Short Term Capital Gains Tax: Rates, Exemption, Calculation, and Examples

Short-term capital gains tax (STCG) is a key consideration for individuals and businesses engaging in asset sales. In India, the tax treatment varies based on the type of asset and the taxpayer’s income slab. This article provides a comprehensive overview of STCG tax rates, exemptions, calculation methods, and practical examples, ensuring a clear understanding of its impact on financial planning.

Updates on Short Term Capital Gains in Budget 2025

Proposal	Details
ULIPs Taxation	ULIPs with premiums exceeding 10% of the policy’s sum assured or annual premiums above ₹2.5 lakh will be treated as capital assets. Income from redemption will be taxed as capital gains.
Amendment to Section 2(14)	Clarification that securities held by investment funds under Section 115UB will be treated as capital assets.

Also Read: Union Budget 2025

Short Term Capital Gains Highlights

When you’ve held an asset for less than 24 months, you can calculate your capital gains under two different methods: the Old Regime and the New Regime. Let’s compare both to see which might work better for you.

Aspect	Old Regime	New Regime
Tax Rate	Applicable income tax slab rate of the individual	Applicable income tax slab rate of the individual
Holding Period	Less than 24 months	Less than 24 months
Indexation Benefits	Yes	No

Also Read: Understanding Capital Gain Tax on Sale of Property in India

What Is a Short-Term Capital Gain on Property?

When you sell immovable property (land or buildings) within 24 months or movable property within 36 months of acquiring it, any profit you make is called a short-term capital gain. This gain is usually taxed at the individual’s income tax slab rate.

You can calculate the short-term capital gain using the formula:

Short-Term Capital Gain = Sale Value of Property 
                         – (Cost of Acquisition + Cost of Improvement + Expenses Incurred)

• Sale Value: The price at which you sold the property.
• Cost of Acquisition: The amount you originally paid to acquire the property.
• Cost of Improvement: Any capital expenses you incurred to enhance or improve the property.
• Expenses Incurred: This can include costs like brokerage fees, legal fees, and other charges directly related to selling the property.

Check: Long-Term Capital Gains Tax on Sale of Property Calculator

Properties Considered Short-Term Capital Assets

Short-Term Immovable Capital Assets
1. Buildings
2. Lands
3. Houses
4. Residential Units
5. Agricultural Land (barring certain exemptions for rural land)

Read More: Can We Construct a House on Agricultural Land?

Short Term Capital Gains with Indexation Example

Mr. Rajesh Sharma, a resident of Mumbai, purchased a residential property in September 2022 for ₹30,00,000. Over the years, the property appreciated in value due to the city’s booming real estate market. Here are the transaction details:

Property Purchase Details:

• Purchase Price: ₹30,00,000
• Year of Purchase: September 2022

Property Sale Details:

• Sale Price: ₹90,00,000
• Date of Sale: June 2024

Steps	Formula	Calculation	Result
Calculate the CII	CII of sale year/ CII of purchase year	363/ 331	1.096
Inflation Adjusted Price	Purchase Price*Indexation Factor	₹30,00,000 * 1.096	₹32,88,000
Profit/ Short Term Capital Gains	Sale Price – Inflation Adjusted Price	₹90,00,000 – ₹32,88,000	₹57,12,000
Short Term Capital Gains Tax	Profit * 5%	₹57,12,000 * 5%	₹2,85,600

Also Read: Effective Strategies to Save Tax on Long-Term Capital Gains

Tax Exemptions on Short Term Capital Gains

Short-Term Capital Gain (STCG) exemptions are available under Section 54B and Section 54D of the Income Tax Act.

• Section 54B applies to gains from the sale of agricultural land (used for agricultural purposes). The exemption is available if the proceeds are reinvested in purchasing another agricultural land.
• Section 54D applies to gains from the sale of industrial land or buildings used for industrial purposes. The exemption is available if the proceeds are reinvested in purchasing another industrial property.

Also Read: Section 54B of the Income Tax Act 2025 Updates

Conclusion

If you’re looking to invest in property, our team is here to assist you every step of the way. Choosing Credit Dharma for your home loan simplifies the process. We offer expert advice and personalized assistance to make everything hassle-free. You’ll receive timely updates on your loan application and disbursement progress.

From the initial application to the final disbursement, we provide comprehensive support. Enjoy clear and honest communication at every stage, with no hidden surprises.

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