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STCG (Short-Term Capital Gains) refers to gains from the transfer of a capital asset held for less than the prescribed long-term holding threshold. The tax rate depends on the asset type and whether STT was paid on the transaction.
Holding-Period Thresholds for Short-Term Classification
| Asset class | Short-term if held for |
|---|---|
| Listed equity shares / equity MF / REIT / InvIT | 12 months or less |
| Real estate (residential / commercial) | 24 months or less |
| Physical gold / gold ETF / gold fund | 24 months or less (post FA 2024; was 36m before) |
| Unlisted equity | 24 months or less |
| Debt MF (equity less than 35%) | N/A -- all gains at slab regardless of holding |
STCG Tax Rates (FY 2025-26, post Finance Act 2024)
| Asset | STCG rate | Statutory basis |
|---|---|---|
| Listed equity / equity MF / REIT / InvIT (STT paid) | 20% flat | Section 111A -- raised from 15% by FA 2024 (23 Jul 2024) |
| Real estate, physical gold, unlisted equity | Slab rate | Section 48 + normal computation |
| Debt MF (equity less than 35%) | Slab rate | Section 50AA (FA 2023) |
Source: Section 111A, Section 50AA, Income Tax Act 1961; Finance Act 2024; Finance Act 2023.
Section 111A Conditions
The 20% flat rate under Section 111A applies only when: (1) the asset is a listed equity share, a unit of an equity-oriented fund, or a unit of a business trust (REIT/InvIT); (2) STT has been paid on the transaction (automatically satisfied for exchange-traded deals); and (3) the transfer occurs on a recognised stock exchange (or at the AMC NAV for MF units). Off-market transfers of equity do not qualify for Section 111A and are taxed at slab rates.
Surcharge on STCG
Surcharge on STCG under Section 111A is capped at 15% regardless of total income (Finance Act 2022). Effective maximum rate: 20% x 1.15 x 1.04 = 23.92%.
STCG vs LTCG: Key Practical Differences
| Factor | STCG (Section 111A) | LTCG (Section 112A) |
|---|---|---|
| Rate | 20% | 12.5% |
| Annual exemption | None | Rs 1.25 lakh/year |
| Indexation | Not applicable | Not applicable (equity) |
| Surcharge cap | 15% | 15% |
Loss Set-Off Rules
A short-term capital loss (STCL) is more flexible than an LTCL: it can be set off against both STCG and LTCG in the same assessment year (Section 70). STCL can be carried forward for 8 assessment years (Section 74) and used against capital gains in future years. This makes STCL generated by deliberate tax-loss harvesting more valuable per rupee than an LTCL.
Source: Sections 70, 74, Income Tax Act 1961.
Related terms: LTCG, STT, Capital Gains Tax on Stocks, Tax-Loss Harvesting Guide, Tax on Investments in India.