Definition
STCG vs LTCG by Asset Class
Capital gains are short-term or long-term depending on how long you hold an asset, and the holding period and tax rate differ by asset class.
Whether a gain is short-term (STCG) or long-term (LTCG) depends on the holding period, which varies by asset. Listed equity shares and equity mutual funds become long-term after a relatively short holding period, while real estate and unlisted assets require a longer holding period to qualify as long-term.
The tax rates also differ. Listed equity LTCG above a small exempt threshold is taxed at a concessional rate, equity STCG at a flat rate, while debt funds and other assets may be taxed at slab rates or special rates depending on when they were bought.
Because recent budgets have changed both holding periods and rates for several asset classes, it is essential to confirm the current rule for the specific asset and purchase date rather than assuming.
Related terms
- Indexation and Cost Inflation Index (CII)Indexation adjusts the purchase price of an asset for inflation using the Cost Inflation Index, reducing taxable long-term capital gains.
- Capital Gains TaxCapital gains tax is the tax you pay on the profit from selling an asset such as shares, mutual funds, gold or property.
- STT (Securities Transaction Tax)STT is a tax levied on the purchase and sale of securities on Indian stock exchanges, collected automatically at the time of trade.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.