Short-Term Capital Gains Tax on Shares and Mutual Funds (FY 2026-27)

Surcharge (if applicable) and 4% cess are added. The 20% rate applies to transfers from 23 July 2024 and is unchanged for FY 2026-27. Long-term gains on equity are taxed at 12.5% above ₹1.25 lakh a year. See our overview of capital gains tax in India.

STCG = sale value − (purchase cost + transfer expenses)

• Transfer expenses include brokerage, exchange charges and stamp duty. STT is not deductible.
• For demat shares, the holding period and cost follow first in, first out: the oldest units are treated as sold first.
• For mutual funds, each SIP instalment is a separate purchase with its own 12-month clock. Selling a year-old SIP portfolio can produce both short- and long-term gains.

Example: you have a salary of ₹15 lakh and sell shares bought eight months ago for a gain of ₹1,00,000. The STCG tax is 20% = ₹20,000 plus 4% cess = ₹20,800, charged on top of the tax on your salary at slab rates.

• Unused basic exemption: a resident whose other income is below the basic exemption limit can use the unused part against STCG taxed at 20%.
• Rebate: the section 87A rebate (income up to ₹12 lakh tax-free under the new regime) doesn't cover tax on gains taxed at special rates like this 20%. Someone with ₹10 lakh salary and ₹1 lakh STCG still pays tax on the gain.
• Loss set-off: short-term capital losses can be set off against both short- and long-term gains. Unused losses carry forward for 8 years, but only if you file your return by the due date.
• Tax-loss harvesting: booking a loss on a weak holding before 31 March can offset gains booked earlier in the year.

Trading results aren't STCG:

• Intraday equity trades are speculative business income, taxed at slab rates. Losses can only be set off against speculative income.
• Futures and options are non-speculative business income, taxed at slab rates, with expenses deductible and a possible tax audit depending on turnover.

Arbitrage and frequent short-term trading can also be treated as business income if it looks like a business, so be consistent from year to year. If you have trading income you file ITR-3, not ITR-2. Mixing these up is a common reason for defective-return notices.

• Return form: ITR-2 if you have capital gains and no business income; ITR-3 if you also trade or run a business. ITR-1 can't be used for these gains. The due date for ITR-2 is 31 July.
• Schedule CG: the broker's and fund house's capital gains statements give the figures. Match them with the AIS, which shows sales reported by brokers and registrars.
• Advance tax: tax on capital gains counts for advance tax, but because gains can't be predicted, there's no interest if you pay it in the instalments after the gain arises. Pay it by the next instalment date. See how to pay advance tax.

Check that the documents for your return are ready using documents required to file an ITR. TaxQue's ITR-2 filing service reconciles broker statements with AIS and files the capital gains schedules for you.