STCG vs LTCG: Indian Capital Gains Tax Explained (FY 2025-26)

The 30-second summary

For listed Indian equity (with STT paid):

Holding Period	Tax	Rate	Exemption
< 12 months	STCG	20%	None
≥ 12 months	LTCG	12.5%	First ₹1.25L exempt per year

These rates apply to transactions on or after 23 July 2024 (Union Budget 2024 changes).

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What changed in Budget 2024?

Before 23 July 2024:

• STCG: 15%
• LTCG: 10% above ₹1L

After 23 July 2024:

• STCG: 20% (up 5pp)
• LTCG: 12.5% above ₹1.25L (rate up, exemption up)

This is a meaningful increase. A ₹10L STCG that cost ₹1.5L in tax now costs ₹2L.

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STCG (Short-Term Capital Gains)

Definition

Profit on equity shares held for less than 12 months before sale.

Rate

20% flat (Section 111A of Income Tax Act).

Example

You bought 100 shares of TCS at ₹3,200 in March 2025. You sold them at ₹3,800 in October 2025 (7 months held). Profit = (3,800 - 3,200) × 100 = ₹60,000. Tax = 20% × ₹60,000 = ₹12,000.

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LTCG (Long-Term Capital Gains)

Definition

Profit on equity shares held for 12 months or more before sale.

Rate

12.5% above the ₹1.25L exemption (Section 112A).

Example

You bought 50 shares of HDFC Bank at ₹1,400 in 2022. You sold them at ₹1,800 in 2025 (3+ years held). Profit = (1,800 - 1,400) × 50 = ₹20,000.

This is well below ₹1.25L exemption → ₹0 tax.

But if you had ₹1,80,000 in LTCG that year:

• First ₹1,25,000: exempt
• Remaining ₹55,000: taxed at 12.5% = ₹6,875

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The exemption is per FY, not per stock

The ₹1.25L LTCG exemption is combined across all your equity sales in a financial year.

If you sold 5 stocks with these LTCG amounts:

• Stock A: ₹40,000
• Stock B: ₹30,000
• Stock C: ₹20,000
• Stock D: ₹50,000
• Stock E: ₹35,000
• Total: ₹1,75,000

You don't get ₹1.25L exemption per stock. You get ONE ₹1.25L exemption for the whole year.

Taxable LTCG: ₹1,75,000 - ₹1,25,000 = ₹50,000. Tax: 12.5% × ₹50,000 = ₹6,250.

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Loss set-offs (Important!)

STCL (Short-Term Capital Loss)

• Can offset against STCG (same year)
• Can offset against LTCG (same year)
• Carry forward 8 years if unused

LTCL (Long-Term Capital Loss)

• Can ONLY offset against LTCG (cannot offset STCG)
• Carry forward 8 years

Tax loss harvesting

If you have a stock down 20%+ that you'd hold anyway, you can sell + immediately rebuy. The realized loss reduces your taxable gains.

Rules:

• The 30-day "wash sale" rule from US tax law does NOT apply in India (yet)
• You can sell on Tuesday and buy back on Wednesday — perfectly legal
• The new holding period resets, so plan around 12-month threshold

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Common scenarios

"I sold within 12 months for a small loss"

That's a Short-Term Capital Loss (STCL). Set off against any other STCG or LTCG you have this year, OR carry forward 8 years.

"I made ₹80,000 LTCG"

₹0 tax. Below the ₹1.25L exemption.

"I made ₹3L LTCG and ₹50K STCL"

• STCL of ₹50K offsets LTCG of ₹50K
• Net LTCG: ₹2.5L
• Less exemption: ₹2.5L - ₹1.25L = ₹1.25L taxable
• Tax: 12.5% × ₹1.25L = ₹15,625

"I bought IPO shares and sold on listing day"

That's STCG (held < 12 months). 20% flat rate. No exemption.

"I got bonus shares and sold within 12 months"

Bonus shares have ₹0 cost basis. Selling at any price = full STCG. But your original shares' cost basis stays the same — quirk of accounting.

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What about pre-23 July 2024 transactions?

Sales before 23 July 2024 are taxed at the OLD rates (10% LTCG, 15% STCG).

In your ITR for FY 2024-25 (filed in 2025), you'll have BOTH old and new rates depending on transaction date. Most brokers' Tax P&L reports split these correctly.

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Grandfathering (pre-Feb 2018 holdings)

If you bought equity before 1 Feb 2018, you get a special benefit:

• Cost basis = higher of (actual cost, FMV on 31 Jan 2018)
• This is to avoid taxing gains that accrued before LTCG was reintroduced

Example: You bought Infosys at ₹50 in 1999. FMV on 31 Jan 2018 was ₹1,180. You sold at ₹1,500 in 2025.

LTCG = (1,500 - 1,180) × shares = use ₹1,180 as cost, not ₹50.

This benefit only matters for very long-term holders.

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How to file (the ITR section)

Capital gains go in:

• ITR-2 for individuals (no business income)
• ITR-3 if you also have business income

Schedule CG → Items A1 to B6 for shares.

Required:

• Total sale consideration
• Cost of acquisition
• Date of purchase, date of sale
• ISIN code (your broker provides this)

Most brokers (Zerodha, Groww) provide pre-formatted Tax P&L Excel files that you can directly attach or use as a worksheet.

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How YieldIQ helps

Our Tax Report tool does all of this automatically:

1. Paste your Zerodha Tax P&L CSV (or any broker)
2. We classify each trade as STCG or LTCG
3. We aggregate per FY
4. We apply the ₹1.25L LTCG exemption
5. We auto-set off STCL against LTCG
6. We compute total tax owed
7. Pro tier: ITR-ready CSV export for your CA

Saves hours of Excel work every March.

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Disclaimer

This is general information based on Income Tax Act 1961 (as amended). Your actual tax depends on your income slab, deductions, and specific circumstances. Always consult a qualified Chartered Accountant before filing.

YieldIQ is not registered with SEBI as an investment adviser, and is not a tax advisor. This article is educational, not tax advice.