions is taxed at 20%. Other STCG is taxed at your applicable income tax slab rate.

02 Is every short-term capital gain taxed at 20%?

No. The 20% rate applies only to qualifying transactions under the special listed-equity provision. Property, gold, unlisted shares and many other assets follow slab rates.

03 Is STCG added to total income?

Normal-rate STCG is added to total income. Special-rate STCG is included in total income too, but its tax is calculated separately at the prescribed 20% rate.

04 Can the Section 87A rebate apply to STCG?

For AY 2026–27 under the new regime, the 87A rebate is limited to tax calculated at normal slab rates. Special-rate capital-gains tax has to be assessed separately, and the practical treatment has faced interpretation — verify before filing.

05 How is STCG on property taxed?

Property held for 24 months or less produces a short-term gain that's added to your total income and taxed at your applicable slab rate. The 20% equity rate doesn't apply.

06 Can STCL be set off against LTCG?

Yes. An eligible short-term capital loss can be set off against both short-term and long-term capital gains.

07 Which ITR form should I use for STCG?

Individuals and HUFs without business income generally use ITR-2. Those with business or professional income may need ITR-3 or another applicable form.

Quick Summary

Key Takeaways

01 Eligible listed equity, equity funds and business trusts: 20% special rate (STT conditions apply).

02 Property, gold, unlisted shares and debt funds: income tax slab rate.

03 The 15% rate is history — 20% applies from 23 July 2024 onward.

04 The Section 87A rebate doesn't automatically cover special-rate STCG under the new regime.

05 Report gains in ITR-2 (or ITR-3), reconcile with AIS/TIS, and file on time to protect your loss carry-forward.

Disclaimer: This article offers general educational information and does not constitute tax, investment or legal advice. Tax treatment depends on the asset, acquisition date, transfer date, residency, taxpayer category and other circumstances. The Income-tax Act, 2025 came into force on 1 April 2026. For confirmation, refer to official CBDT and Income Tax Department guidance, or consult a qualified tax professional before filing.

Expert-Assisted ITR Filing

Have Short-Term Capital Gains? File Them Correctly.

Get help calculating your STCG, checking the correct tax rate, adjusting eligible capital losses, reconciling AIS/TIS data, and reporting everything in the right ITR.

STCG Calculation Capital Loss Set-Off AIS/TIS Reconciliation ITR-2 / ITR-3 Filing

Start Short-Term Capital Gains ITR Filing → Review your capital gains before you submit your return.

Written & Reviewed By

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.

✓ Income Tax ✓ GST ✓ TDS ✓ Tax Notices ✓ Business Compliance

✓ Content reviewed for tax accuracy, practical relevance and compliance context.

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