The Tool Desk
Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Some links on this page are affiliate links: if you buy through them we may earn a commission, at no extra cost to you.
LTCG or STCG on stock sales is decided mainly by how long you held the shares, when you transferred them, and whether the statutory Securities Transaction Tax (STT) conditions are met. For equity shares listed on a recognized Indian exchange, holding the shares for more than 12 months generally makes the gain long-term; holding them for 12 months or less generally makes it short-term. For qualifying transfers on or after 23 July 2024, the special short-term rate is 20%, while qualifying long-term gains are taxed at 12.5% on aggregate annual gains above ₹1.25 lakh. Those are headline rates, not an automatic final bill: the share’s listing status, acquisition route, STT, taxpayer status, losses, surcharge and cess can change the result.
This guide explains how to classify a sale, which date rules apply, how the gain is computed, what records to retain and where the listed-share rules stop applying.
As an Amazon Associate I earn from qualifying purchases.
At a glance
| Name | Best for | Key spec | Checked |
|---|---|---|---|
| Short-term capital gain (STCG) | Listed Indian equity held 12 months or less | 20% special rate when section 111A (1961 Act) or section 196 (2025 Act) conditions, including STT requirements, are met | November 2026 |
| Long-term capital gain (LTCG) | Listed Indian equity held more than 12 months | 12.5% on qualifying aggregate annual gains above ₹1.25 lakh under section 112A (1961 Act) or section 198 (2025 Act), subject to STT conditions | November 2026 |
Prices checked November 2026.
What is the difference between LTCG and STCG on stocks?
For listed equity shares on a recognized Indian exchange, the dividing line is one year: more than 12 months is generally long-term, while 12 months or less is short-term. The Income Tax Department notes that capital-gains rates depend on the asset, holding period and assessee status; the classification is therefore the starting point, not the whole tax calculation. See the Department’s capital-gains overview.
| Factor | STCG: listed Indian equity | LTCG: listed Indian equity |
|---|---|---|
| Holding period | 12 months or less | More than 12 months |
| Special rate for qualifying transfers from 23 July 2024 | 20% | 12.5% on aggregate gains above ₹1.25 lakh |
| Relevant 1961 Act provision | Section 111A | Section 112A |
| Relevant 2025 Act provision for Tax Year 2026–27 onward | Section 196 | Section 198 |
| Core eligibility check | Applicable STT conditions | Applicable STT conditions; for equity shares, acquisition and transfer STT are relevant, subject to specified exceptions |
The 20% and 12.5% figures are statutory headline rates. Surcharge, health and education cess, taxpayer category, loss set-offs and special transaction rules can affect what you finally owe.
Popular on Amazon
- Ideal for Gifting
- Ideal for a bookworm
- Compact for travelling
How do I know whether my shares are long-term or short-term?
Count the statutory holding period from acquisition to transfer and check the nature of the security. Exactly 12 months is not “more than 12 months,” so a listed share held for 12 months or less is generally short-term.
- Identify the asset. Confirm that the security is an equity share listed on a recognized Indian stock exchange. Do not automatically apply this rule to an unlisted share, overseas stock, an employee award, or shares held as business inventory.
- Record both dates. Use the acquisition date shown by your broker, depository or other valid records and the transfer or sale date. The transfer date determines which legislative rate regime applies.
- Measure the period. More than 12 months generally qualifies as long-term for listed securities; 12 months or less generally remains short-term.
- Check how you acquired and sold the shares. STT, acquisition route and notified exceptions can determine whether the special provision is available.
- Compute the gain or loss. Tax is based on the statutory capital gain, not automatically on the gross sale proceeds.
For example, if the legal holding period is exactly 12 months, the listed-share result is generally STCG. If it exceeds 12 months, it is generally LTCG, assuming the transaction is otherwise within the relevant capital-gains rules.
Which transfer date and tax year apply?
The 2024 capital-gains changes apply to transfers made on or after 23 July 2024. The CBDT’s Ministry of Finance FAQ states: “The new provisions for taxation of capital gains come into force from 23.7.2024 and shall apply to any transfer made on or after 23.7.2024.” Read the full CBDT FAQ for the commencement explanation.
For income earned from 1 April 2026, the Income-tax Act, 2025 applies. The Department describes that period as Tax Year 2026–27. For those transactions, current section references are section 196 for specified STCG and section 198 for specified LTCG. A transaction made in an earlier tax year is not relabelled with the new section numbers merely because you file or amend it after 1 April 2026; the Department’s new-Act FAQ says earlier assessments and pending matters continue under transition rules.
Keep a timeline for each sale: acquisition date, transfer date, financial or tax year, and the Act in force for that transfer. This avoids applying the 2024 rate change to a pre-23 July 2024 transfer or using the 2025 Act section numbers for an earlier transaction.
When does the 20% STCG rate apply?
