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STCG on Shares Guide

Short-Term Capital Gains Tax on Shares in India : Rate, Calculation, ITR & Examples

Quick Answer

Quick Answer: If you sell listed equity shares within 12 months and the Securities Transaction Tax (STT) conditions are met, your short-term capital gain is taxed at 20% plus 4% cess (surcharge may apply on higher incomes). If you sell unlisted shares within 24 months, the gain is added to your income and taxed at your slab rate. Intraday equity and F&O profits are usually treated as business income, not capital gains.

Listed Equity + STT Conditions 20% STCG Rate + 4% Cess
Unlisted Shares Within 24 Months Applicable Income Tax Slab Rate
Intraday Equity & F&O Usually Treated as Business Income
Selling shares at a profit can trigger tax, and how much you pay depends mostly on one thing: how long you held them. Sell too soon and the profit becomes a short-term capital gain, often taxed at a higher rate than long-term gains. This guide breaks down the 2026 rules in plain language, with rates, formulas, worked examples, and clear explain you how to show share gains in your ITR.
Quick Reference

At a Glance: STCG on Shares in 2026

Scenario Holding period Tax treatment
Listed equity shares 12 months or less 20% (if STT conditions met) + 4% cess
Listed preference shares 12 months or less 20% if eligible, else slab rate
Unlisted equity shares 24 months or less Slab rate
Unlisted preference shares 24 months or less Slab rate
Intraday equity trades Same day Business income (speculative)
Futures & options Any Business income (non-speculative)
Equity-oriented mutual fund units 12 months or less 20% if STT conditions met
Use this table as your starting point, then read the detailed sections below to confirm which row applies to your situation.
STCG Basics

What Is a Short-Term Capital Gain on Shares?

A capital gain arises when you sell shares held as an investment for more than they cost you. The gain counts as short-term when you sell within the prescribed holding period.
Sale consideration − eligible transfer expenses − cost of acquisition = capital gain
Simple Example

Listed Shares Sold Within 12 Months

Here's a simple case. If you buy listed shares for ₹4,00,000 and sell them eight months later for ₹5,00,000, the roughly ₹1,00,000 profit (after eligible expenses) is a short-term capital gain because you held the shares for less than 12 months.

Tax Depends On

Your Final Tax Treatment Depends on:

  • Whether the shares are listed or unlisted
  • How long you held them
  • Whether the transaction met the STT conditions
  • Whether you held the shares as an investment or as trading stock
  • Your residential status
  • The date you transferred the shares
Share Holding Period

Holding Period: Listed vs Unlisted Shares

The line between short-term and long-term depends on the type of share.

Listed Shares 12 months or less = short-term
Unlisted Shares 24 months or less = short-term
Type of shares Short-term if held for
Listed equity shares 12 months or less
Listed preference shares 12 months or less
Unlisted equity shares 24 months or less
Unlisted preference shares 24 months or less
If you hold listed shares for more than 12 months, then they usually qualify as long-term assets.
If you hold unlisted shares for more than 24 months, then they normally become long-term.
Special rules apply to inherited shares, bonus shares, rights issues, and shares received through mergers or demergers. We cover those below.
Listed Share Tax Rate

STCG Tax Rate on Listed Shares

If you sell eligible listed equity shares that meet the STT conditions, then the short-term capital gain is taxed at 20%.

This 20% rate applies to transfers made on or after 23 July 2024. Before that date, the rate was 15%.

Transfer of eligible listed equity shares STCG tax rate
Before 23 July 2024 15%
On or after 23 July 2024 20%
On top of the tax, a Health and Education Cess of 4% applies. A surcharge may also apply if your total income crosses the prescribed thresholds.

A quick note on Section 111A vs Section 196

The special share-STCG provision was long known as Section 111A under the Income-tax Act, 1961. The Income-tax Act, 2025 came into force on 1 April 2026, and the equivalent provision now sits in Section 196.
  • Older articles and records may still say Section 111A.
  • Current statutory references use Section 196.
  • Both point to the same special treatment of qualifying short-term gains.
  • The rate remains 20% when the conditions are met.
The change in section numbering does not mean a new tax arrived in 2026. The 20% rate already applied to eligible transfers from 23 July 2024.
Have Share Capital Gains to Report?

