TaxSaral

Section 196 · was Section 111A in the 1961 Act

STCG on Listed Equity (STT paid) — 20%

Short-term capital gains on listed equity shares or equity-oriented MF units where STT has been paid are taxed at 20%. Gains are short-term if the asset is held for 12 months or less.

Who it applies to: Investors who sell listed shares or equity mutual funds held for 12 months or less.

Key points

  • Holding period: ≤ 12 months → short-term; > 12 months → long-term (taxed under Section 198).
  • STCG rate of 20% is FLAT — not the slab rate — regardless of your income level.
  • STT (Securities Transaction Tax) must have been paid — OTC unlisted share sales do not qualify.
  • Short-term capital losses can be set off against STCG or LTCG but not against salary/other income.

Worked example

Quick trade on listed shares

Nisha buys 100 shares of TCS at ₹3,500 each in September 2026 and sells in February 2027 at ₹4,200 each. Holding period = ~5 months (STT paid on exchange).

Purchase: 100 × ₹3,500 = ₹3,50,000
Sale: 100 × ₹4,200 = ₹4,20,000
STCG = ₹4,20,000 – ₹3,50,000 = ₹70,000

Tax: ₹70,000 × 20% = ₹14,000
Add 4% cess: ₹14,560

(No threshold exemption for STCG unlike LTCG)

Result: Nisha pays ₹14,560 tax on her ₹70,000 short-term gain. If she had waited 7 more months to cross 12 months, the gains would have been LTCG taxed at 12.5% with ₹1.25L exemption — potentially zero tax.

Related sections

Not sure how Section 196 applies to you? Ask a question or browse all sections.

Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative; verify with a Chartered Accountant before filing.