STCG rate on equities is now 20% (not 15%): the Finance Act 2024 change no salary earner expected
Short-term capital gains on listed equity and equity mutual funds are taxed at 20% under s.111A for sales on or after 23 July 2024 — up from 15%. Asset coverage, holding-period rule, and a worked NIFTY 50 ETF example.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Short-term capital gains on listed equity shares, equity-oriented mutual funds, and units of business trusts are taxed at 20% under s.111A of the Income-tax Act, 1961 for transfers made on or after 23 July 2024 — up from 15%. The Finance (No. 2) Act, 2024 raised the rate with immediate effect from the Budget date, not from a new financial year, and most salaried taxpayers who trade through a demat account only noticed when their first post-cutover sale was taxed. The holding-period test did not change: an asset held for 12 months or less produces short-term gains, and there is no exemption in front of the 20% rate.
Staleness alert: Broker portals, tax blogs, and even some calculators still quote 15% STCG on equities. That rate applied only to sales before 23 July 2024. If you sell within 12 months of buying in FY 2025-26, the rate is 20%, and no ₹1.25 lakh cushion exists for short-term gains.
At a glance: the STCG rate table
The right-hand column is the current law for FY 2025-26 (AY 2026-27). The last row matters: not every fund is an equity fund. Debt mutual funds, hybrid funds below the 65% equity threshold, and international funds do not qualify for s.111A — their gains are taxed at your slab rate, and their holding-period test is different (24 months for long-term under the general rules, and indexation was removed for them from 1 April 2023). Do not assume "it is a mutual fund" tells you the rate; the asset class inside the fund decides it.
What changed: the before/after diff
Three points worth internalising:
- The change applies by sale date. Buy in March 2024 and sell in June 2024 — 15%. Buy in August 2024 and sell in May 2025 — 20%. The date of transfer fixes the rate.
- No basic-exemption shelter. Unlike long-term gains under s.112A, s.111A short-term gains get no ₹1.25 lakh exemption and no use of the basic exemption limit for a resident. The first rupee of STCG is taxed at 20%.
- Surcharge is capped. On capital gains chargeable under s.111A and s.112A, surcharge is capped at 15% even when total income crosses the ₹50 lakh / ₹1 crore thresholds — so a large short-term trading profit does not attract the 25% or 37% surcharge that ordinary income faces.
Why the rate hike stings more than the LTCG one
The LTCG move (10% → 12.5%) came bundled with a higher exemption (₹1,00,000 → ₹1,25,000), which softens the impact for small portfolios. The STCG move is a pure increase: 15% → 20% is a 5 percentage-point rise on every short-term gain, with no offsetting relief. On a ₹1,00,000 short-term gain the tax jumps from ₹15,000 to ₹20,000 — an extra ₹5,000 before cess. For an active trader churning positions inside a year, this compounds quickly and is one of the least-announced changes of the 2024 restructure.
Worked example: Rohan trades a NIFTY 50 ETF
Persona: Rohan, salaried resident individual, FY 2025-26.
Facts:
- Bought ₹5,00,000 of a NIFTY 50 ETF on 1 September 2025
- Sold it on 30 June 2026 — that is 10 months, well inside 12
- Sale consideration: ₹6,50,000; STT paid on both legs
Step 1 — Confirm the head. Held 10 months ≤ 12 months → short-term under s.111A. No exemption applies.
Step 2 — Compute the gain.
₹6,50,000 − ₹5,00,000 = ₹1,50,000 short-term capital gain.
Step 3 — Tax at the current 20% rate.
₹1,50,000 × 20% = ₹30,000, plus 4% health & education cess = ₹31,200 total.
Step 4 — What it would have been at 15%.
₹1,50,000 × 15% = ₹22,500, plus cess = ₹23,400.
The rate rise costs Rohan ₹7,800 (₹31,200 − ₹23,400) on a ₹1.5 lakh gain. Reproduce it in the Capital Gains Calculator 2025: the tool applies the post-23-July-2024 rate automatically.
Had Rohan held the ETF one day past 12 months, the gain would instead be long-term under s.112A: ₹1,50,000 minus the ₹1,25,000 exemption = ₹25,000 taxable at 12.5% = ₹3,125 (₹3,250 with cess). Holding across the 12-month line is the single biggest lever in this calculation — the same economic gain costs ₹31,200 if short-term versus ₹3,250 if long-term.
Filing and documentation points
When you report s.111A gains in ITR-2 / ITR-3 for AY 2026-27:
- Keep contract notes showing the STT line item on both purchase and sale — STT payment is a precondition for the s.111A rate.
- Report STCG and LTCG on separate lines in Schedule CG. They are charged at different rates (20% vs 12.5%) and the utility computes each independently.
- Reconcile against Form 26AS / the Annual Information Statement so the pre-filled figures match your broker statement. The department's system auto-matches, and a mismatch can trigger a s.143(1) intimation.
- Losses: short-term capital losses can be set off against other capital gains and unabsorbed losses can be carried forward up to 8 years under s.74 — unlike VDA losses, which cannot be set off outside the VDA class.
ITA 2025 transition note
Under the Income-tax Act, 2025 (Tax Year 2026-27 onward), s.111A → s.196 and s.112A → s.198. The 20% STCG and 12.5% LTCG rates carry over unchanged. See the ITA 2025 section map.
See Also
Frequently Asked Questions
What is the STCG rate on equities for FY 2025-26?
20% under s.111A for listed equity shares, equity-oriented mutual fund units, and units of business trusts with STT paid, held for 12 months or less. The rate was raised from 15% by the Finance (No. 2) Act, 2024.
When did the STCG rate change from 15%?
23 July 2024. The Finance (No. 2) Act, 2024 raised the rate with effect from the Budget date, not from a new financial year. Sales before 23 July 2024 were taxed at 15%; sales on or after that date are taxed at 20%.
Is there any exemption for short-term capital gains?
No. There is no exemption threshold in front of the 20% STCG rate. Unlike LTCG (which has a ₹1,25,000 annual exemption under s.112A), short-term gains on listed equity are taxed from the first rupee at 20%.
What holding period makes equity gains short-term?
12 months or less. If you sell listed equity shares within 12 months of purchase, the gain is short-term and taxed at 20% under s.111A. If you hold for more than 12 months, the gain qualifies as long-term (12.5% under s.112A with ₹1,25,000 exemption).
Do I need to report STCG in my ITR?
Yes. STCG under s.111A must be reported in the Capital Gains schedule of your ITR. Brokerage platforms report these transactions to the tax department via AIS, and the figures should match your ITR. Any mismatch triggers a notice.
Related Services
Based on this article's category and vertical tag, these services are the most relevant next steps.
Go deeper with our hub guides
Statute-cited, section-by-section guides covering the same ground this article does.
Need help with this?
Our team handles the paperwork. You focus on your business.