Short Term Capital Gains Tax Rate in India 2026

Short Term Capital Gains Tax Rate in India 2026

Short-term capital gains (STCG) play a crucial role in the taxation of investment income in India. Whether you earn profits from shares, mutual funds, property, or insurance-linked investments, understanding STCG helps you plan exits, reduce tax liability, and stay compliant. With evolving tax rules and 2026 updates, knowing how STCG is calculated, taxed, and optimised is essential for smart financial planning.

What are Short Term Capital Gains (STCG)?

Short-term capital gains (STCG) refer to profits realised when a capital asset is sold within a prescribed holding period under the Income Tax Act. In simple terms, STCG refers to gains from assets held for less than 12 months. These assets can include equity shares, mutual funds, property, gold, bonds, or other securities.

The definition of short-term capital gains depends on the type of asset sold. For example, equity shares and equity-oriented mutual funds attract STCG if sold within 12 months, while assets such as debt funds, gold, or jewellery are considered short-term if sold within 36 months. Immovable property is treated as short-term if sold within 24 months of acquisition.

STCG is taxed differently from long-term capital gains, often at higher rates, and with limited exemptions or deductions.

Depending on the asset, STCG may be taxed at a flat rate or added to the taxpayer’s total income and taxed according to applicable income tax slabs. Understanding short-term capital gains is essential for investors who trade frequently or plan short-term exits, as tax implications can significantly impact overall returns.

Understanding Holding Periods for STCG in India

The STCG holding period determines whether gains from the sale of an asset are treated as short-term or long-term under the Income Tax Act. The holding period for capital gains varies across asset classes, making it essential to carefully track purchase and sale dates. Below is a simplified overview of short-term asset holding rules in India:

• Equity shares & equity-oriented mutual funds: Short-term if held for 12 months or less
• Unlisted shares: Short-term if held for 24 months or less
• Immovable property (land or building): Short-term if sold within 24 months
• Debt mutual funds: Short-term if held for 36 months or less
• Gold, jewellery & other movable assets: Short-term if held for 36 months or less

If an asset is sold within these specified periods, the resulting profit is classified as short-term capital gains and taxed accordingly. Exceeding the prescribed holding period allows gains to qualify as long-term capital gains, which may offer lower tax rates and additional tax benefits.

Understanding holding periods helps investors plan exits strategically and optimise post-tax returns.

Short-Term Capital Gains Tax Rates in India 2026

The short-term capital gains tax rate in India depends on the type of asset sold and the provisions of the Income Tax Act that apply. In 2026, STCG tax rates continue to follow a differentiated structure: equity-related gains are taxed at a special concessional rate, while gains from other assets are taxed as part of regular income. Understanding how income tax on STCG is applied helps investors assess the real impact of taxes on short-term profits.

STCG on equity shares and equity-oriented mutual funds is taxed separately under Section 111A, provided Securities Transaction Tax (STT) has been paid. In contrast, STCG from assets such as property, debt mutual funds, gold, and unlisted shares is added to the taxpayer’s total income and taxed according to the applicable income tax slab. This difference can significantly affect post-tax returns, especially for individuals in higher tax brackets.

The table below summarises the applicable STCG tax rates in India for 2026:

STCG on Equity Shares and Equity-Oriented Mutual Funds (Section 111A)

STCG on equity shares and STCG mutual funds is governed by Section 111A of the Income Tax Act. When equity shares or equity-oriented mutual funds are sold within 12 months of purchase, the resulting gains are classified as short-term capital gains. To qualify for the concessional tax rate under Section 111A, Securities Transaction Tax (STT) must be paid at the time of purchase and sale (for shares) or at redemption (for mutual funds).

Such gains are taxed at a flat rate of 15%, irrespective of the taxpayer’s income slab. This makes short-term equity investments relatively tax-efficient compared to other asset classes that are taxed at slab rates. However, no indexation benefit or deductions under Chapter VI-A can be claimed against these gains.

STCG on equity and equity mutual funds is taxed separately and does not get adjusted against the basic exemption limit in most cases. Investors who trade frequently or exit equity investments early should factor in this tax liability, as it can materially impact short-term returns.

STCG on Other Assets: Property, Debt Funds, and Gold

STCG on property, STCG debt funds, STCG gold, and STCG unlisted shares are taxed differently from equity-related gains. When these assets are sold within their respective short-term holding periods, 24 months for property and unlisted shares, and 36 months for debt funds and gold, the resulting gains are added to the taxpayer’s total income.