The 20% rate applies to qualifying short-term transfers of listed equity and the other asset categories covered by the special provision, when the required STT and statutory conditions are satisfied. For transactions under the Income-tax Act, 1961 this is section 111A; for Tax Year 2026–27 onward under the Income-tax Act, 2025 it is section 196.
Free tools Windows power users keep installed
One-click scans. No signup required.
Also popular on Amazon
The concessional treatment is not a blanket rate for every share sale. The official share-sale guidance requires the transaction to fall within the specified listed-equity category and meet the relevant STT rules. If a sale does not qualify, another provision or the taxpayer’s ordinary applicable rate may govern it.
Apply the rate to the calculated short-term capital gain, after the deductions allowed by law, rather than to the entire amount credited by the broker. Add any applicable surcharge and cess and consider permitted loss set-offs before estimating the final liability.
When does the 12.5% LTCG rate and ₹1.25 lakh threshold apply?
For a qualifying listed-equity transfer on or after 23 July 2024, long-term gains receive the special 12.5% treatment on the aggregate amount above ₹1.25 lakh for the relevant year. Under the 1961 Act the provision is section 112A; for Tax Year 2026–27 onward the corresponding current-Act reference is section 198.
The ₹1.25 lakh amount is an annual aggregate threshold, not a separate allowance for every share, broker account or transaction. Add qualifying long-term gains covered by the provision for the year before determining how much exceeds the threshold. A ₹90,000 gain on one sale and a ₹70,000 gain on another would be considered together for this purpose, subject to the statutory rules and any allowable losses.
Section 112A treatment is limited to the listed equity share, equity-oriented fund-unit and business-trust-unit categories described in the official guidance. This article’s rate explanation is centered on listed equity shares; do not extend the ₹1.25 lakh threshold to assets outside that scope without checking the applicable provision.
Why does STT matter for the special rates?
STT is a condition of the concessional listed-equity provisions, not merely a brokerage detail. The Income Tax Department’s share-sale guidance says STT must be paid on transfer and, for equity shares, on acquisition subject to specified exceptions. The exact acquisition exception depends on the notified circumstances, so an investor should not assume that a later exchange sale alone proves eligibility.
Also popular on Amazon
Check the contract note, broker tax statement and depository records for STT. If the shares came through a gift, conversion, corporate action, employee plan or another non-standard route, obtain the transaction’s documentary trail and verify whether a notified exception applies. If the STT condition is not met, do not claim the special 20% or 12.5% treatment without professional advice on the applicable alternative.
How is the taxable capital gain calculated?
Capital-gains tax is calculated on the gain under statutory rules. The Income-tax Act, 2025 section 72 framework allows the transfer consideration to be reduced by applicable acquisition and improvement costs and expenses wholly and exclusively connected with the transfer, subject to the Act’s specific limits. The Department publishes the section 72 computation text.
Outdated Drivers Are Slowing You Down
One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchPC Slower Than It Used to Be?
A free scan shows the junk files, broken settings and background clutter dragging Windows down - then fixes them in one click.Free scan · Windows 10 & 11A practical records worksheet should contain:
- sale consideration and transfer date;
- purchase cost, acquisition date and quantity;
- permitted transfer expenses and applicable improvement costs;
- brokerage, exchange charges and STT as shown in statements, with the tax treatment checked under the current rules;
- corporate-action or lot details that affect original cost or holding period; and
- other capital gains and losses in the same year.
Do not treat the broker’s gross turnover, contract-note value or bank credit as the taxable gain by itself. Use the prescribed computation and the filing-year instructions, especially where records include multiple lots, partial sales, rights issues, mergers or other adjustments.
How do capital losses change the result?
The Income Tax Department’s ITR-2 FAQ explains the usual set-off distinction: a short-term capital loss can be set off against short-term or long-term capital gains, while a long-term capital loss can be set off only against long-term capital gains. Carry-forward is subject to conditions, including timely filing, and the exact form-year instructions should be followed.
Illustration: a short-term loss may reduce a qualifying long-term gain after the relevant calculations, but a long-term loss cannot generally be used to shelter short-term gain. Keep a year-by-year loss schedule and verify brought-forward amounts against filed returns and assessment records.
Because the FAQ contains legacy section references and forms change, use the current filing-year instructions rather than copying an old return workflow. The official ITR-2 FAQ says a yearly share/securities profit-and-loss summary is needed for computation.
Recommended Free Tools
Also popular on Amazon
What records should I keep before filing?
At minimum, retain broker contract notes, annual tax or capital-gains statements, demat transaction statements, purchase confirmations, bank records, corporate-action notices and evidence of STT. Match each sale to its acquisition lot and preserve records for the statutory retention period applicable to your return.
Prepare one annual summary even if you used several brokers. Reconcile the summary to Form 26AS, AIS or other official reporting available for the filing year, but treat prefilled data as a cross-check rather than a substitute for your own lot-level records. If the summary contains a classification error, resolve it with the broker and retain the correction trail.
