Home > Topics > Income Tax > Computation of Short-Term Capital Gains – Format & Problems
← PreviousNext →

Computation of Short-Term Capital Gains – Format & Problems

Sold stocks after 6 months, made ₹5 lakh profit! Tax? ₹75,000 (15%). Same profit from gold? Tax could be ₹1.5 lakh (30%)! Let's decode STCG.

What is Short-Term Capital Gain (STCG)?

Gain from sale of capital asset held for less than specified period:

📈
< 12 months
Listed Equity
🏠
< 24 months
Property
💎
< 36 months
Debt Funds
🏢
< 24 months
Unlisted Shares

Standard Computation Format

Short-Term Capital Gains - Format

Full value of consideration (Sale Price)₹XXX
Less: Less: Expenses on transfer (brokerage, legal)(₹XXX)
Net Consideration₹XXX
Less: Less: Cost of Acquisition (NO indexation)(₹XXX)
Less: Less: Cost of Improvement (NO indexation)(₹XXX)
Short-Term Capital Gain₹XXX

Key Difference from LTCG: NO INDEXATION for STCG!

Tax Rates on STCG

1. Listed Equity Shares & Equity Mutual Funds (Section 111A)

Conditions:

  • STT paid on both purchase and sale
  • Listed on recognized stock exchange

Tax Rate: 15% (flat) + 4% cess = 15.6%

No slab rates, dividend income not included!

2. Other Assets

Tax at normal slab rates:

  • Added to total income
  • Taxed at 0%, 5%, 10%, 20%, or 30% (as per slab)

Assets: Unlisted shares, property, gold, debt funds, bonds

Example 1: Listed Equity Shares (STT Paid)

Rahul bought & sold Reliance shares:

Details:

  • Purchase: Jan 2024, 500 shares @ ₹2,500 = ₹12,50,000
  • Brokerage on purchase: ₹1,000
  • STT on purchase: ₹250
  • Sale: August 2024, 500 shares @ ₹3,000 = ₹15,00,000
  • Brokerage on sale: ₹1,500
  • STT on sale: ₹300
  • Holding: 7 months (STCG)

Rahul - STCG on Equity

Sale consideration₹15,00,000
Less: Less: Brokerage on sale(₹1,500)
Net sale consideration₹14,98,500
Less: Less: Purchase cost(₹12,50,000)
Less: Less: Brokerage on purchase(₹1,000)
Short-Term Capital Gain₹2,47,500

Tax: ₹2,47,500 × 15% = ₹37,125 (+ 4% cess = ₹38,608)

Note: STT paid separately, not included in cost

Example 2: Unlisted Shares (No STT)

Priya sold shares of private company:

Details:

  • Purchase: March 2023 for ₹5,00,000
  • Sale: January 2024 for ₹8,00,000
  • Holding: 10 months (STCG)
  • Priya's other income: ₹12,00,000

Priya - STCG on Unlisted Shares

Sale price₹8,00,000
Less: Less: Cost of acquisition(₹5,00,000)
Short-Term Capital Gain₹3,00,000

Tax Calculation:

  • Other income: ₹12,00,000
  • STCG: ₹3,00,000
  • Total Income: ₹15,00,000

Tax (using slabs):

₹0-3L: NIL
₹3L-6L: ₹15,000
₹6L-9L: ₹30,000
₹9L-12L: ₹60,000
₹12L-15L: ₹90,000
Total: ₹1,95,000

Effective on STCG portion: Higher slab (30%)! So ₹3L × 30% = ₹90,000

Example 3: Property (Land) - Less than 24 Months

Mr. Verma sold agricultural land (capital asset for him):

Details:

  • Purchase: May 2023 for ₹20,00,000
  • Stamp duty: ₹40,000
  • Sale: March 2024 for ₹28,00,000
  • Brokerage: ₹50,000
  • Holding: 10 months (STCG - property < 24 months)

Mr. Verma - STCG on Land

Sale price₹28,00,000
Less: Less: Brokerage(₹50,000)
Net consideration₹27,50,000
Less: Less: Purchase cost(₹20,00,000)
Less: Less: Stamp duty(₹40,000)
Short-Term Capital Gain₹7,10,000

