Short Term Capital Gains on equity mutual funds and stocks are now taxed at 20% flat (Budget 2024 — increased from 15%). Calculate your exact STCG tax before you redeem.
If you sell equity mutual funds within 12 months of buying, every rupee of profit is Short Term Capital Gain (STCG) — taxed at a flat 20% (Budget 2024), with no exemption, no deductions. It doesn't matter if the gain is ₹5,000 or ₹5 lakh. If you held it less than 12 months, 20% goes to the government. This calculator shows you exactly how much tax you'll pay — and how many months you need to wait to save it.
Rajan invested ₹2,00,000 in an equity fund in August 2024. By February 2025 (6 months later), it's worth ₹2,40,000. The market looks shaky. He sells.
📌 Gain: ₹40,000
📌 STCG tax at 20%: ₹8,000
📌 In-hand: ₹32,000
Now suppose Rajan had waited just 6 more months (until August 2025 — the 12-month mark). Same ₹40,000 gain becomes LTCG. Since ₹40,000 < ₹1,25,000 exemption limit: Tax = ₹0. Full ₹40,000 in his pocket.
Tax saved by waiting 6 months: ₹8,000 — that's a 25% return on the tax amount itself.
For most retail investors with gains under ₹1.25 lakh, waiting just past the 12-month mark turns a 20% STCG bill into a ₹0 LTCG bill (since the first ₹1.25L is exempt). The only time selling early makes sense is when the market is falling sharply and the tax cost is less than the expected further loss — but this requires accurate market prediction, which is very difficult.
Panic selling during market corrections. The average equity fund correction lasts 6–18 months. If you sell during a panic at month 8 (STCG), you pay 20% tax on whatever gain you had, miss the recovery, and then need to re-enter at a higher price. STCG + missed recovery + re-entry costs can erase 2–3 years of investment gains. Time in the market beats timing the market.
Equity funds redeemed within 12 months attract 20% STCG — no exemption, no indexation. Know your tax before you redeem.
Short Term Capital Gains (STCG) tax is the tax you pay when you sell equity mutual fund units or listed stocks before completing a 12-month holding period. Budget 2024 raised the STCG rate from 15% to 20% (effective July 23, 2024) — making early redemptions significantly more expensive than most investors realise. Understanding this tax can directly save you thousands of rupees on your next redemption.
For equity mutual funds (minimum 65% equity allocation), any redemption within 12 months of purchase creates STCG, taxed at 20% flat — with no exemption and no deduction for cess-inclusive cost. For SIP investors, each instalment starts its own clock: if you started a ₹10,000/month SIP 10 months ago and redeem everything today, all 10 tranches are STCG. Wait 2 more months and the first 2 tranches cross the 12-month mark, converting those units' gains to LTCG at 12.5% with ₹1.25L exemption.
Debt mutual funds purchased after April 1, 2023 have no separate STCG/LTCG distinction — all gains are taxed at your income slab rate (up to 30%), regardless of holding period. For debt funds bought before April 2023, the pre-amendment rules apply: STCG at slab rate for holdings under 3 years.
The tax differential between STCG and LTCG is larger than most people realise once you factor in the LTCG exemption. Consider a ₹5 lakh gain on equity MF units:
| Scenario | STCG (sell at 11 months) | LTCG (sell at 13 months) |
|---|---|---|
| Total Gain | ₹5,00,000 | ₹5,00,000 |
| Exemption | Nil | ₹1,25,000 |
| Taxable Gain | ₹5,00,000 | ₹3,75,000 |
| Tax Rate | 20% | 12.5% |
| Tax + 4% Cess | ₹1,04,000 | ₹48,750 |
| Tax Saving by Waiting | ₹55,250 saved by waiting just 2 months | |
This is the single most powerful insight for SIP investors: the tax differential is not 7.5% (20% minus 12.5%) — it's the entire 20% on STCG versus just 12.5% on the amount above ₹1.25L for LTCG. For most investors, waiting a few weeks beyond the 12-month mark to convert STCG to LTCG is the easiest, highest-return "investment decision" they can make.
The most straightforward way to avoid STCG is to plan redemptions around the 12-month boundary. Use this calculator's "Waiting Cost" section: enter your gain and current holding period to see the exact tax you'd pay today vs. if you held for the remaining days. Even if you need cash urgently, consider liquidating a different fund where units are already beyond 12 months, while keeping the short-term units intact.
If you have STCG losses from one fund in the same financial year, you can set them off against STCG gains from another — reducing your net taxable STCG. STCG losses can also be set off against LTCG gains. Any unabsorbed losses carry forward for 8 years. Unlike LTCG losses (which can only offset LTCG), STCG losses are more flexible — they can offset both STCG and LTCG.