Do unlisted or overseas shares use the same 12-month rule?
No. The 12-month boundary in this guide is for listed equity shares on a recognized Indian exchange. Unlisted shares generally require more than 24 months for long-term treatment, and overseas shares, employee stock awards, business inventory and non-resident or treaty cases can involve different rules.
For an unlisted share, first confirm the applicable 24-month test and the relevant rate provision. For overseas stock, check foreign-asset reporting, currency conversion and treaty questions in addition to the capital-gains classification. For shares held as trading stock, profits may be business income rather than capital gains. The supplied official material does not establish one universal answer for all of these situations, so a personalized determination is needed.
How should I check a sale before reporting it?
Use this decision checklist for each disposal:
- Listing: Was the share listed on a recognized Indian exchange at the relevant time?
- Dates: What are the documented acquisition and transfer dates, and is the holding period more than 12 months?
- Effective law: Was the transfer before 23 July 2024, on or after that date, or from 1 April 2026 onward under the 2025 Act?
- STT: Is transfer STT documented, and is acquisition STT documented or covered by a specified exception?
- Computation: Have you deducted only costs permitted by the applicable rules and avoided taxing gross proceeds as gain?
- Aggregation: Have you combined qualifying long-term gains for the year when checking the ₹1.25 lakh threshold?
- Losses: Have you applied short-term and long-term loss set-off rules correctly and checked carry-forward eligibility?
- Filing: Are you using the current return form and instructions for the relevant tax year?
If any answer is uncertain—especially STT eligibility, a non-standard acquisition, residency, employee awards or business-versus-investment classification—pause before filing and obtain advice based on the complete records.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What are the most common mistakes?
- Calling exactly 12 months “long-term.” For listed equity, the general test is more than 12 months.
- Using the sale date incorrectly. The 23 July 2024 change is tied to transfers made on or after that date.
- Applying 2025 Act section numbers to old sales. Section 196 and section 198 are the current references for Tax Year 2026–27 onward; earlier transactions remain governed through transition rules.
- Ignoring STT on acquisition. Equity-share acquisition STT is relevant to the special treatment, subject to notified exceptions.
- Using ₹1.25 lakh per transaction. The threshold is an aggregate annual amount for qualifying gains.
- Taxing gross sale proceeds. Capital-gains computation considers permitted cost and transfer deductions.
- Mixing listed and unlisted rules. Unlisted shares generally use a more-than-24-month long-term threshold.
- Relying only on a prefilled return. Reconcile it to lot-level broker and depository records.
Which official sources should I use?
For the classification and STT conditions, start with the Income Tax Department’s tax-on-sale-of-shares guidance. For the 2024 effective date and rate changes, use the CBDT/Ministry of Finance FAQ. For transactions from 1 April 2026, confirm section numbering and transition treatment in the Department’s new-Act FAQ and the published Income-tax Act, 2025 text.
Also popular on Amazon
- It can be a gift option
- Comes with secure packaging
- Helpful in various ways
For filing mechanics, consult the current return form and the Department’s ITR-2 FAQ. These sources explain the framework; they do not replace advice on an unusual transaction or an individual’s complete tax position.
How we picked the rules in this guide
The framework follows the official Indian tax sources supplied for this topic: listed-share holding periods, the 23 July 2024 commencement date, the 20% and 12.5% special rates, the ₹1.25 lakh annual threshold, STT conditions, the 1 April 2026 commencement of the Income-tax Act, 2025, computation rules and capital-loss set-off guidance. No independent performance statistic or product comparison is relevant to this statutory classification question.
Do these 3 things before closing this tab:
1Clear out junk files and repair common Windows errors2Scan for outdated or missing drivers - takes under a minute3Repair Windows errors before they cause bigger problemsFrequently Asked Questions
Does selling shares after one year always make the gain long-term?
Not automatically. The listed-share rule generally requires more than 12 months, and the special treatment also depends on the asset category, STT conditions and the transaction’s effective date. Unlisted shares generally use a more-than-24-month threshold.
Is the ₹1.25 lakh exemption available separately for every broker account?
No. It is an aggregate annual threshold for qualifying long-term gains covered by the relevant provision. Combine eligible gains across brokers and transactions for the year before applying it.
Can I use a short-term share loss to reduce long-term gains?
Generally, yes: the ITR-2 guidance says short-term capital loss can be set off against short- or long-term capital gains. Long-term capital loss is generally restricted to long-term gains, and carry-forward requires compliance with filing conditions.
What if STT was not charged when I acquired the shares?
Do not assume the 20% or 12.5% special treatment applies. Equity-share acquisition STT is relevant, subject to specified exceptions, so review the acquisition route and notified exceptions with the transaction records before claiming the rate.
Quick wins for a faster PC:
Repair Windows errors before they cause bigger problemsFix Now →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →
