The Union Budget 2025 has introduced key updates to the taxation of short-term capital gains (STCG), directly affecting individual investors, property sellers, and those investing in mutual funds. The changes aim to streamline tax compliance, ensure fairness across asset classes, and promote long-term investments.
In this guide, we break down everything you need to know about the latest STCG rules, applicable rates, exemptions, and tax-saving strategies for FY 2024–25 (AY 2025–26).
What Are Short-Term Capital Gains (STCG)?
Short-Term Capital Gains arise when an asset is sold within a short holding period, defined as:
| Asset Type | STCG Holding Period |
|---|---|
| Listed Equity Shares | 12 months or less |
| Equity-Oriented Mutual Funds | 12 months or less |
| Unlisted Shares & Foreign Shares | 24 months or less |
| Immovable Property | 24 months or less |
| Movable Assets (e.g., gold) | 24 months or less |
STCG Tax Rates for FY 2024–25
The tax rates differ based on the type of asset:
| Asset Type | STCG Tax Rate |
|---|---|
| Listed Equity Shares | 20% (earlier 15%) under revised Section 111A |
| Equity-Oriented Mutual Funds | 20% |
| Unlisted Equity Shares (including foreign shares) | As per applicable income tax slab |
| Immovable Property | As per income tax slab |
| Movable Assets (e.g., gold, antiques) | As per income tax slab |
Asset-Wise STCG Tax Treatment
1. STCG on Listed Shares
If listed shares are sold within 12 months and Securities Transaction Tax (STT) is paid, the gains are now taxed at 20% (updated from 15%) under Section 111A.
2. STCG on Mutual Funds (Equity)
Equity mutual funds held for less than 12 months attract 20% tax on short-term capital gains. STT of 0.001% continues to apply on sale transactions.
3. STCG on Property
Selling a residential or commercial property within 24 months of purchase results in short-term capital gains, which are added to your total taxable income and taxed at the applicable slab rate.
4. STCG on Hybrid Mutual Funds
If a hybrid fund has equity exposure > 65%, STCG is taxed at 20%. For equity exposure below 65%, gains are taxed as per your slab rate.
5. STCG on SIP (Systematic Investment Plan)
SIPs are taxed on First-In-First-Out (FIFO) basis. Units sold within 12 months attract 20% STCG. Long-term units (>12 months) are taxed separately under LTCG provisions.
How to Calculate Short-Term Capital Gains
Use the following method:
STCG = Sale Proceeds – (Cost of Acquisition + Related Expenses)
Example:
- Buy Price: ?100 per share
- Sell Price: ?125 per share
- Shares: 100
- Expenses (brokerage, fees): ?2,000
1. Sale Proceeds:
100 × ?125 = ?12,500 – ?2,000 = ?10,500
2. Acquisition Cost:
100 × ?100 = ?10,000
3. STCG = ?10,500 – ?10,000 = ?500
Tax Payable @ 20% = ?100
Exemptions Available on STCG
The Income Tax Act offers exemptions in certain cases:
Section 54B – Agricultural Land
If you sell agricultural land used for farming and invest in another agricultural property, STCG may be exempt.
Section 54D – Industrial Property
STCG on sale of industrial land/building is exempt if reinvested in another industrial asset within the time limit.
Tips to Minimize STCG Tax
- Hold Long-Term: Sell after 12 or 24 months (based on asset type) to benefit from LTCG’s lower tax rate.
- Invest in ELSS Funds: Equity Linked Savings Schemes (ELSS) qualify for deductions under Section 80C.
- Use Capital Losses: Offset STCG with any short-term capital losses to reduce taxable gains.
- Avoid Frequent Trading: Align your investment strategy with financial goals, not just tax savings.
Conclusion
Short-Term Capital Gains Tax in 2025 is a critical area of concern for every investor, especially those trading in equities, mutual funds, real estate, or gold. With updated rates and holding period definitions, knowing how and when to sell your assets is now more important than ever.
Proper planning, understanding exemptions under Section 54B and 54D, and evaluating your holding strategy can significantly reduce your tax burden. Whether you’re a trader, SIP investor, or property owner, staying informed is key to maximizing returns and minimizing tax outflow.
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