Get your gains, losses, broker statements and ITR reporting checked before you file.

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Special Rate Conditions

When Does the 20% Rate Apply?

If all of these conditions are met, then the special 20% rate applies:
01 The asset is an eligible equity share, equity-oriented mutual-fund unit, or business-trust unit.
02 The asset qualifies as a short-term capital asset.
03 The gain is taxable under the head "Capital Gains."
04 The transaction meets the applicable STT requirements.

Situations That Often Need Extra Review

Buying or selling through a broker does not automatically satisfy every condition. These situations often need extra review:

Off-market share transfers
Unlisted shares
Employee stock options (ESOPs)
Foreign shares
Shares from corporate restructuring
Transactions exempt from STT
Shares held as business stock
Frequent or systematic trading
Unlisted Share Tax

STCG on Unlisted Shares

Unlisted shares follow different rules.

If you sell unlisted shares held for 24 months or less, then the gain is short-term, added to your total income, and taxed at your applicable slab rate. The 20% special rate does not apply.

Holding Period 24 months or less = short-term
Tax Treatment Applicable slab rate — not the special 20% rate

Unlisted-Share Transactions May Also Involve:

Fair-market-value provisions
Extra ITR disclosures
Valuation requirements
Foreign-asset reporting
Restrictions for closely held companies
Special provisions for non-residents
Even if you did not sell, holding unlisted equity shares during the year may require specific disclosure in your income-tax return.
Share STCG Calculation

How to Calculate STCG on Shares

General Formula
Full sale consideration − Expenses incurred wholly and exclusively for the transfer − Cost of acquiring the shares = Short-term capital gain or loss

Sale Consideration

Sale consideration is the amount you receive from selling. Your broker statement typically shows the gross sale value, brokerage, exchange charges, statutory levies, and net settlement.

Cost of Acquisition

Cost of acquisition is generally what you paid to buy the shares. Special rules apply for bonus issues, rights issues, ESOPs, inheritance or gifts, and mergers or demergers.

Transfer Expenses

Transfer expenses must directly relate to the sale, such as eligible brokerage. Note that STT is not treated as an ordinary deductible expense when computing income under "Capital Gains." Keep your contract notes and broker statements to support every figure.

Indexation is not available for short-term capital gains.

Worked example: listed shares

  • Purchase price: ₹5,00,000
  • Sale value after eight months: ₹6,20,000
  • Eligible transfer expenses: ₹5,000
  • STT conditions: Met
Short-term capital gain
₹1,15,000
₹6,20,000 − ₹5,000 − ₹5,00,000 = ₹1,15,000
Tax at 20%: ₹1,15,000 × 20% = ₹23,000
Cess at 4%: ₹23,000 × 4% = ₹920
Indicative tax: ₹23,920
Your actual tax can change due to loss adjustments, unused basic exemption, residential status, surcharge, tax regime, or treaty relief.
Special Share Cases

Worked Examples: Bonus, Rights, and ESOP Shares

These special cases trip up many investors. Here's how each one works.

Bonus Shares

Bonus shares

If you receive bonus shares, then their cost of acquisition is treated as zero, and the holding period starts from the date the bonus shares were allotted (not the date of the original shares).

Example

You hold 100 original shares and receive 100 bonus shares. You sell the bonus shares five months after allotment for ₹80,000, with ₹500 expenses.

STCG = ₹80,000 − ₹500 − ₹0 = ₹79,500, taxed at 20% (plus cess) if STT conditions are met.
Rights Shares

Rights shares

If you buy rights shares, then the cost is the amount you actually paid to subscribe, and the holding period starts from the date of allotment.

Example

You subscribe to rights shares for ₹1,20,000 and sell them six months later for ₹1,55,000, with ₹800 expenses.

