Short Term Capital Gains Tax (STCG)

Short term capital gain is the gain (profit) arising from transfer of a capital asset that the assessee was holding for period less than 36 months.  However, in select cases, the upper ceiling of period is  12 months only for treating  such assets  as short term capital assets.  The tax arising on the gain from the transfer of a short term capital asset is called Short Term Capital Gains Tax (STCG). Gains arising from capital assets held for periods more than 36 months/12 months, as the case may be will be treated as long term capital assets and the gains thereon will be treated as long term capital gains.  

Which assets can be treated as capital assets aby holding more than 12 months?

The following assets will be treated as short term assets only if that was hold for period less than 12 months.   

1) Equity or preference shares in a company (listed in recognised stock exchange in India) 
2) Securities (like debentures, bonds, Government securities, derivatives etc.) listed in recognised stock exchange in India 
3) Unit of UTI (whether quoted or not)
4) Units of equity oriented fund (whether  quoted or not) 
5) Zero coupon bonds (whether quoted or not)

Unlisted shares of a company, can be considered as short term  if held  for a period less than  24 months.  
Equity oriented mutual fund means a mutual fund specified under section 10(23D) and 65% of its investible funds out of total proceeds are invested in equity shares of a domestic company.

What is the present rate of tax for Short Term Capital Gains (STCG)?

Capital gain arising on transfer of a short term capital asset is short term capital gain. Short term capital gain is included in the gross taxable income like other sources of income and normal rates of tax apply, which depend on the gross taxable income from all sources including short term capital gains. 
However, short term capital gains from sale of equity shares or units of equity oriented mutual fund schemes is an exception. In this case, short term capital gains are taxed at a flat rate of 15% plus applicable cess(s), irrespective of the tax slab on other sources of income, provided securities transaction tax is paid on such sale.

Example for Short Term Capital Gain (STCG)

In August, 2017 Mr. Pranab sold his residential house property for Rs. 60,00,000 which was purchased in May, 2016 for Rs. 55,00,000. Capital gain on the sale is Rs. 5,00,000. In this case the gain is a se property is a short-term capital gain and Rs. 5,00,000 will be included along with other incomes and tax will be charged at normal rate of tax. 

How is Short Term Capital Gain calculated? 

STCG on account of short term capital asset can be calculated as shown below:

Mr. Devesh,  a salaried employee purchased gold worth Rs. 6,50,000 in November, 2015  and sold the same in October, 2016 for Rs. 7,00,000. At the time of sale of gold, he paid brokerage of Rs. 5,000.  What is the capital gain?

Gold purchased in November, 2015 was sold in October, 2016 after holding for a period of 11 months, which is less than 36 months. Hence, the gain is a short-term capital gain and can be computed as shown below: