STCG on stocks in India: complete guide

The key numbers at a glance

From 23 July 2024 onward, short-term capital gains (STCG) on listed equity shares and equity-oriented mutual funds — positions held for 12 months or less — are taxed at a flat 20% on the entire gain. There is no annual exemption comparable to the ₹1.25 lakh LTCG shield. Every rupee of STCG is taxable from the first rupee.

The rate was 15% before 23 July 2024. Budget 2024-25 raised it to 20%, a 33% increase in the tax burden for short-term traders and investors who exit positions within the year. For gains made between 1 April 2024 and 22 July 2024 in FY 2024-25, the old 15% rate still applies; for gains from 23 July 2024 onward, 20% applies. If you had transactions on both sides of that date in the same financial year, the ITR utility handles the split automatically.

You can model specific transactions using the LTCG/STCG calculator, which applies the correct rate based on the holding period and transaction date you enter. The companion LTCG guide covers the long-term side of the same equation.

What counts as short-term?

For listed equity shares traded on a recognised Indian stock exchange with Securities Transaction Tax (STT) paid, the holding period threshold is straightforward: if you hold for 12 months or less, the gain is short-term. The law requires more than 12 months for long-term classification, which means:

• Bought 15 April 2024, sold 15 April 2025 — exactly 12 months — still short-term.
• Bought 15 April 2024, sold 16 April 2025 — 12 months and 1 day — long-term.

For equity-oriented mutual funds (at least 65% of assets in domestic equity), the same 12-month rule applies. Hybrid funds that fall below the 65% equity threshold follow debt fund taxation rules — gains are added to total income and taxed at slab rates without any holding-period benefit.

BTST (Buy Today, Sell Tomorrow) trades — where shares are sold the day after purchase before receiving delivery — sit in a grey area. The income tax department has generally treated BTST as short-term capital gains rather than speculative income in most assessment orders, but there is no definitive statutory clarity. Conservative filers treat it as STCG; the BTST volume is too small to matter greatly for most retail investors.

No exemption — unlike LTCG

A point worth emphasising because it surprises many first-time investors: the ₹1.25 lakh annual exemption available for long-term capital gains (LTCG) does not apply to STCG. LTCG and STCG are computed and taxed under separate provisions of Section 112A and Section 111A of the Income Tax Act respectively.

Under Section 111A, there is no threshold exemption. If you made ₹10,000 of short-term gains from a delivery-based equity position, all ₹10,000 is taxable at 20% (plus cess). This makes the timing of exits material for investors sitting on gains close to the 12-month mark. Waiting a day or two past the anniversary to qualify for long-term status — and the ₹1.25 lakh exemption — has been historically meaningful, more so now that the rate gap is 7.5 percentage points (20% vs 12.5%).

The old 15% rate vs the new 20% — what actually changed

Under the pre-Budget 2024 framework, STCG on listed equity attracted a flat 15% under Section 111A. The Union Budget 2024-25 raised this to 20%. To put the increase in context:

• On a ₹1 lakh short-term gain, the old tax was ₹15,600 (15% + 4% cess). Under the new rate it is ₹20,800 (20% + 4% cess) — ₹5,200 more.
• On a ₹5 lakh short-term gain, the additional tax is ₹26,000 per financial year.

The increase was part of a broader rationalization of capital gains tax rates across asset classes. The government simultaneously raised LTCG from 10% to 12.5% and the LTCG exemption from ₹1 lakh to ₹1.25 lakh. For short-term traders, however, there was no offsetting relief — the full 5-percentage-point hike applied without any compensating change.

Speculative vs non-speculative income: where intraday fits

Not all equity trading profits are capital gains. The Income Tax Act draws a sharp distinction:

• Delivery-based trades (where you take delivery of shares and hold overnight, even for a single day) — these generate capital gains, either STCG or LTCG depending on the holding period.
• Intraday equity trades (bought and sold on the same day, no delivery taken) — classified as speculative business income under Section 43(5). This is taxed at your slab rate, not at the 20% STCG rate. Speculative losses can only be set off against speculative income — not against capital gains or even non-speculative business income. They can be carried forward for only 4 years (not 8 like capital losses).
• Futures and options (F&O) trading is treated as non-speculative business income under Section 43(5), again at slab rates. F&O losses can be set off against any income head except salary.

If you mix delivery trades (STCG), intraday trades (speculative), and F&O (non-speculative business) in the same year, you need ITR-3 — not ITR-2. The three buckets are reported and taxed separately. Most online brokers now provide a tax P&L statement that pre-classifies each trade into these categories; reconcile it against the AIS before filing.

Set-off rules: using STCG losses

Capital losses from equity have specific set-off rules under the Income Tax Act:

• Short-term capital losses (STCL) on listed equity can be set off against both short-term capital gains and long-term capital gains from any asset class in the same financial year. This makes STCL more flexible than long-term capital losses.
• Long-term capital losses (LTCL) can only be set off against long-term capital gains. They cannot reduce your STCG liability.
• Capital losses (both STCL and LTCL) cannot be set off against salary income, business income, or any other head. They stay within the capital gains universe.
• Speculative losses (intraday) cannot be set off against STCG or LTCG — they are entirely separate.