Tax: At slab rates (added to total income)

If Mr. Verma in 30% bracket: ₹7,10,000 × 30% = ₹2,13,000

Example 4: Gold - Physical Gold

Mrs. Sharma sold gold jewelry:

Details:

  • Purchase: January 2023 for ₹8,00,000
  • Sale: October 2023 for ₹10,00,000
  • Holding: 9 months (STCG)

Mrs. Sharma - STCG on Gold

Sale price₹10,00,000
Less: Less: Cost(₹8,00,000)
Short-Term Capital Gain₹2,00,000

Tax: At slab rates (say 20% bracket) = ₹2,00,000 × 20% = ₹40,000

Example 5: Debt Mutual Fund

Amit sold debt mutual fund:

Details:

  • Purchase: June 2023, 10,000 units @ ₹50 = ₹5,00,000
  • Sale: December 2023, 10,000 units @ ₹58 = ₹5,80,000
  • Holding: 6 months (STCG for debt)

Amit - STCG on Debt Fund

Sale proceeds₹5,80,000
Less: Less: Cost(₹5,00,000)
Short-Term Capital Gain₹80,000

Tax: At slab rates (added to income)

Comparison: STCG Tax Rates

Section 111A (Listed Equity with STT)

  • Tax rate: 15% flat
  • Not added to slab income
  • Applies to equity shares, equity MF
  • STT must be paid
VS

Other STCG (Slab Rates)

  • Tax rate: 0-30% (slab)
  • Added to total income
  • Property, gold, unlisted, debt
  • Can push to higher bracket

Comparison Table

AssetHolding for STCGTax RateIndexation?
Listed Equity (STT paid)< 12 months15% flat❌ No
Unlisted Shares< 24 monthsSlab rates❌ No
Property< 24 monthsSlab rates❌ No
Gold/Jewelry< 36 monthsSlab rates❌ No
Debt Mutual Funds< 36 monthsSlab rates❌ No

Set-Off of STCG Loss

STCG Loss can be set off against:

  • STCG ✅
  • LTCG ✅

Example:

  • STCG loss from equity: (₹2,00,000)
  • LTCG from property: ₹5,00,000
  • Net LTCG: ₹3,00,000 (loss adjusted!)

Carry Forward: Unadjusted loss can be carried forward for 8 years

Practice Problem

Calculate STCG:

Suresh sold:

  1. TCS shares (listed, STT paid): Bought ₹3L (6 months ago), sold ₹4.5L
  2. Gold: Bought ₹2L (8 months ago), sold ₹2.8L

His salary: ₹8L

Solution:

TCS Shares:

TCS Shares STCG

Sale₹4,50,000
Less: Less: Cost(₹3,00,000)
STCG₹1,50,000

Tax on equity: ₹1,50,000 × 15% = ₹22,500

Gold:

Gold STCG

Sale₹2,80,000
Less: Less: Cost(₹2,00,000)
STCG₹80,000

Gold added to salary: ₹8L + ₹80k = ₹8.8L

Tax on gold portion: ₹80,000 × 20% (marginal rate) = ₹16,000

Total tax: ₹22,500 + ₹16,000 = ₹38,500 (on STCG only)

Summary

  • STCG: Asset held less than specified period (12/24/36 months)
  • No indexation for STCG (unlike LTCG)
  • Listed equity (STT): 15% flat rate (Section 111A)
  • Other assets: Slab rates (0-30%) - added to total income
  • Calculation: Sale price - Expenses - Cost (actual, no indexation)
  • Set-off: STCG loss can be set off against STCG + LTCG
  • Carry forward: Unabsorbed loss for 8 years
  • Key advantage of equity: 15% flat vs 30% slab rate!

Quiz Time! 🎯

Test Your Knowledge

Question 1 of 5

1. For listed equity shares, holding period for STCG is:

< 6 months
< 12 months
< 24 months
< 36 months

Next Chapter: Income from Other Sources! 💰

← PreviousNext →