Definition of STCG (Short Term Capital Gains Tax)
STCG (Short Term Capital Gains Tax) is the tax on profits from the sale of capital assets held for a short period. For equity mutual funds and stocks in India, any gains from holdings of less than 12 months are classified as short-term.
As of Budget 2024, STCG on equity and equity-oriented mutual funds is taxed at 20% (increased from 15% earlier). For debt mutual funds, STCG is added to your income and taxed at your applicable income tax slab rate.
STCG is relevant for investors who frequently redeem equity investments within a year. One of the advantages of SIP investing is the long-term holding mindset, which naturally keeps most investors in the LTCG bracket for their equity holdings.