STCG = ₹1,55,000 − ₹800 − ₹1,20,000 = ₹34,200.
ESOP Shares

ESOP shares

If you sell ESOP shares, then your cost of acquisition is the fair market value (FMV) already taxed as a perquisite at the time of exercise, not just the price you paid. The holding period runs from the date the shares were allotted to you.

Example

At exercise, the FMV taxed as a perquisite was ₹3,00,000. You sell four months later for ₹3,90,000, with ₹1,000 expenses.

STCG = ₹3,90,000 − ₹1,000 − ₹3,00,000 = ₹89,000, taxed at the applicable rate based on whether the shares are listed and STT conditions are met.
Gift & Inheritance Rules

STCG on Shares Received by Gift or Inheritance

Shares you receive as a gift or through inheritance follow a "carryover" principle.
Cost of Acquisition

If you inherit or receive shares as a gift, then: The cost of acquisition carries over from the previous owner (the person who gifted or bequeathed them).

Holding Period

The holding period includes the time the previous owner held the shares.

Example

Example: Your father bought listed shares for ₹2,00,000 in January 2025 and gifted them to you in October 2025. You sell them in December 2025 for ₹2,60,000.

  • Cost of acquisition = ₹2,00,000 (your father's cost).
  • Holding period counts from January 2025, so total holding exceeds 12 months, and the gain would qualify as long-term, not short-term.
Classification Long-Term Because the previous owner's holding period is included.
This carryover rule can work in your favour. If the previous owner held the shares long enough, your combined holding period may push the gain into the long-term category, even though you personally held them only briefly.
NRI Share Tax

STCG on Shares for NRIs

Non-resident investors face a few extra layers.

If you are an NRI selling listed equity shares within 12 months with STT met, then the STCG is taxed at 20% plus cess, the same special rate as residents. The differences show up in collection and relief:

What Changes for an NRI?

TDS at Source

TDS at source: Tax is often deducted before you receive the proceeds. For NRIs, buyers or intermediaries may deduct TDS on the gain, so you may need to claim a refund if excess tax was withheld.

DTAA Relief

DTAA relief: If your country has a Double Taxation Avoidance Agreement (DTAA) with India, then you may reduce or offset your Indian tax liability, subject to a Tax Residency Certificate and Form 10F.

Account Type

Account type: Gains routed through NRE accounts are generally freely repatriable; NRO account gains face repatriation limits and documentation.

ITR

ITR: NRIs with capital gains generally file ITR-2.

Extra Review

Unlisted and off-market: These attract different TDS rates and valuation scrutiny, so review them carefully.

NRIs cannot use the basic exemption limit adjustment the way resident individuals can, so plan withdrawals and filings with this in mind.
Have Share Capital Gains to Report?

Get your gains, losses, broker statements and ITR reporting checked before you file.

File Capital Gain ITR →
Tax Planning

How to Legally Reduce STCG Tax on Shares

You can lower your STCG bill using legitimate planning. Here are four practical strategies.

01

Tax-loss harvesting

If you hold shares sitting at a loss, then you can sell them to book a short-term capital loss and set it off against your short-term gains, cutting your net taxable gain.

Example

You have ₹1,80,000 STCG from Company A and an unrealised loss on Company B. Sell Company B to book a ₹70,000 short-term loss. Net STCG falls to ₹1,10,000, so tax at 20% drops from ₹36,000 to ₹22,000 (before cess).

₹1,80,000 STCG − ₹70,000 STCL = ₹1,10,000 net STCG
02

Time your sales across financial years

If a sale can wait, then spreading gains across two financial years can keep you below surcharge thresholds or spread the use of your basic exemption limit.

03

Use your unused basic exemption limit

If you are a resident and your other income is below the basic exemption limit, then you can adjust the unused portion against your special-rate STCG (more on this below).

04

Hold to cross into long-term territory

If you hold listed shares just past 12 months, then the gain becomes long-term, taxed at 12.5% (above the annual exemption) instead of 20%. A short wait can meaningfully cut your tax.

Tax planning works best before you sell. Check your holding period, available losses, total income and timing before placing the transaction.
Share Loss Set-Off

Can Share Losses Reduce Your STCG?

Short-Term Capital Loss

If you have a short-term capital loss, then you can set it off against both short-term and long-term capital gains.

Long-Term Capital Loss

If you have a long-term capital loss, then you can set it off only against long-term capital gains.

If a short-term loss cannot be fully adjusted this year, then you can carry it forward for up to eight tax years — but only if you file your return by the applicable due date. An unreported loss cannot be carried forward just because it appears in a broker statement.

Example with a short-term loss

Transaction Result
STCG from Company A shares ₹1,80,000
STCL from Company B shares ₹70,000
Net STCG ₹1,10,000
Tax on ₹1,10,000 at 20% = ₹22,000, plus 4% cess (₹880) = ₹22,880 indicative tax.
Basic Exemption Limit

Can the Basic Exemption Limit Reduce Share STCG?

If you are a resident individual or HUF and your other income is below the basic exemption limit, then you may adjust the unused portion against eligible special-rate STCG.

Example

Basic exemption limit ₹4,00,000
Income excluding special-rate STCG ₹3,20,000
Unused exemption ₹80,000
Eligible share STCG ₹1,50,000
Subject to conditions, the 20% rate applies to only ₹70,000 (₹1,50,000 − ₹80,000) rather than the full ₹1,50,000.
Amount Taxed at 20% ₹70,000
This benefit depends on residency, taxpayer status, and tax regime.
Rebate & Share STCG

Is the Section 87A Rebate Available Against Share STCG?

For AY 2026–27, the new-regime rebate can be up to ₹60,000 when conditions are met. But there's a catch.

If your income includes special-rate STCG, then the 87A rebate applies only to tax calculated at normal slab rates — it cannot wipe out tax on special-rate capital gains, even if your total income is within the rebate threshold.

The rebate and special-rate capital-gains tax should be calculated separately rather than assuming the general rebate automatically removes your share STCG tax.

So Separate Your Income Into Three Buckets Before Calculating the Rebate:

01

Income taxed at normal slab rates

02

STCG taxed at the special rate

03

Other special-rate income

Have Share Capital Gains to Report?

Get your gains, losses, broker statements and ITR reporting checked before you file.

File Capital Gain ITR →
STCG Deductions

Are Section 80C and Other Deductions Available Against STCG?

If your STCG is taxed at the special 20% rate, then deductions under Sections 80C to 80U are not available against it. For example, a fresh 80C investment cannot be deducted from special-rate STCG.

Such deductions may reduce other eligible income under the old regime, subject to each provision's conditions. Most conventional deductions are unavailable under the new regime.

Classification Matters

Investor or Trader: Why the Distinction Matters

Not every share profit is a capital gain. Shares held as investments produce capital gains; shares held as stock-in-trade produce business income.

Relevant factors include transaction frequency, trading volume, average holding period, use of borrowed funds, treatment in your books, your intention at purchase, and consistency with past returns. No single number of trades decides the classification.

Intraday equity

Intraday equity: Generally treated as speculative business income, not capital gains.

Futures and options

Futures and options: Generally treated as non-speculative business income, with separate reporting. Don't fold them into a listed-share STCG calculation.

Delivery-based investments

Delivery-based investments: Can be reported as capital gains where the facts support investment treatment.

Avoid reporting similar transactions inconsistently from year to year without a genuine reason.
Choose the Correct ITR

ITR-2 vs ITR-3: Which Form Do You Need?

Choosing the right return form protects you from defective-return notices.

If you are an individual or HUF with capital gains but no business or professional income, then use ITR-2.

If any of these apply, then use ITR-3:

  • Your share activity is treated as a business.
  • You have other business or professional income.
  • Your intraday or derivative activity produces business income.
If you have any short-term capital gains, then you cannot use ITR-1.

Quick decision guide

Your situation Form
Only delivery-based capital gains, no business income ITR-2
Capital gains + salary/house property, no business ITR-2
Intraday or F&O treated as business income ITR-3
Any business or professional income ITR-3
ITR Reporting

How to Report STCG in Your ITR

Report share STCG in the relevant capital-gains schedules. The ITR-2 process typically involves:

Schedule Capital Gains
Schedule SI (income taxed at special rates)
Loss-adjustment schedules
Carry-forward loss schedules
Tax-paid schedules

Documents to keep

Broker capital-gains statement
Tax profit-and-loss report
Contract notes
Demat statement
Purchase and sale records
Corporate-action, bonus, and rights records
AIS and TIS information
Previous capital-loss records
Advance-tax and self-assessment-tax challans

Reconcile your broker statement with AIS

Broker reports help, but they don't replace the return. Before filing:

Compare sale transactions with AIS.
Check purchase dates and holding periods.
Confirm whether shares are listed or unlisted.
Verify the cost assigned to bonus or rights shares.
Separate intraday, derivatives, and delivery transactions.
Adjust eligible capital losses.
Report special-rate and normal-rate income separately.
Advance Tax

Advance Tax on Share STCG

If your total tax after credits exceeds ₹10,000 in a year, then you must pay advance tax in instalments. Since a capital gain can be hard to predict at the start of the year, review the interest rules based on when the gain arose.

Advance-tax instalment schedule

Due date Cumulative advance tax payable
15 June 15% of total tax
15 September 45% of total tax
15 December 75% of total tax
15 March 100% of total tax
If a capital gain arises after an instalment date, then the shortfall attributable to that gain is generally required in the remaining instalments, easing the interest impact under Sections 234B and 234C. If advance tax stays unpaid, pay self-assessment tax before filing.
Avoid These Errors

Common Mistakes to Avoid

Applying the old 15% rate to transfers on or after 23 July 2024.
Using the settlement date instead of the correct transfer details for holding periods.
Treating unlisted shares like listed equity — different holding period, no 20% rate.
Assuming every exchange trade qualifies — the asset and STT conditions must be met.
Deducting every broker charge — not every levy is deductible.
Mixing delivery, intraday, and derivatives — they have different classifications.
Ignoring bonus and rights shares — they carry separate cost and date rules.
Not reporting losses — report them even when no tax is due, to preserve future value.
Selecting the wrong ITR — it can trigger a defective-return notice.
Common Questions

Frequently Asked Questions

01 What is the short-term capital gain tax rate on shares?

Eligible listed equity-share STCG satisfying the applicable STT conditions is generally taxed at 20%, plus cess and applicable surcharge.

02 What is the holding period for listed shares?

Listed shares held for 12 months or less are generally treated as short-term capital assets.

03 What is the holding period for unlisted shares?

Unlisted shares held for 24 months or less are generally treated as short-term capital assets.

04 Are unlisted-share gains taxed at 20%?

Not ordinarily. Short-term gains from unlisted shares are generally taxed at the applicable slab rate, subject to the relevant provisions.

05 Is STT deductible while calculating STCG?

STT should not be treated as an ordinary deductible transfer expense when income is computed under the head “Capital Gains.” Maintain it separately from eligible brokerage and transfer expenses.

06 Can a short-term share loss reduce LTCG?

Yes. An eligible short-term capital loss can generally be set off against both STCG and LTCG.

07 Is the Section 87A rebate available on listed-share STCG?

For AY 2026–27 under the new regime, the rebate is restricted to tax calculated at normal slab rates. It does not eliminate tax payable on special-rate STCG.

08 Is intraday share profit a capital gain?

Intraday equity profit is generally examined as speculative business income rather than delivery-based capital gains.

09 Are futures and options taxed as STCG?

Futures and options are generally examined under business-income provisions and should not automatically be reported as share STCG.

10 Which ITR should I use for share STCG?

ITR-2 is generally used when an individual or HUF has capital gains but no business or professional income. ITR-3 may apply when trading is treated as a business or the taxpayer has another business or profession.

Disclaimer: This article is intended for general educational purposes and does not constitute tax, financial, investment or legal advice. Tax treatment depends on the transaction, holding period, residency, taxpayer status and individual circumstances. Consult a qualified tax professional before filing or acting on this information.
Have Share Capital Gains to Report?

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CA Sagar Batra - Chartered Accountant
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.