Sold shares, property, or mutual funds recently? If you held those assets for less than the specified period, the profit you made is a short-term capital gain — and the tax treatment is different from long-term gains. Short-term capital gains tax in India depends heavily on what asset you sold and when. This guide covers the rates, how the calculation works, which exemptions exist, and how to report everything correctly in your ITR.
The Budget 2026 proposes taxing share buyback proceeds as Capital Gains Income in the hands of shareholders — rather than treating them as dividend income. This is still at the proposal stage, and the final rules will depend on the Finance Bill passed in Parliament.
Whether your gain is short-term or long-term comes down entirely to how long you held the asset before selling. Sell too early, and you're in short-term territory — which typically means a higher tax rate.
For most assets — property, gold, debt funds — you need to hold for more than 24 months to qualify as long-term. Listed equity shares and equity-oriented mutual funds get a shorter window: just 12 months. Sell those before a year is up, and the gain is short-term. No indexation benefit applies here, regardless of how long you held the asset within that short-term window.
The rate you pay on short-term gains depends on what you sold. Here's the full picture:
The 20% flat rate on listed equity shares under Section 111A was raised from 15% — effective 23rd July 2024. That shift caught many investors mid-year, especially those who sold shares between April and July 2024 at the older 15% rate. If your sale happened before that date, your rate was lower.
Important distinctions:
The STCG formula follows a consistent structure regardless of asset type:
No indexation adjustment is applied anywhere in this calculation — that benefit only exists for certain long-term assets.
Short-term capital gains exemptions are limited. Most taxpayers won't qualify — but two provisions do exist for specific situations.
Section 54B applies when you sell agricultural land that was actively used for farming. If you reinvest the proceeds into another agricultural land within the prescribed timeline, the gain can be exempt from tax.
Section 54D covers industrial land or buildings used for industrial purposes. Reinvest those sale proceeds into a new industrial property, and you can claim a similar exemption.
Both sections are designed to encourage reinvestment within the same asset class. They won't help if you're selling equities or a residential flat — those situations don't qualify.
This is where a lot of taxpayers get confused.
For short-term gains taxed at slab rates, both the basic exemption limit and rebate under the Income Tax Act apply without restriction. Your capital gains simply get added to your other income, and the full slab structure — including exemption and rebate — applies normally.
Section 111A gains (the 20% flat rate on equity shares and equity funds) work differently. The rebate doesn't apply here. However, you can still use up any remaining basic exemption limit against these gains. Here's what that means in practice: if your non-capital-gains income is, say, Rs. 1.5 lakh, and the basic exemption limit is Rs. 2.5 lakh, the unused Rs. 1 lakh can offset your Section 111A capital gains before the 20% rate kicks in.
Kunal bought a house in 2025 for Rs. 45 lakhs and sold it in 2026 for Rs. 72 lakhs. Since he held it for less than 24 months, it's a short-term capital gain — taxed at his applicable slab rate.
Rs. 27 lakhs gets added to Kunal total income and taxed at his slab rate. Had he held the property for more than 24 months, the entire calculation — and the rate — would have been different.
Short-term capital gains go under Schedule Capital Gains in your ITR.
The Schedule CG section breaks down capital gains by asset type and holding period — fill in each transaction separately. Don't lump different asset categories together; the tax rate varies, and the form accounts for that.
The most impactful change was the equity rate moving from 15% to 20%. Everything else was largely a clarification or reinforcement of existing rules.
No confirmed changes to STCG rules are expected in Budget 2026 as of now — but that can shift quickly once the Finance Bill is actually tabled. Minor definitional clarifications are possible, particularly around specified mutual funds and crypto classification. Keep an eye on the official Finance Bill text rather than relying on pre-budget speculation.
The rules differ for non-residents in two important ways.
First, the basic exemption limit offset that resident Indians can use against Section 111A gains doesn't apply to NRIs. Their short-term capital gains on listed shares and equity funds are taxed at the full 20% flat rate from the first rupee.
Second, TDS deduction is mandatory on short-term capital gains earned by non-residents — the broker or depository participant handles this automatically. NRIs who pay tax both in India and their country of residence can claim relief under the applicable Double Taxation Avoidance Agreement (DTAA), which India has with over 90 countries. The specific relief depends on the treaty terms with your country.
Tax rates on capital gains have shifted multiple times in the last few years — the 2024 Budget alone changed the equity STCG rate mid-year. Getting this wrong doesn't just mean a higher tax bill; it can mean penalties and interest for under-reporting. Knowing the current short-term capital gains tax rate in India for each asset class, and filing under the right ITR form, is the baseline for staying compliant.
Section 111A covers short-term capital gains on listed equity shares and equity-oriented mutual funds where STT has been paid. The flat rate is 20%, effective from 23rd July 2024 — it was 15% before that. No slab rate applies here, and the rebate isn't available either, though the basic exemption limit can still be used if your other income leaves a shortfall.
Property held for less than 24 months produces a short-term capital gain when sold. That gain gets added to your total income for the year and taxed at your applicable income slab rate — there's no separate flat rate like there is for equity. If you're in the 30% slab, your property STCG is taxed at 30% plus applicable surcharge and cess. The tax regime you've chosen (old or new) also affects the final number.
Crypto is taxed at a flat 30% regardless of how long you held it — there's no long-term/short-term distinction for crypto under Indian tax law. On top of that, a 1% TDS applies on crypto transfers above certain thresholds. You can't offset crypto losses against any other income, and losses within crypto can't be carried forward either.
For debt mutual funds purchased on or after 1st April 2023, yes — all gains are classified as short-term capital gains regardless of the holding period, and they're taxed at slab rates. Funds bought before that date still follow the old rules: held more than 36 months qualifies as long-term. If you're unsure which rule applies to a specific fund in your portfolio, check the purchase date first.
Short-term capital gains go under Schedule Capital Gains in either ITR 2 or ITR 3. Use ITR 2 if your income is from salary, capital gains, and other sources only. Switch to ITR 3 if you also have business or professional income. Within Schedule CG, report each asset category separately — Section 111A gains go in one row, slab-rate gains in another. Mixing them creates discrepancies that can trigger scrutiny.
NRIs pay the same 20% rate on listed equity gains under Section 111A, but without the basic exemption benefit that residents get. TDS is automatically deducted by the broker or custodian before the proceeds are credited. If your home country has a DTAA with India, you can claim a credit for the Indian tax paid — but you'll need to file both in India and in your resident country to do that properly.
Listed equity shares and equity mutual funds: 20% flat under Section 111A. All other assets — property, gold, debt funds — are taxed at slab rates. Crypto remains at 30% regardless of budget changes. The 20% equity rate replaced the old 15% rate from 23rd July 2024 onward
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