STCG vs LTCG on Equity — What Changed After Budget 2024
The Union Budget presented on 23 July 2024 made the most significant changes to capital gains taxation in over a decade. STCG went from 15% to 20%. LTCG went from 10% to 12.5%. The LTCG exemption was raised from ₹1 lakh to ₹1.25 lakh. If you traded or invested in equity, mutual funds, or ETFs after July 2024, your tax calculation is different from prior years — and many traders are still applying the old rates by mistake.
1. Quick summary of Budget 2024 changes
Both changes were effective from 23 July 2024 — the date the Finance Bill 2024 was tabled in Parliament. This creates a split within FY 2024-25 where some trades are taxed under old rates and others under new rates.
2. New STCG rate: 20%
Short-Term Capital Gains on listed equity shares, equity-oriented mutual funds, and units of business trusts are now taxed at 20% under Section 111A, up from 15%.
This rate applies when you sell listed equity shares held for less than 12 months from the date of purchase. It is a flat rate — it does not depend on your income bracket or total income. Even if your slab rate is 5%, your STCG from equity is taxed at 20%.
Section 87A gives a rebate (up to ₹60,000) on slab-rate tax if your total income is ≤ ₹12 lakh. But this rebate does not apply to STCG or LTCG taxed under special rates. Even if your only income is ₹5L of STCG, you pay 20% — there is no rebate on this.
4% Health and Education Cess applies on top of the STCG tax, making the effective rate 20.8%.
3. New LTCG rate: 12.5% and ₹1.25 lakh exemption
Long-Term Capital Gains on listed equity shares and equity mutual funds are taxed at 12.5% under Section 112A, up from 10%. But the annual exemption was simultaneously raised from ₹1 lakh to ₹1.25 lakh.
The exemption works like this: in a financial year, the first ₹1.25 lakh of LTCG from listed equity and equity mutual funds is completely tax-free. Only the amount above ₹1.25 lakh is taxed at 12.5%.
If you and your spouse both have equity investments, each of you gets the ₹1.25 lakh exemption separately. A couple can collectively realise ₹2.5 lakh of LTCG tax-free by managing which account holds which assets.
For long-term investors with modest equity gains, the higher exemption largely offsets the rate increase. Someone with ₹3L LTCG used to pay 10% on ₹2L (= ₹20,000). Now they pay 12.5% on ₹1.75L (= ₹21,875). A small increase.
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| Asset type | STCG holding period | LTCG holding period |
|---|---|---|
| Listed equity shares (NSE/BSE) | Less than 12 months | 12 months or more |
| Equity mutual funds (≥65% in equity) | Less than 12 months | 12 months or more |
| Equity ETFs (Nifty ETF, Sensex ETF, etc.) | Less than 12 months | 12 months or more |
| Debt mutual funds (post Apr 2023) | Always at slab rate | Always at slab rate |
| Gold ETFs / Silver ETFs | Less than 24 months | 24 months or more |
| Unlisted equity shares | Less than 24 months | 24 months or more |
| REITs and InvITs | Less than 12 months | 12 months or more |
Many traders assume Gold ETFs follow the same 12-month rule as equity ETFs. They don't. Gold ETFs and Silver ETFs are classified as "other than equity-oriented funds" — they use a 24-month holding period and short-term gains are taxed at your slab rate, not the flat 20%.
5. Effective date — which trades get which rate
The key date is 23 July 2024 — the date of the sale/transfer, not the purchase. This creates an important split within FY 2024-25:
- If you sold before 23 July 2024: old rates apply (15% STCG, 10% LTCG, ₹1L exemption)
- If you sold on or after 23 July 2024: new rates apply (20% STCG, 12.5% LTCG, ₹1.25L exemption)
Both sets of rates can appear in the same FY 2024-25 return. Your broker's Tax P&L should handle the split automatically. From FY 2025-26 onwards, only the new rates apply throughout the year.
6. Different rules for different assets
Listed equity and equity mutual funds
STCG: 20%. LTCG: 12.5% above ₹1.25L exemption. These are the Section 111A and 112A rates covered above.
Debt mutual funds
Since April 1, 2023, all debt mutual fund gains (regardless of holding period) are taxed at your slab rate. The distinction between STCG and LTCG no longer applies to debt funds. This change was made in the Finance Act 2023 and is separate from Budget 2024.
Gold ETFs and Silver ETFs
Held for less than 24 months: slab rate. Held for 24 months or more: 12.5% LTCG (post Budget 2024, without indexation). Note: indexation benefit was removed for Gold ETFs in Budget 2024.
Unlisted shares
Held for less than 24 months: slab rate. Held for 24 months or more: 12.5% LTCG (Budget 2024 reduced this from 20%). The ₹1.25L exemption does not apply to unlisted shares.
7. Grandfathering for pre-2018 holdings
When LTCG on equity was reintroduced in 2018 (after being exempt since 2004), the government introduced a "grandfathering" provision under Section 112A to protect gains already accrued.
For shares or equity mutual fund units purchased before 31 January 2018, the cost of acquisition is the higher of:
- The actual purchase price, and
- The Fair Market Value (FMV) / highest traded price on 31 January 2018
Only gains above this grandfathered cost are subject to LTCG tax. This provision still applies — Budget 2024 did not change the grandfathering rules.
8. Worked examples
Let's see how the new rates impact a typical equity investor for FY 2025-26 (trades after July 2024).
9. Section 87A rebate and capital gains — a critical note
Section 87A provides a tax rebate of up to ₹60,000 for taxpayers with total income up to ₹12 lakh (under the new regime). However, this rebate does not apply to STCG or LTCG taxed under special rates (Section 111A and 112A).
This means: a taxpayer with ₹10 lakh of STCG and no other income cannot claim the 87A rebate on their ₹2 lakh STCG tax. The rebate applies only to slab-rate tax (salary, F&O income, other income).
Contrast this with F&O income at the same ₹10L amount: that would qualify for 87A if no other factors push GTI above ₹12L, since F&O is a slab-rate income. Capital gains are different — the rebate explicitly excludes them.
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