Taxation · Chapter 3 / 34
Short-term capital gains tax on equity mutual funds
Sold within 12 months: 20% flat (Finance Act 2024). No exemption threshold.
If you sell equity mutual fund units within 12 months of buying them, the gain is short-term — taxed at a flat rate regardless of which income-tax slab you're in.
The rate
Effective for transfers on or after 23 July 2024, the short-term capital gains (STCG) rate on equity-oriented mutual funds is 20% under Section 111A of the Income Tax Act. Before that date, the rate was 15%.
There is no per-year exemption threshold for STCG (unlike LTCG's ₹1.25 lakh). The full gain is taxed at 20% plus surcharge and cess.
What counts as "equity-oriented"
Per SEBI definitions, an equity-oriented fund is one that invests at least 65% of its assets in Indian equity shares. This includes Large Cap, Mid Cap, Small Cap, Flexi Cap, Multi Cap, ELSS, sectoral and thematic equity funds, and most Aggressive Hybrid funds.
Per-instalment treatment
For SIPs, each monthly instalment is its own purchase with its own 12-month clock. A SIP started in January 2025: the January instalment becomes "long-term" only in January 2026; the February instalment in February 2026; and so on. When you redeem on a FIFO basis, some units may be STCG and others LTCG in the same transaction.
Reporting
STCG goes in Schedule CG section A of ITR-2. As with LTCG, your AMC's annual capital-gains statement is the cleanest source — it splits each redemption into the LTCG and STCG components for you.
Sources
- Income Tax Act, 1961 — Section 111A (short-term capital gains) · accessed Jun 2026
- AMFI — Capital Gains Taxation on Mutual Funds · accessed Jun 2026