Short-Term Capital Gains Tax on Shares: Calculation, Rates & Updates

When you sell shares for a profit, that profit is called a capital gain. If you sell the shares within a short period of time, usually within a year from the date of purchase, the profit is considered short term capital gain (STCG). In India, profits from such sales are taxable under the Short Term Capital Gain Tax (STCG Tax). This tax is calculated based on the profit made from selling the shares, and the rate of tax depends on the holding period of the shares and the type of asset. Understanding how STCG tax works is important because it affects the returns you get from investing in shares.

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What is Short Term Capital Gain Tax on Shares?

Short Term Capital Gain Tax on shares refers to the tax that you need to pay when you sell shares within a short period of time, typically within one year from the date of purchase. If you make a profit from selling the shares in this period, the tax is calculated based on the gains you made. This tax is applicable when you sell equity shares and the tax rate for such gains is different compared to long-term capital gains (LTCG), where shares are sold after more than one year.

The government charges STCG tax at a rate of 15% on profits made from the sale of shares held for less than a year. The STCG tax is designed to encourage long-term investing by taxing short-term gains at a higher rate. The amount of tax you pay depends on the profit you make, and the tax is calculated on the difference between the selling price and the buying price of the shares.

Budget 2025 Updates on STCG Tax on Shares

In the Budget 2025, there have been no significant changes to the Short Term Capital Gain Tax on shares. The current 15% tax rate on short-term capital gains continues to apply. However, the government may review tax policies to encourage long-term investments in the stock market. Any changes in the future could affect the way taxes are calculated for short-term gains, but for now, the rules remain the same.

The 15% tax on STCG is considered favorable for traders who make profits from short-term investments, but it is important for investors to keep track of any updates in the budget, as the government may make future adjustments.

Calculation of Short Term Capital Gain Tax on Shares

To calculate STCG tax on shares, you need to first figure out the profit you made from the sale. Here’s a simple way to understand how this tax is calculated:

1. Selling Price: The price at which you sold the shares.
2. Buying Price: The price at which you purchased the shares.
3. Profit: The difference between the selling price and the buying price.

Formula:

• Profit = Selling Price – Buying Price

Once you have the profit, you calculate STCG tax by applying the 15% tax rate on the profit.

Here’s an example in a table for a better understanding:

Particulars

Amount (₹)

Buying Price per Share

₹100

Selling Price per Share

₹150

Profit (Selling Price - Buying Price)

₹150 – ₹100 = ₹50

STCG Tax Rate

15%

Tax Payable (Profit × Tax Rate)

₹50 × 15% = ₹7.5

STCG Tax on Total Profit

₹7.5

So, if you sell 100 shares and make a profit of ₹50 per share, the total STCG tax you need to pay will be ₹750 (100 shares × ₹7.5).

Understanding the Short Term Capital Gain Tax is crucial for investors who trade stocks frequently. The 15% tax on short-term gains ensures that short-term traders contribute to the tax system, while encouraging long-term investments. By calculating your tax liability correctly and being aware of the applicable rules, you can manage your investments more effectively. Remember, staying updated with budget changes and tax laws will help you make better financial decisions and reduce the impact of taxes on your profits.