Short Term Capital Gains Tax

Short Term Capital Gains Tax meaning:

 The gain or profit from the sale of assets is classified as a capital gain. The tax for this capital gain needs to be paid in the year that the asset transfer takes place. So, what is Short Term Capital Gains Tax? STCG or Short Term Capital Gains Tax is the tax levied on profits generated from the sale of an asset which is held for a government-defined short period is called short-term capital gains tax. The short term period differs for various items; for example, for immovable property such as land, building, and house property, the holding period was reduced in FY 2017-18 from 36 months or less to 24 months or less, to deem it as “short term.”

How is short term capital gains calculated?

After taking the full value of the asset into account, deduct the expenditures incurred in connection with the transfer. Also, deduct the cost of acquisition and improvement costs. The leftover amount is a short-term capital gain, which will then be taxed under STCG.


Assets that attract Short Term Capital Gains Tax:

The below-mentioned assets, when held for 12 months or less, are considered short-term capital assets:

  • Short Term Capital Gains Tax on shares: Equity and preference shares in a company which are listed on NSE or BSE or any other recognized stock exchange
  • Securities such as debentures, bonds, govt securities, etc. which are listed on the stock exchange in India
  • Units of UTI, even if not quoted.
  • Zero-coupon bonds both unquoted and quoted.


What is Short Term Capital Gains Tax rate?

Once the period of holding for various assets is defined for categorization as “short term,” one has to look at the tax rates that apply. For instance, the government may choose to apply 15%* short term capital gains tax when securities transaction tax is applicable. Similarly, when securities transaction tax is not applicable, the short-term capital gain is added to the income tax return, and the taxpayer is taxed according to their income tax slab.


Short Term Capital Gains Tax rate in case of inheritance/gifts/wills:

A capital gains tax is not levied on an inherited property since it is just a transfer of ownership and not an actual sale. However, if the asset is sold after inheriting it, capital gains tax will be applicable, the duration for which will also count the ownership period of the previous owner.

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