Unlike equity, STCG on these assets is taxed according to the individual’s income tax slab rate, which can go up to 30% (plus applicable surcharge and cess). No indexation benefit is available, making short-term exits potentially tax-inefficient for higher-income individuals. Expenses incurred exclusively for the transfer, such as brokerage or stamp duty, can be deducted from the gain.

This slab-based taxation significantly affects net returns, especially for real estate and debt investments sold prematurely. Investors should carefully assess holding periods and overall tax impact before exiting such assets, as waiting to qualify for long-term capital gains can result in substantially lower tax liability.

How to Calculate Short-Term Capital Gains Tax

To calculate STCG tax, you first need to determine the profit earned from the sale of a short-term capital asset. The short-term capital gains calculation is based on the difference between the sale price and the cost of acquisition, after adjusting for eligible transaction expenses. The applicable tax rate depends on whether the asset is equity-related or falls under other categories, such as property, debt funds, or gold.

STCG calculation formula:  
Short Term Capital Gains = Sale Consideration – (Cost of Acquisition + Cost of Improvement + Transfer Expenses)

For equity shares and equity-oriented mutual funds covered under Section 111A, the calculated gain is taxed at a flat rate of 15%, provided Securities Transaction Tax (STT) has been paid. For other assets, the calculated STCG is added to the taxpayer’s total income and taxed according to the applicable income tax slab.

Example scenarios:

If you purchase listed shares for ₹1,00,000 and sell them for ₹1,30,000 within 12 months, your STCG is ₹30,000. The tax payable would be ₹4,500 at 15%.

In another case, if you sell a property within 24 months and earn a short-term gain of ₹5,00,000, this amount is added to your total income and taxed at your slab rate.

Understanding how to calculate short-term capital gains tax helps investors estimate tax liability accurately and plan exits more efficiently.

Step-by-Step STCG Calculation

Understanding the STCG calculation steps makes it easier to determine tax liability and avoid errors when filing returns accurately. Below is a simple guide on how to calculate short-term gains:

• Identify the asset sold and confirm that it qualifies as a short-term capital asset based on its holding period
• Determine the sale consideration, including the final selling price received
• Calculate the cost of acquisition, which includes the purchase price and any improvement costs, if applicable
• Deduct transfer-related expenses, such as brokerage, stamp duty, or legal fees
• Compute the short-term capital gain using the prescribed STCG calculation formula
• Apply the correct tax rate, either 15% for equity assets under Section 111A or the applicable income tax slab rate for other assets

Following these STCG calculation steps ensures accurate computation of short-term gains and helps investors effectively assess post-tax returns. Maintaining proper records of purchase costs and expenses also simplifies tax compliance and reduces the risk of disputes during assessment.

Exemptions and Deductions for Short-Term Capital Gains

STCG exemptions are more limited than those for long-term capital gains, as the tax framework discourages short-term trading and early exits. In most cases, deductions from STCG under popular reinvestment sections such as Section 54, 54F, or 54EC are not available for short-term gains. However, certain specific provisions do offer relief in defined circumstances.

Section 54B provides an exemption on STCG arising from the compulsory transfer of agricultural land, provided the taxpayer reinvests the proceeds in new agricultural land within the prescribed time. Similarly, Section 54D provides an exemption from capital gains on the compulsory acquisition of land or buildings used for industrial purposes, subject to reinvestment conditions. These sections apply only when the transfer is due to compulsory acquisition, not to a voluntary sale.

Apart from these specific cases, taxpayers can deduct expenses incurred wholly and exclusively for the transfer of the asset, such as brokerage, stamp duty, or legal charges, while computing STCG. While exemptions are limited, understanding the available deductions and planning asset holding periods strategically can help reduce the overall tax burden on short-term capital gains.

Impact of STCG on Different Investment Products

The impact of STCG and investments varies significantly across asset classes, making it an important consideration in portfolio planning. STCG implications are most pronounced for investors who frequently trade or exit investments within short holding periods. Since short-term capital gains are often taxed at higher rates and offer limited exemptions, they can substantially reduce post-tax returns.

For equity shares and equity-oriented mutual funds, STCG is taxed at a concessional rate under Section 111A, which may still be manageable for short-term strategies. However, capital gains on investments such as property, debt funds, gold, and unlisted shares are taxed at applicable income tax slab rates, increasing the tax burden for high-income individuals. This difference in taxation influences investment behaviour, encouraging longer holding periods for non-equity assets.

