Section 196Capital Gainswas Section 111A in IT Act 1961

STCG on Listed Equity (STT paid) — 20%

Short-term capital gains on listed equity shares or equity-oriented MF units where STT has been paid are taxed at 20%. Gains are short-term if the asset is held for 12 months or less.

Who this applies to

Investors who sell listed shares or equity mutual funds held for 12 months or less.

Key Points

Holding period: ≤ 12 months → short-term; > 12 months → long-term (taxed under Section 198).
STCG rate of 20% is FLAT — not the slab rate — regardless of your income level.
STT (Securities Transaction Tax) must have been paid — OTC unlisted share sales do not qualify.
Short-term capital losses can be set off against STCG or LTCG but not against salary/other income.

Worked Example

Quick trade on listed shares

Scenario

Nisha buys 100 shares of TCS at ₹3,500 each in September 2026 and sells in February 2027 at ₹4,200 each. Holding period = ~5 months (STT paid on exchange).

Calculation

Purchase: 100 × ₹3,500 = ₹3,50,000
Sale: 100 × ₹4,200 = ₹4,20,000
STCG = ₹4,20,000 – ₹3,50,000 = ₹70,000

Tax: ₹70,000 × 20% = ₹14,000
Add 4% cess: ₹14,560

(No threshold exemption for STCG unlike LTCG)

Result

Nisha pays ₹14,560 tax on her ₹70,000 short-term gain. If she had waited 7 more months to cross 12 months, the gains would have been LTCG taxed at 12.5% with ₹1.25L exemption — potentially zero tax.

Related Sections

Section 198LTCG on Listed Equity (STT paid) — 12.5% above ₹1.25L

Section 197LTCG on Assets (General) — 12.5%

Section 14Heads of Income

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Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative — verify with a Chartered Accountant before filing.