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.
Frequently asked questions
1. 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 where STT is paid, sold within 12 months of acquisition.2. 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. Sales before that day were taxed at 15%; sales on or after it are taxed at 20%.3. Is there an exemption for short-term equity gains?
No. Unlike long-term gains under s.112A (which have a ₹1,25,000 annual exemption), s.111A short-term gains have no exemption — the first rupee is taxed at 20%.4. What is the holding period that makes gains short-term?
12 months or less for listed equity assets. Hold beyond 12 months and the gain is long-term under s.112A at 12.5% after the ₹1,25,000 exemption — a far lower bill on the same gain.5. Does the 20% rate apply to debt mutual funds?
No. Debt and hybrid funds below the 65% equity threshold are not covered by s.111A. Their gains are taxed at your slab rate regardless of holding period, and indexation was removed from them on 1 April 2023.6. Can I set off short-term losses from equities?
Yes. Short-term capital losses can be set off against any capital gains in the same year, and unabsorbed short-term losses carry forward up to 8 years under s.74 — in contrast to VDA losses, which can only be set off against VDA gains in the same year.---
Last verified: 2026-08-05 (FY 2025-26 / AY 2026-27)
Sources: s.111A, Income-tax Act, 1961, as amended by the Finance (No. 2) Act, 2024 (20% w.e.f. 23-07-2024); s.112A (LTCG 12.5%, ₹1,25,000 exemption); s.74 (carry-forward of capital losses); s.48 (computation); s.111A surcharge cap per the Finance (No. 2) Act, 2024; Income-tax Act, 2025 renumbering (s.111A → s.196). Rates cross-checked against the FY 2025-26 tax config used across harunraaj.com tools. For a holding-period strategy before you sell, book a consultation at harunraaj.com.
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