Understanding how STCG affects various investment products helps investors make informed decisions about entry and exit timing, balance liquidity needs, and align tax efficiency with long-term financial goals.

STCG on ULIPs (Unit-Linked Insurance Plans)

STCG on ULIP gains depends on the policy structure, premium amount, and holding period. Traditionally, ULIPs enjoyed tax-exempt status under Section 10(10D). However, recent changes in ULIP taxation in India have introduced capital gains tax on certain high-premium policies. If the annual premium exceeds the prescribed threshold and the policy is surrendered within the short-term holding period, the gains may be treated as capital gains.

In such cases, capital gains on ULIP investments are treated as short-term if the policy is exited within 12 months of the date of allotment. The gains are then taxed as STCG and added to the taxpayer’s total income, subject to the applicable income tax slab rates. No indexation benefit or special exemption is available for short-term ULIP gains.

This change aims to prevent the misuse of ULIPs as short-term tax-saving instruments. Investors should carefully assess premium limits, lock-in periods, and long-term objectives before exiting ULIPs early, as STCG taxation can significantly reduce overall returns.

STCG on Shares, Securities & Mutual Funds

STCG on shares and STCG securities depends on whether the investment is equity-oriented or non-equity. For listed equity shares and equity-oriented mutual funds sold within 12 months, mutual fund STCG is taxed under Section 111A at a flat rate of 15%, provided Securities Transaction Tax (STT) has been paid. This concessional rate applies irrespective of the investor’s income slab.

In contrast, STCG on debt mutual funds, bonds, and other securities is taxed as part of total income and is subject to slab-based taxation. This can significantly impact investors in higher tax brackets, especially those engaging in short-term debt investments. No indexation benefit is available for short-term gains, further increasing the tax burden.

Frequent trading in shares and securities can lead to repeated STCG liabilities, reducing post-tax returns. Understanding the tax treatment of different securities helps investors plan holding periods more effectively and balance liquidity needs with tax efficiency.

STCG on Real Estate and Immovable Property

STCG on real estate arises when immovable property, such as land or buildings, is sold within 24 months of its acquisition. In such cases, the resulting short-term capital gains on property are added to the taxpayer’s total income and taxed under the applicable income tax slabs under the property tax rules in India. This can lead to a substantial tax liability, particularly for individuals in higher income brackets.

Unlike long-term property gains, STCG does not qualify for indexation benefits or reinvestment exemptions under Sections 54 or 54F. Only expenses incurred wholly and exclusively for the transfer, such as stamp duty, brokerage, or legal fees, can be deducted while calculating gains.

Given the high value of real estate transactions, STCG taxation can significantly erode profits on early property sales. Investors are therefore encouraged to carefully evaluate holding periods and align property investments with long-term financial goals to minimise tax impacts and improve net returns.

Key Differences: STCG vs. LTCG (Long Term Capital Gains)

Understanding the difference between STCG and LTCG is essential for effective tax and investment planning. Short-term vs. long-term capital gains are classified based on the asset's holding period, which varies across asset classes. This classification directly impacts the applicable tax rate, availability of exemptions, and overall post-tax returns.

STCG applies when assets are sold within the prescribed short-term holding period and is generally taxed at higher rates.

In contrast, LTCG applies to assets held for longer periods and usually benefits from lower tax rates, indexation, and reinvestment exemptions.

As a result, long-term investments are often more tax-efficient, especially for non-equity assets such as property and debt funds.

The table below highlights the key aspects of STCG vs LTCG:

Choosing between short-term and long-term investment strategies depends on liquidity needs, risk appetite, and tax considerations.

Understanding the distinction between STCG and LTCG helps investors time exits strategically and maximise overall returns.

Planning Your Investments to Optimise STCG Tax

Effective STCG tax planning focuses on minimising tax liability while aligning investments with financial goals. Since short-term capital gains are often taxed at higher rates and offer limited exemptions, adopting the right investment strategy for STCG is essential. One of the most effective approaches is to extend holding periods wherever possible so that gains qualify as long-term capital gains, which generally attract lower tax rates and additional benefits.

Maintaining accurate records of acquisition costs and transfer-related expenses ensures correct gain calculation and prevents overpayment of taxes. Consulting a tax or financial advisor before making large short-term exits can help structure transactions more efficiently. A disciplined investment approach that balances liquidity needs with tax efficiency is key to optimising STCG tax outcomes.

AN Jan 60/26