Short-Term Capital Gain (STCG) is the profit earned from selling a capital asset after holding it for a short period. It is taxed differently from long-term capital gains because the holding period is shorter and the gain is considered more immediate.
Capital assets can include shares, mutual funds, bonds, land, buildings, gold and other investment assets.
Meaning and Holding Period
STCG arises when a capital asset is sold within the specified short-term holding period.
The holding period depends on the type of asset.
| Asset Type | Treated as Short-Term If Held For |
| Listed equity shares | 12 months or less |
| Equity-oriented mutual funds | 12 months or less |
| Listed securities / bonds / debentures | 12 months or less |
| Immovable property | 24 months or less |
| Unlisted shares | 24 months or less |
| Gold / jewellery / most other assets | 36 months or less |
If the asset is held beyond the specified period, the gain becomes Long-Term Capital Gain (LTCG).
Tax Treatment
STCG tax depends on the type of asset and whether Securities Transaction Tax has been paid.
For listed equity shares and equity-oriented mutual funds where STT is paid, STCG is taxed under Section 111A.
After the changes announced in Budget 2024, STCG on such assets is taxed at 20%.
For other assets, STCG is usually added to the taxpayer’s total income and taxed according to the applicable income tax slab rate.
| Type of STCG | Tax Rate |
| Listed equity shares / equity mutual funds with STT | 20% |
| Other short-term capital gains | Taxed as per income slab |
Examples
If a person buys listed shares for ₹1,00,000 and sells them after 8 months for ₹1,30,000, the short-term capital gain is ₹30,000.
Since the shares were held for less than 12 months, the gain is treated as STCG. If STT was paid, it will be taxed at 20% under Section 111A.
If a person sells gold after 2 years at a profit, the gain is also short-term because gold generally needs to be held for more than 36 months to qualify as long-term. In that case, the gain is added to total income and taxed as per slab rate.
Difference Between STCG and LTCG
| Basis | STCG | LTCG |
| Meaning | Gain from sale of asset held for short period | Gain from sale of asset held for longer period |
| Holding period | Depends on asset type | Beyond short-term holding period |
| Tax treatment | Usually higher or slab-based | Often concessional |
| Indexation | Generally not available | Available only in limited cases as per law |
| Example | Shares sold within 12 months | Shares sold after more than 12 months |
Significance
STCG matters because it affects investment decisions and tax planning.
Frequent buying and selling can create short-term gains, which may be taxed at a higher rate than long-term gains. This is why investors often compare holding periods before selling assets.
It is especially relevant for:
- stock market investors
- mutual fund investors
- property sellers
- gold investors
- bond investors
- tax planning
Conclusion
STCG is the profit earned from selling a capital asset within the short-term holding period. For listed equity shares and equity-oriented mutual funds with STT, STCG is taxed at 20%. For most other assets, it is added to income and taxed according to the applicable slab. The key point is that STCG depends on both the type of asset and the holding period.
