Capital Gains · Limits
Short Term Capital Gain Tax Exemption Limit (India, 2026)
People search for the short term capital gain exemption limit expecting a figure like the one that exists for long term gains. The honest answer is that short term gains do not have their own flat exemption the way long term equity gains do. What does exist is the basic exemption limit, which can absorb some gains for a resident with low other income. This guide explains how short term gains are taxed, what relief is actually available, and how it differs from the long term exemption.
- No dedicated STCG exemption: short term gains do not have a flat exempt amount like long term equity.
- Equity STCG: taxed at the flat 111A rate (raised for transfers on or after 23 July 2024; confirm).
- Other assets: short term gain is added to income and taxed at your slab.
- Basic exemption relief: a resident with low other income can set the unused basic exemption against gains.
- Long term equity: gains up to Rs 1.25 lakh a year are exempt under 112A (confirm).
- ITR: capital gains go in ITR-2 (or ITR-3 with business income), not the simplest form.
01How short term capital gains are taxed
Short term capital gain (STCG) is the profit on an asset you sold within the short term holding period for that asset. How it is taxed depends on the asset.
- Listed shares and equity mutual funds (with STT): taxed at a special flat rate under section 111A. For transfers on or after 23 July 2024 this rate was raised, so confirm the rate for your sale date.
- Other assets (property, gold, debt funds, unlisted shares): short term gain is added to your income and taxed at your normal slab rate.
So the first question is always: what asset, and when did you sell it? That decides the rate. For the long term side of this, see the long term capital gains tax rate.
02Is there a short term exemption limit?
Here is the point people are really asking about. Unlike long term equity gains, short term capital gains do not have a separate flat exemption amount. There is no "first Rs X of STCG is tax free" rule of the kind that applies to long term equity.
What you do get is:
- The ordinary deductions and the basic exemption limit that apply to your total income (subject to the rules below).
- No special STCG carve out beyond that.
The honest answer
If you were hoping for a fixed short term exemption like the long term one, there is not one. The relief for short term gains comes mainly from the basic exemption limit, and only for a resident whose other income is low enough to leave room.
03The basic exemption limit relief
A resident individual (and a resident HUF) gets one useful relief: if your other income is below the basic exemption limit, the unused part of that limit can be set against your capital gains, including short term gains under 111A.
- If your normal income is below the basic exemption limit, the shortfall can be used to reduce the gains that are taxed.
- This benefit is for residents. A non resident cannot adjust 111A gains against the basic exemption limit this way.
- The limit itself differs between the old and new regimes, so the room available depends on which regime you are in.
So a retiree or a person with little other income can often shelter a meaningful amount of short term gain simply by using the basic exemption limit, even though there is no dedicated STCG exemption.
04Short term versus long term exemption
The contrast with long term gains is where the confusion comes from.
| Point | Short term (STCG) | Long term equity (LTCG 112A) |
|---|---|---|
| Dedicated exemption amount | none | gains up to Rs 1.25 lakh a year exempt |
| Rate on equity (with STT) | flat 111A rate (confirm for sale date) | 12.5 percent above the exempt amount (confirm) |
| Basic exemption adjustment | available to residents | available to residents |
| Other assets | taxed at slab | special long term rate rules |
In short, the Rs 1.25 lakh exemption belongs to long term equity gains, not short term ones. People often transplant it to STCG, which is the mistake. For the exemption on reinvesting property gains, see capital gain exemption under section 54.
05Which ITR form and how to report
Capital gains cannot be reported in the simplest return. If you have capital gains, you generally file ITR-2 (or ITR-3 if you also have business income).
- Report each gain with the asset, dates of purchase and sale, and cost.
- Keep broker statements, the capital gains statement from your fund house, and property documents.
- Match your figures to the annual information statement (AIS) so there is no mismatch.
Getting the holding period and the correct section right is where most errors happen, because the rate and any relief turn on it.
There is no magic short term exemption number. Get the asset, the holding period and the sale date right, then use the basic exemption limit if you are a resident with room to spare.
06How Claw Tax helps
Claw Tax and Accounts is an online tax, GST and accounting service for India that connects you with a verified chartered accountant at a fixed, published price, with a Claw reviewer checking every filing before it is submitted.
If your only capital gain is a small, clearly short term equity sale, the figures from your broker make self filing possible. Claw Tax is for when there are many trades, a property or gold sale, a mix of short and long term, or you want the basic exemption adjustment and the correct sections applied so the return is right and matches your AIS.
A verified chartered accountant can compute your capital gains, apply any relief, pick the correct ITR form and file it at a fixed, published price (a capital gains ITR starts from Rs 2,499, see the page), with a Claw reviewer checking it and reminders before the due date. See the services and prices at clawlaw.in/tax.
This is general information, not tax advice; a verified CA handles the specifics of your case.
07Frequently asked questions
What is the short term capital gain tax exemption limit in India?
There is no dedicated flat exemption for short term capital gains the way there is for long term equity gains. Short term gains on listed equity are taxed at the special 111A rate, and on other assets at your slab. The main relief is the basic exemption limit, which a resident with low other income can set against the gains.
Can I set the basic exemption limit against short term gains?
Yes, if you are a resident individual or HUF and your other income is below the basic exemption limit, the unused part can be set against your capital gains, including short term gains under section 111A. This relief is not available to non residents. The limit itself differs between the old and new regimes, which affects the room available.
What is the long term capital gain exemption limit?
For listed equity and equity mutual funds taxed under section 112A, long term gains up to Rs 1.25 lakh in a financial year are exempt, with the balance taxed at the special long term rate, for transfers on or after 23 July 2024 (the earlier figures were Rs 1 lakh and a lower rate). Confirm the exact amount and rate for your sale date.
Why do people confuse the short term and long term exemptions?
Because the Rs 1.25 lakh exempt amount is well known, many assume it also applies to short term gains. It does not. That exemption belongs only to long term equity gains under 112A. Short term gains have no equivalent carve out, and transplanting the long term figure to a short term gain is a common and costly mistake.
How are short term capital gains on property taxed?
Short term gains on property, gold, debt funds and unlisted shares are not taxed at a special flat rate. The gain is added to your total income and taxed at your normal slab rate. The special 111A rate applies only to listed shares and equity mutual funds on which securities transaction tax was paid.
Which ITR form do I use for capital gains?
You cannot report capital gains in the simplest return. If you have capital gains you generally file ITR-2, or ITR-3 if you also have business income. Report each gain with the dates of purchase and sale and the cost, keep your broker and fund statements, and match the figures to your annual information statement to avoid a mismatch.