The hierarchy matters in practice. If you realised ₹2 lakh of LTCG and ₹50,000 of STCL in the same financial year, you can use the STCL to reduce the LTCG (subject to the ₹1.25 lakh LTCG exemption applying on the reduced amount). The net taxable LTCG would be ₹1,50,000 − ₹50,000 = ₹1,00,000, which falls within the exemption — leaving zero taxable LTCG.

Carry forward: 8 years for capital losses

If losses exceed gains in a given year, the unadjusted capital loss can be carried forward for up to 8 financial years. For example, STCL arising in FY 2025-26 can be carried forward and set off against capital gains up to FY 2033-34.

The critical condition: the ITR for the loss year must be filed on or before the original due date (typically 31 July for non-audit individuals). Filing a belated return forfeits the carry-forward right — the loss is extinguished. This is one of the most common and costly mistakes investors make, particularly in years when markets have fallen and they assume there is nothing to gain from filing on time.

Carried-forward STCL can be set off against STCG or LTCG in future years. Carried-forward LTCL can only be set off against LTCG. The type of loss does not change as it ages — a STCL carried forward remains a STCL and retains its flexible set-off character.

Tax-loss harvesting: the concept

Tax-loss harvesting is the practice of deliberately realising paper losses by selling holdings that are down to offset gains already realised in the same financial year. The result is a lower net taxable capital gain and therefore a lower tax outflow for the year. After harvesting the loss, many investors immediately reinvest in a similar (but not the same) position to maintain their market exposure.

There is no wash-sale rule in Indian income tax law — unlike the US, India does not disallow the loss merely because you repurchase the same stock shortly after selling. This makes loss harvesting relatively straightforward to implement. However, each repurchase resets your cost basis and holding period clock, which can affect future tax calculations.

The optimal window for STCG loss harvesting is between January and mid-March each financial year — late enough to know your realised gains for the year, but early enough to execute before 31 March. We do not provide individual tax planning guidance on this site; a SEBI-registered investment adviser or chartered accountant can help apply this to a specific portfolio.

ITR filing: Schedule CG and which form to use

For investors with only capital gains income (no business income), the correct ITR form is ITR-2. ITR-1 (Sahaj) cannot be used for any capital gains, even a small STCG. If you have intraday or F&O trading income, ITR-3 is required because those are business income.

Inside ITR-2, short-term capital gains on listed equity are reported in Schedule CG, specifically under Short-term capital gains — section 111A. You enter the full value of consideration, the cost of acquisition, transfer expenses (brokerage), and the resulting STCG. The utility applies the correct rate automatically.

For FY 2024-25 returns, note that transactions before and after 23 July 2024 are entered in separate sub-sections — the older transactions attract 15% while the newer ones attract 20%. The ITR utility had separate columns for this split in AY 2025-26.

The Annual Information Statement (AIS) on the income tax portal contains broker-reported sale transactions. Cross-check this against your broker's tax P&L statement. The AIS shows proceeds but not cost basis — you must supply the cost basis from your own records or the broker's contract notes.

Advance tax on STCG

If your total tax liability (including tax on STCG) for the financial year exceeds ₹10,000, you are required to pay advance tax in four instalments:

• 15% by 15 June
• 45% by 15 September
• 75% by 15 December
• 100% by 15 March

For capital gains that are hard to predict in advance (because they depend on when you exit positions), the law provides a concession: if you receive capital gains income after 15 March, you can pay the entire advance tax by 31 March without interest. For gains earned earlier in the year, the advance tax instalments apply normally.

Failing to pay adequate advance tax leads to interest under Sections 234B and 234C. At 1% per month, the interest on shortfall adds up quickly for active traders with large short-term gains. The standard practice is to make a conservative estimate after each quarter based on realised gains so far and top up as needed.

Cess and surcharge

The 20% STCG rate is before cess and surcharge. On top of the base tax:

• Health and education cess of 4% applies to all taxpayers, making the effective STCG rate 20.8% for those with no surcharge.
• Surcharge applies at 10% for total income between ₹50 lakh and ₹1 crore, and at 15% for income above ₹1 crore. The surcharge on capital gains under Section 111A was capped at 15% in Budget 2024, which means the maximum effective STCG rate for very high-income individuals is roughly 23.92% (20% × 1.15 × 1.04).

For most retail investors with total income below ₹50 lakh, the effective STCG rate is 20.8% — that is 20% base rate plus 4% cess, no surcharge.

Where to go next

Read the companion LTCG guide to understand how the long-term side works and when crossing the 12-month threshold materially changes your tax outcome. Use the LTCG/STCG calculator to model specific transactions before you decide on exit timing. For a step-by-step walkthrough of entering capital gains in your ITR, see our ITR capital gains guide.

This article is educational only and does not constitute tax or investment advice. Tax laws change; please verify with a chartered accountant or refer to the latest CBDT circulars before filing your return. EquitiesIndia.com is not liable for any reliance placed on this article.