What is Short Term Capital Gains Tax?
Any profit from the sale of a capital asset such as house property, land property, equity investments, gold, etc. is termed as a capital gain. If a capital asset is sold for profit within its applicable short term holding period, it is termed as short term capital gain (STCG). The tax rate applicable to these short term gains is termed as short term capital gains tax. The rate of tax applicable to short term capital gains and the short term holding period differs depending on the type of capital asset.
Short Term Capital Gains Tax Rate and Holding Period
The following are the short term capital gains tax rate for some key capital assets and the holding period for each asset*:
|Capital Asset||Holding Period for STCG||STCG Tax Rate|
|Listed Equity shares||Up to 1 year||15% of total gains|
|Unlisted Equity Shares||Up to 2 years||Income Tax slab rate|
|Equity Mutual Funds||Up to 1 year||15% of total gains|
|Exchange Traded Funds||Up to 1 year||15% of total gains|
|Non-Equity Mutual Funds||Up to 3 years||Income Tax slab rate|
|Gold Funds||Up to 3 years||Income Tax slab rate|
|Immovable Property (house/land)||Up to 2 years||Income Tax slab rate|
|Movable Property (gold/jewelry)||Up to 3 years||Income Tax slab rate|
*The list is indicative and rates are subject to periodic change. STCG Tax Rate updated as of AY 2019-20.
STCG Tax Applicability
Since capital gains tax is applicable only to the gains i.e. profits obtained from sale of capital assets, it is important to know which assets qualify as capital assets in India. Most common examples of capital assets are land, building, house property, gold, trademarks, patents, leasehold rights, machinery, etc. The following are assets that do not qualify as capital assets and thus gains from these are beyond the scope of STCG tax:
- Any consumables, stock or raw material held for the purpose of business or profession
- Personal goods held for personal use
- Agricultural land in rural India
- Special bearer bonds
- Good deposit bond issued under the Gold Deposit Scheme of 1999 or deposit certificates issued under the Gold Monetisation Scheme of 2015
- 6.5% Gold bonds (1977), 7% Gold bonds (1980) and national defence gold bonds (1980) issued by the Central Government
How to Calculate Short-term Capital Gain?
Short-term Capital Gain is calculated using the following formula:
STCG = Full Value of Consideration – (Cost of Acquisition + Cost of Improvement + Cost of Transfer)
- Full Value of Consideration is the price at which the capital asset has been sold/transferred
- Cost of Acquisition is the money spent on purchasing the capital asset
- Cost of improvement is the amount spent in making any changes to the asset before selling/transferring it. For example, the cost of renovation in the case of a house propertyCost of Transfer is the amount spent on purchasing/acquiring the capital asset
How can I Download my Capital Gains Statement for Investments?
If you want to download your Capital Gains Statement then you need to go to the investment platform you use and visit their “Reports” section. The Capital Gains Report will be listed there. You can download it in an excel file. However, if you are investing via multiple platforms, instead of downloading them separately, you can get your consolidated Capital Gains Statement from CAMS/KARVY.
How Can I Show STCG on ITR Form?
STCG is included as part of the income for the financial year under the head “Short Term Capital Gains” or “Short Term Capital Gains 15%”. They are to be used for reporting STCG as follows:
- The head “Short Term Capital Gains” refers to short term capital gains taxed as per the applicable income tax slab rate. This would include gains from property, unlisted equity shares, debt mutual funds, etc.
- The head “Short Term Capital Gains 15%” refers to short term capital gains taxed at the STCG tax rate equal to 15% of total gains. Capital assets in this category include listed equity shares, ETF (exchange traded fund) and equity-oriented mutual funds.
Tax Treatment of Capital Loss
The loss incurred from the transfer/sale of a capital asset is termed as capital loss. For the applicable financial year, Short-term Capital Loss can be set off against capital gain from transfer/sale of any other short-term capital asset in the same assessment year. Similarly, Long Term Capital Loss can be set off against capital loss from transfer/sale of any other short-term capital asset in the same assessment year. They cannot be set off against any other type of incomes. However, both Short-term and Long-term Capital Loss can be carried forward for up to 8 subsequent assessment years counted from the assessment year in which the loss was incurred.