Short-Term Capital Gains tax on Equity Shares

Here’s something many new investors overlook: the taxman wants a share too.

If you’ve ever sold a stock within a year of buying it and made a profit, you’ve probably heard the term STCG, or Short-Term Capital Gains. But what exactly does that mean? And how much tax do you actually owe?

In this article, we’ll break down everything you need to know about STCG tax on equity shares in India

What Is STCG (Short-Term Capital Gains)?

Let’s start with the basics.

When you buy and sell listed equity shares (like stocks on the NSE or BSE) and make a profit, that profit is called a capital gain. If you sell those shares within 12 months of buying them, the profit is classified as a short-term capital gain.

The government taxes short-term gains differently from long-term ones—and often at a higher rate.

💼 STCG Tax Rate in India (as of FY 2024-25)

Here’s the deal:

• STCG on equity shares is taxed at a flat rate of 15%.
• This applies only if the sale is made through a recognized stock exchange, and STT (Securities Transaction Tax) is paid on the transaction.

Example:

You bought 100 shares of ABC Ltd at ₹500 each and sold them within six months at ₹600 each.

Profit = (₹600 - ₹500) × 100 = ₹10,000
STCG Tax = 15% of ₹10,000 = ₹1,500

So, you’ll pay ₹1,500 as tax on your short-term capital gain.

📋 Important Conditions for STCG Tax to Apply

Not every short-term stock sale is taxed the same way. For the 15% rate to apply:

• The shares must be listed on a recognized exchange like BSE/NSE
• Securities Transaction Tax (STT) must be paid during the transaction
• The asset must be sold within 12 months of purchase

If any of these conditions aren’t met, the gain might be taxed at a higher rate under your applicable income slab.

How to Report STCG in Your ITR :-

Declaring STCG income is pretty straightforward, but it’s essential to do it correctly:

• Use ITR-2 (for salaried individuals with capital gains)
• Report STCG under the ‘Capital Gains’ section
• Maintain brokerage statements, contract notes, and demat records as proof

Also, note that STCG is taxable even if your total income is below the basic exemption limit—though certain exemptions for senior citizens or low-income individuals may apply.

🧾 Can STCG Be Set Off Against Losses?

Yes. You can set off short-term capital losses against both:

• Short-term capital gains, and
• Long-term capital gains

And if you don’t have any gains this year? You can carry forward your short-term capital loss for up to 8 assessment years, as long as it’s declared in your ITR.

📊 STCG vs LTCG: A Quick Comparison

Feature	STCG (Short-Term)	LTCG (Long-Term)
Holding period	Less than 12 months	More than 12 months
Tax rate	15%	10% (above ₹1 lakh)
Set-off eligibility	Can be set off	Can be set off
Exemption threshold	None	₹1 lakh annually

⚠️ Common Mistakes to Avoid

• Ignoring STCG when income is below taxable limits
• Not declaring capital gains while filing ITR
• Forgetting that 15% tax is flat—it doesn’t follow income slabs
• Failing to report STCG even if you reinvested the money

Even if you’re actively trading and reinvesting, taxes apply every time you book a profit.

Final Thoughts: Don’t Let STCG Catch You Off Guard

Trading in stocks can be fun and rewarding—but it comes with responsibilities. Knowing how STCG tax works on equity shares helps you make smarter, tax-efficient choices. The 15% rate might sound small, but it adds up over time, especially if you're trading frequently.

A little tax planning now can save you both money and stress during filing season. To understand the difference between Long Term Vs Short Term Tax Implications please read this article

 

FAQs:

1. What is the holding period for STCG on equity shares?

If you sell listed shares within 12 months of buying them, it’s considered short-term.

2. Is STCG taxed even if my total income is below ₹2.5 lakh?

Yes, STCG on listed shares is taxed at 15% flat, regardless of your total income.

3. Can I adjust STCG with losses?

Yes. Short-term capital losses can be set off against both short and long-term capital gains.

4. Do I have to pay STCG tax if I reinvest the gains?

Yes. Reinvestment doesn't exempt you from STCG tax liability.

5. Is STT payment mandatory for the 15% STCG rate?

Yes. To get the 15% rate, the sale must be done via a recognized exchange and STT must be paid