What is short-term capital gains tax on property?

Short-Term Capital Gains (STCG) tax on property arises when a property is sold within 24 months (2 years) of its purchase date. The profit earned from such a sale is called Short-Term Capital Gain (STCG) and is added to the seller's total income for that financial year and taxed at the applicable income tax slab rate.

Key Characteristics of STCG on Property

• Holding Period: 24 months or less from date of purchase.
• Tax Rate: As per individual income tax slab (0% / 5% / 20% / 30%).
• Indexed Cost: NOT applicable (no indexation benefit for STCG).
• Exemption Available? No specific exemption under Sections 54/54F for STCG.
• Applicable On: All immovable properties residential, commercial, land.

How STCG is Calculated

STCG = Sale Price – (Purchase Price + Cost of Improvement + Transfer Expenses)

Example: Property bought for ₹50 lakh, sold in 18 months for ₹65 lakh. Transfer costs: ₹1 lakh. STCG = ₹65L – ₹50L – ₹1L = ₹14 lakh. This ₹14 lakh is added to total income and taxed at slab rate.

Short-term capital gains on property are taxed at your regular income tax slab rate and offer no indexation benefit or special exemptions. Holding a property beyond 2 years converts the gain to LTCG, which carries significant tax advantages.