Short Term Capital Gains Tax: Rates, Calculation and Exemptions 2026

Sold shares within a few months and made a profit? Sold a flat you had bought just last year? The tax on that profit is called short term capital gains tax, and it works very differently depending on what you sold. Equity shares are taxed at a flat 20%. Property, gold, and debt instruments are taxed at your slab rate. Getting this wrong when filing your ITR is one of the more common mistakes I see from salaried professionals who invest on the side.

Budget 2024 changed the STCG rate on equity from 15% to 20%, effective July 23, 2024. Budget 2025 and Budget 2026 made no further changes. So for FY 2025-26, the rates below are final and confirmed.

This guide covers STCG tax rates for all asset types, holding periods, how to calculate your tax, the Section 87A rebate restriction, and where to report it in your ITR.

What Is Short Term Capital Gain?

A short term capital gain (STCG) arises when you sell a capital asset at a profit and the holding period is below the threshold for long term classification. What counts as “short term” depends entirely on the type of asset:

Budget 2024 reduced the holding period for property and most non-equity assets from 36 months to 24 months, effective July 23, 2024. This change applies fully to FY 2025-26.

STCG Tax Rates for FY 2025-26

There are two tracks for STCG taxation:

Track 1: Flat rate under Section 111A (20%) Applies to equity shares, equity mutual funds, and business trust units where Securities Transaction Tax (STT) has been paid.

Track 2: Slab rate Applies to all other assets, including property, gold, debt mutual funds, unlisted shares, and bonds.

Complete STCG Rate Table FY 2025-26

Note: The 20% STCG rate under Section 111A was increased from 15% by Budget 2024, effective July 23, 2024. If you sold equity shares before July 23, 2024 in FY 2024-25, the old 15% rate applied. For all transactions in FY 2025-26, the rate is 20%.

Section 111A: Conditions to Qualify for 20% Flat Rate

Not every equity transaction automatically qualifies for the flat 20% rate. Section 111A applies only when all three conditions are met:

1. The asset must be an equity share, equity-oriented mutual fund unit, or unit of a business trust
2. The transaction must be on a recognised stock exchange in India
3. STT (Securities Transaction Tax) must have been paid on the transaction

If any of these conditions are not met, for example if you sold unlisted shares or shares off-market, the gain is taxed at your applicable slab rate, not 20%.

How to Calculate Short Term Capital Gains Tax

The calculation itself is straightforward:

STCG = Sale Price minus (Cost of Acquisition + Cost of Improvement + Transfer Expenses)

There is no indexation benefit for STCG. Unlike long term capital gains where you can inflate the cost of purchase using the Cost Inflation Index, STCG uses the actual purchase price with no adjustment for inflation.

What can be included as deductions:

• Brokerage paid on purchase and sale
• STT paid (not deductible for Section 111A gains, but deductible for non-111A gains)
• Stamp duty and registration charges (for property)
• Cost of improvement made to the asset

What cannot be deducted from Section 111A STCG: Deductions under Section 80C to 80U are not available against STCG taxed under Section 111A. So even if you invest Rs. 1.5 lakh in PPF or ELSS, that deduction cannot reduce your equity STCG tax. However, these deductions are available against slab-rate STCG (property, gold, etc.).

Practical Examples

Example 1: STCG on Listed Equity Shares

Arun bought 500 shares of a listed company at Rs. 200 per share in August 2025. He sold them in January 2026 at Rs. 280 per share. Brokerage paid: Rs. 500 total.

Since the shares were sold within 12 months and STT was paid, Section 111A applies at 20%.

Example 2: STCG on Property

Meena bought a flat in Mumbai in June 2024 for Rs. 45 lakh. She sold it in March 2026 for Rs. 52 lakh. Registration and brokerage costs at purchase: Rs. 50,000.

Meena held the property for less than 24 months, so it is STCG. This Rs. 6.5 lakh is added to her salary income and taxed at her applicable slab rate. If she is in the 30% bracket, the tax on this gain is Rs. 1,95,000 plus cess.

Example 3: STCG on Equity Mutual Fund

Sanjay invested Rs. 2 lakh in an equity mutual fund in October 2025 and redeemed it in May 2026 for Rs. 2.4 lakh.

Held for less than 12 months, equity fund, STT paid: Section 111A at 20%.

Section 87A Rebate: Does It Apply to STCG?

This is an important point that many salaried investors get wrong.

Under the new tax regime, income up to Rs. 12 lakh effectively attracts zero tax due to the Section 87A rebate. However, the Section 87A rebate does not apply to STCG taxed under Section 111A.

This means if your only income is Rs. 10 lakh in equity STCG, you cannot claim the rebate and will pay tax at 20% on the full amount.

However, for slab-rate STCG (property, gold, etc.), Section 87A rebate can apply against the tax on those gains as they are part of your regular income calculation. The rebate restriction is specifically for special-rate income under Section 111A and Section 112A.

Debt Mutual Funds: Special STCG Rules

Debt mutual funds have their own set of rules that changed significantly with Budget 2023:

Debt mutual funds purchased on or after April 1, 2023: Gains are always taxed as short term capital gains at slab rate, regardless of how long you hold them. Even if you hold for 5 years, there is no long term benefit. This rule was introduced to remove the indexation advantage that made debt funds more attractive than fixed deposits from a tax perspective.

Debt mutual funds purchased before April 1, 2023: The old rules apply. If held for less than 36 months, gains are short term and taxed at slab rate. If held for more than 36 months, gains are long term and taxed at 20% with indexation (for transfers before July 23, 2024) or at 12.5% without indexation (for transfers after July 23, 2024).

