Short-Term Capital Gains (STCG) Tax in India: Rate, Rules, and How to Reduce It
STCG on listed equities is taxed at a flat 20% with no exemption limit. Here's how the rules work — and how loss harvesting can bring your tax down.
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What is STCG tax in India?
Short-term capital gains tax applies to profits from selling listed equity shares or equity-oriented mutual funds that you held for 12 months or less. Unlike long-term gains, there is no exemption threshold — every rupee of short-term gain is taxable.
| STCG Amount | Tax Rate |
|---|---|
| All STCG on listed equity | 20% flat (no exemption) |
Unlike LTCG, there is no annual exemption for STCG. Every rupee of short-term gain is taxable. This makes loss harvesting the primary strategy for reducing your STCG tax bill.
How to reduce your STCG tax: loss harvesting
Since STCG has no exemption limit, the most effective way to reduce your short-term tax is to offset gains with losses. This is called loss harvesting: deliberately selling positions that are in the red to realize losses that reduce your net taxable gain.
Short-term losses are especially powerful because they can offset both STCG and LTCG — giving you maximum flexibility in how you apply them.
Example
You have Rs 1.5 lakh in STCG this FY. You also hold stocks with Rs 60,000 in unrealized short-term losses.
If you sell the losing stocks, your net STCG drops to Rs 90,000.
Tax saved: Rs 12,000 (20% of Rs 60,000).
How losses reduce your STCG tax
Your STCG tax is calculated on net gains, not gross gains. But not all losses can offset STCG — the rules depend on whether the loss is short-term or long-term.
Short-Term Capital Loss (STCL)
Can offset both STCG and LTCG — the most flexible type of loss.
Long-Term Capital Loss (LTCL)
Can only offset LTCG. Cannot be used against short-term gains.
Example
You have Rs 2 lakh in STCG. Your portfolio also has Rs 50,000 in short-term losses and Rs 30,000 in long-term losses.
STCL offsets STCG: Rs 2L - Rs 50K = Rs 1.5L STCG remains.
LTCL cannot offset STCG. It can only offset LTCG.
Tax on Rs 1.5L STCG: Rs 30,000 (20%). Without harvesting: Rs 40,000.
See the full picture of offset rules on the tax loss harvesting guide.
How your STCG is actually calculated (FIFO method)
India uses the FIFO method: when you sell shares, the first shares you bought are treated as sold first. This determines both the gain amount and whether the transaction qualifies as short-term or long-term.
If you've made multiple purchases of the same stock at different times and prices, some lots may be short-term while others are long-term. FIFO determines which lots are sold first — and therefore which tax rate applies.
TaxHarvestLab does this automatically from your Zerodha or Groww tradebook, so you see the correct short-term vs. long-term split before deciding to sell.
What this page covers — and what it doesn't
This guide covers listed equities and equity-oriented mutual funds only — the asset class most retail investors hold through Zerodha or Groww. Different rules apply to:
- Unlisted sharesDifferent rates and holding period requirements
- Debt mutual fundsTaxed as per income slab, not at 20%
- Real estateSeparate capital gains rules with different thresholds
- Gold and sovereign gold bondsDifferent holding period and tax treatment
See which short-term positions to act on before March 31
TaxHarvestLab identifies your short-term losses, calculates the tax impact of harvesting them, and shows exactly which positions to sell to reduce your STCG tax.
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Common STCG questions
Is there any exemption for STCG in India?
No. Unlike LTCG (which has a Rs 1.25 lakh annual exemption), STCG on listed equities is taxed at a flat 20% from the first rupee of profit. There is no threshold or exemption limit.
Can short-term losses offset long-term gains?
Yes. Short-term capital losses (STCL) can offset both STCG and LTCG, making them the most flexible type of capital loss. This is why loss harvesting short-term positions can be especially valuable.
What is the holding period for STCG on listed shares?
12 months or less. If you sell listed equity shares or equity-oriented mutual fund units within 12 months of purchase, the gain or loss is classified as short-term. Shares held for more than 12 months qualify as long-term.
Can STCG losses be carried forward?
Yes. Short-term capital losses can be carried forward for up to 8 assessment years, provided you file your income tax return on time. Carried-forward STCL can offset both STCG and LTCG in future years.
From the Blog: STCG Tax & Loss Harvesting
What Is Tax Loss Harvesting?
The complete beginner's guide
Set-Off Rules for Capital Gains
Which losses offset which gains
STCG vs LTCG Tax Rates Compared
Side-by-side comparison for FY 2025-26
Wash Sale Risk in India
What to watch when rebying after harvest
Tax Loss Harvesting: Real Examples
Step-by-step with actual numbers
FIFO Method for Shares in India
How purchase lots determine your tax