STCG vs LTCG — Key Differences
| Factor | STCG | LTCG |
|---|---|---|
| Holding period | 2 years or less | More than 2 years |
| Tax rate | Income slab rate (5%/20%/30%) | 12.5% flat (post July 2024) |
| Indexation | Not applicable | Not available post July 2024 |
| Section 54 exemption | Not available | Available — reinvest in house |
| Section 54EC bonds | Not available | Available — invest up to ₹50L |
| Tax planning | Very limited — avoid by holding 2+ years | Multiple exemption options |
| Effect on total income | Added to income — may push to higher slab | Taxed separately at flat rate |
STCG Calculation Example
STCG tax can be brutal: Property bought for ₹60 lakh in Jan 2024, sold for ₹75 lakh in Dec 2024 (held 11 months). STCG = ₹75L − ₹60L − expenses = ₹14L (approx). If in 30% bracket: Tax = ₹4.2 lakh + 4% cess = ₹4.37 lakh. Had the same property been sold after Jan 2026 (2+ years), LTCG tax = 12.5% × ₹14L = ₹1.75L + cess = ₹1.82 lakh. Saving: ₹2.5+ lakh just by waiting.
STCG Planning — The 2-Year Rule
The simplest and most effective tax planning for property sellers is to hold the property for more than 2 years. This single step converts taxable gain from STCG (up to 30% slab) to LTCG (12.5% flat). For a ₹20 lakh gain, this saves up to ₹3.5 lakh in tax for someone in the 30% bracket. Always check your purchase date before planning a property sale.
Related Terms
Frequently Asked Questions
Short-term capital gains (STCG) arise when property held for 2 years or less is sold at a profit. Unlike LTCG (flat 12.5%), STCG is added to your total income and taxed at your normal income slab rate — up to 30% for the highest bracket. No exemptions (Section 54, 54EC) are available for STCG. The most effective STCG planning is simply to hold property beyond 2 years.
STCG on property is taxed at your normal income tax slab rate: 5% (income ₹3–7L), 20% (₹7–12L approximately), or 30% (above ₹12L under old regime). It is added to your total income for the year — potentially pushing you to a higher slab. Add 4% cess. There is no flat STCG rate for property unlike equities where STCG is 20%.
The most effective approach: simply hold the property for more than 2 years — it becomes long-term and taxed at 12.5% instead of slab rate. If you must sell before 2 years, set off STCG against short-term capital losses from other assets in the same year. No Section 54 or bond exemptions are available for STCG. Consult a CA before any early sale.
STCG losses from property can be set off against STCG or LTCG gains from other assets in the same year. They cannot be set off against salary, rental, or business income. Unabsorbed STCG losses can be carried forward for 8 years and set off against future capital gains only.
If you sell inherited property within 2 years of the original owner's purchase date (not inheritance date), it is treated as short-term. The holding period includes the period the deceased held the property. So if the deceased bought in Jan 2024 and you inherit and sell in Dec 2024, it is STCG even though you held it for a short time.