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.
Frequently Asked Questions
STCG can only be set off against Short-Term Capital Losses (STCL). It cannot be set off against any other income, such as salary or business income.
STCG arises when an asset is held for a short duration (as defined by the Income Tax Act), while Long-Term Capital Gains (LTCG) arise when an asset is held for a longer duration. The tax rates and exemptions differ for STCG and LTCG.
Yes, cryptocurrencies are treated as capital assets. If held for less than 36 months, gains from their sale are considered STCG and taxed as per the individual’s income tax slab.
The holding period varies by asset type:
Equity Shares/Equity Mutual Funds: Less than 12 months.
Debt Mutual Funds: Less than 36 months.
Real Estate: Less than 24 months.
Other Assets: Less than 36 months.
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