Set-Off and Carry Forward of Short Term Capital Loss

If you have made a short term capital loss (sold an asset at a loss within the short term holding period), the Income Tax Act allows you to set it off against gains:

If the loss cannot be fully set off in the same year, it can be carried forward for up to 8 years. However, you must file your ITR on time (by July 31, 2026 for FY 2025-26) to be eligible to carry forward capital losses. A belated return does not allow carry forward of capital losses.

Advance Tax on STCG

If your total tax liability for the year, including STCG tax, exceeds Rs. 10,000, you are required to pay advance tax in instalments during the year. Many salaried professionals assume their employer’s TDS covers everything, but if you have significant trading income or sold property during the year, you may have an advance tax obligation.

Missing advance tax payments on STCG leads to interest under Section 234B and 234C. You can read the complete advance tax payment guide to understand the instalment schedule and how to avoid interest.

How to Report STCG in Your ITR

Short term capital gains are reported in Schedule CG (Capital Gains) in your ITR. You cannot use ITR-1 if you have capital gains. Use ITR-2 if you have capital gains but no business income, or ITR-3 if you have both.

Steps to report STCG:

Step 1: In your ITR form on the income tax portal, navigate to Schedule CG.

Step 2: Under Short Term Capital Gains, select the relevant section: Section 111A for equity or non-111A for other assets.

Step 3: Enter details of each transaction: asset type, date of purchase, date of sale, sale price, cost of acquisition, and expenses.

Step 4: The portal will automatically compute the tax at 20% for Section 111A gains or at slab rate for other STCG.

Step 5: Verify that TDS if any (for property transactions above Rs. 50 lakh, TDS at 1% is deducted by the buyer under Section 194-IA) is reflected in Schedule TDS and claimed as credit.

You can refer to the complete step-by-step ITR filing guide for detailed portal navigation.

The ITR filing deadline for FY 2025-26 is July 31, 2026. Missing this deadline means you lose the ability to carry forward capital losses. Check the ITR filing last date for all category-wise deadlines.

STCG Under the New Income Tax Act 2025

The new Income Tax Act 2025 came into effect from April 1, 2026. For FY 2025-26 returns filed in July 2026, you are using Tab 1 on the portal (Act 1961 rules). The STCG provisions under Section 111A and the slab rate treatment for other assets remain applicable under Tab 1.

Under the new Act 2025, the corresponding provisions are renumbered but the tax treatment remains substantively the same for Tax Year 2026-27 filings (Tab 2).

Which ITR Form to Use for Capital Gains

If you are a salaried employee who sold shares or mutual funds during FY 2025-26, you must switch from ITR-1 to ITR-2. Filing ITR-1 with capital gains will result in a defective return notice.

Frequently Asked Questions

Q: I sold shares on July 20, 2024. Does the 15% or 20% STCG rate apply? The 20% rate applies only to transactions on or after July 23, 2024. Shares sold on July 20, 2024 are taxed at the old 15% rate under Section 111A. The cut-off date is July 23, 2024.

Q: I sold my flat after 20 months. Is it STCG or LTCG? STCG. For immovable property, the threshold is 24 months. Since you held it for 20 months, it is short term and taxed at your applicable slab rate.

Q: Can I claim Section 80C deduction to reduce my STCG on equity shares? No. Section 80C and other Chapter VI-A deductions cannot be used to reduce STCG under Section 111A. They can be used against slab-rate STCG such as property gains.

Q: I made a short term capital loss on shares. Can I set it off against my salary income? No. Capital losses can only be set off against capital gains, not against salary or other income heads. A short term capital loss can be set off against STCG or LTCG from any other asset.

Q: I invest through SIPs in equity mutual funds. How is STCG calculated for SIPs? Each SIP instalment is treated as a separate investment with its own purchase date and cost. When you redeem, units are matched using the FIFO (first in, first out) method. Units held for less than 12 months from the date of that specific instalment attract 20% STCG.

Q: Is STCG on gold jewellery taxed differently from gold ETFs? Yes. Gold jewellery sold within 24 months is STCG at slab rate. Gold ETFs sold within 12 months are also STCG, but because ETFs are listed and STT is paid, they fall under Section 111A at 20%.

Q: My total income including STCG is below Rs. 7 lakh. Do I still pay tax? For Section 111A STCG (equity), the 20% flat rate applies regardless of your total income. The Section 87A rebate does not apply to Section 111A income. For slab-rate STCG (property, gold), the rebate can apply if your total income including that gain stays within the eligible threshold. You can review your options under the old vs new tax regime to choose the more tax-efficient option.

Conclusion

Short term capital gains tax in India has two very different rates depending on what you sold. Equity and equity mutual funds attract a flat 20% under Section 111A. Everything else, including property, gold, and debt funds, gets added to your income and taxed at your slab rate.

The most important things to get right for FY 2025-26: use the 20% rate (not 15%) for equity transactions after July 23, 2024; remember that Section 87A rebate does not apply to Section 111A gains; use ITR-2 and not ITR-1 if you have any capital gains; and file on time by July 31, 2026 if you want to carry forward any capital losses.

If you are investing regularly through a demat account or mutual funds, understanding your STCG liability before the financial year ends helps you plan advance tax payments and avoid unnecessary interest charges.

Written & Reviewed by

Diksha Chawla

Financial Educator & Content Creator | FinLecture.in

Diksha covers Indian income tax, mutual funds, ITR filing, and personal finance. FinLecture content is cross-checked against official government portals and SEBI/AMFI guidelines.

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