Short Term Capital Gains Tax - STCG Tax Rate & Exemption Limit

Short Term Capital Gains (STCG) vary for different assets. If you have made STCG from financial assets where STT is applicable like equity shares or equity mutual funds, then the gains are taxed at 15%. In Financial Assets and in Non-Financial Assets where STT is not applicable, the STCG is added to the total income of the individual and the amount over and above the exemption limit will be taxable as per the income tax slab.

You cannot avoid paying Short Term Capital Gain Tax on securities like equity shares or equity mutual funds i.e. securities where STT is applicable. A flat tax rate of 15% is levied on such gains. However, for securities other than equity shares and mutual funds, one can avoid paying STCG if they have a total income during a financial year that falls under the exemption limit as per the Income Tax Act. An individual can also reduce or avoid paying STCG from other securities by adjusting their short-term capital loss with STCG as well as LTCG and they can also carry forward the loss for the next 8 years.

To understand the calculation of how the tax on STCG is calculated, we first need to understand how to calculate STCG on the sale of financial or non-financial assets. Here is a formula to calculate STCG.


STCG = Sale Value of an Asset - [Cost of acquisition of the asset + Cost of repair or improvement + Cost of Transfer or Sale]


For STCG made on assets that fall under Section 111A of the Income Tax Act, tax is calculated at 15% of STCG. For example, Mr. A bought 100 shares of XYZ Ltd. on 17th May 2022 for Rs. 1280 each. He sold off these shares on 29th November 2022 for Rs. 1400 each after a span of 6 months. These shares were listed on NSE hence STT was levied on Mr. A for the transaction. He also paid Rs. 25 towards brokerage charges. Let us calculate the STCG that Mr. A made through the sale of these shares as well as the STCG Tax that will be added to the total tax liability of Mr. A during FY 22-23.






Sale Value of the shares


i.e. 1400 x 100 = Rs. 1,40,000




Less: Cost of Acquisition of shares


i.e. 1280 x 100 = Rs. 1,28,000




Less: Cost of improvement


Rs. 0




Less: Cost of Sale


Rs. 25




Short Term Capital Gain


i.e. 1,40,000 - [1,28,000 + 25] = Rs. 11,975




STCG Tax


i.e. 11,975 x 15% = Rs. 1796




Other Tax Liability of Mr. A


Rs. 18,756




Add: STCG Tax


Rs. 1796




Add: 4% Cess


i.e. Rs. 20,552+4%




Total Tax Liability of Mr. A


Rs. 21,374





This is how you calculated STCG and tax towards STCG made on assets under Section 111A of the ITA. Now the STCG made on other assets is added to the person's total income and the applicable tax rate according to the income tax slab applies. For example, if Mr. Z has earned an income of Rs. 12,00,000 from sources other than Capital Gains and has also made Rs. 15,000 as STCG, then this STCG will be added to his total income and the total taxable income (Rs. 12,15,000) will be applicable as per the income tax slab.

Once you have divided up your Capital Gains into STCG and LTCG, filing them under relevant sections is also necessary. To file income from STCG, you must report them under the Schedule Capital Gains. Once you select Schedule CG, you need to select the asset types from where you have earned STCG and provide the amounts that you have received from the sale of such short-term assets less the costs. Once you have filled in the necessary details the STCG will be calculated for you and you need to confirm it and then move on to fill in other details of the ITR.

If you don’t correctly report the capital gains that you might have earned in a particular FY, you might get a notice from the Income Tax Department. Also, with the launch of AIS (Annual Information Statement), your financial transactions including the capital gains that you might have earned are mapped in the statement so if you misreport it, you might face problems in filing your ITR. And there are hefty penalties and interest that you need to pay if you skip paying taxes in a certain year.

Yes, a seller can claim a refund on TDS on the capital gains or capital loss they made during the sale of their property. Whenever a person sells an immovable property valued over Rs. 50 Lakhs, the buyer has to deduct 1% TDS on the transaction value. If the seller has made capital gains, he can invest the gains in eligible assets and be eligible to claim a refund on the tax deducted by the buyer. Even if the seller makes a capital loss, he is eligible to claim a refund on the TDS.

Section 54 of the Income Tax Act or as it is popularly known as Once in a Lifetime Exemption is the exemption from tax on Long-Term Capital Gains that an individual or HUF selling a residential property is allowed to avail. The asset sold should be a long-term capital asset and the gains should be invested in the purchase of residential property within 2 years (3 years in case the seller is constructing a house). Once the seller fulfils the required conditions then the capital gains made on the sale of the property are exempted once in the lifetime of a seller. Such capital gains exemption amount was without a cap but from 1st April 2023, the exemption amount is capped at Rs. 10 Crores.