STCG vs LTCG on Equity: What Changed in Budget 2024

This article is for the investor who's never opened the Income Tax Act, doesn't know what "Section 111A" means, and just wants to know, in plain English, what changed, why, and what to do about it.

I'll keep the jargon out. Where a section number actually helps you, I'll mention it. Where it doesn't, I won't.

Five Things That Changed

For long-term equity investors, almost the entire capital-gains regime got a quiet rewrite. The headline rates moved up, but a few less-obvious knobs moved too. Here are the five things to know.

All three changes apply to listed Indian equity and equity-oriented mutual funds where Securities Transaction Tax (STT) has been paid.

STCG vs LTCG — The 12-Month Line

The Income Tax Act draws one line through your investment life: twelve months.

If you buy listed equity or an equity mutual fund and sell within 12 months, your profit is a Short-Term Capital Gain, or STCG. If you sell after 12 months, it's a Long-Term Capital Gain, or LTCG. That's it. Same stock, same profit, different label, very different tax bill.

Here's why the line matters. On a ₹1 lakh gain:

• Sell on day 364

  STCG — 20% flat tax

  ₹20,000 tax before cess and surcharge. There is no ₹1.25 lakh-style STCG exemption. However, resident individuals and HUFs may be able to use any unused basic exemption limit against STCG if their other income is below the basic exemption limit.

• Sell on day 366

  LTCG — 0% on this amount

  The entire ₹1 lakh sits below the annual ₹1.25 lakh LTCG exemption. Tax: nil. Two days of patience, the entire tax bill vanishes.

This is not a marginal difference. It's the kind of gap that quietly compounds across a 20-year investing career and ends up funding someone's retirement, or not.

Worked Example — Old Rules vs New Rules

Let's run a concrete case. Suppose you bought shares of a company for ₹5,00,000 in January 2023. You sold them for ₹8,00,000 in March 2025, a clean ₹3 lakh long-term gain, well past the 12-month line.

Here's what you'd owe under the two regimes:

On this size of gain, the new regime costs you ₹1,875 more, about a 9% increase in tax. The hike sounds dramatic in headlines, but on a small portfolio the additional exemption softens the blow.

Where the new rules hurt more is on large gains. Take a ₹20 lakh LTCG: old tax was ₹1,90,000, new tax is ₹2,34,375, almost ₹44,000 extra. The bigger your portfolio, the heavier the new regime sits on you.

On STCG, the hike is uglier. The earlier 15% becomes 20% with no exemption cushion, a flat 33% jump in tax owed on every short-term trade. That should change how an investor thinks about churning positions.

The FY 2024–25 Split — Old Rates and New Rates in the Same Year

Because the new regime kicked in mid-year, FY 2024–25 is the strangest tax year of the decade. Two sets of rates apply, depending on the date of your sale.

For FY 2025–26 and onwards, only the new rates apply. No split treatment. But if you're filing for FY 2024–25 and you sold equity that year, you'll need to dig out your contract notes and segregate.

Most modern brokers (Zerodha, Groww, Upstox, ICICI Direct) generate a Tax P&L statement that does this split automatically. The CBDT's own FAQ on the change is the cleanest official reference.

How Losses Work — And Why Most Investors Get This Wrong

Here's where most retail investors leave money on the table. Capital losses can offset capital gains and reduce your tax bill, but only if you understand the rules.

Two loss types. Two sets of permissions.

Either type of loss, if unutilised, can be carried forward for up to 8 assessment years, but only if you file your ITR by the due date. Miss the deadline, lose the carry-forward right. This is the cheapest mistake in retail tax planning.

Once a year, typically in March, open your portfolio and look at the red ones. The stocks that are down, that you've been avoiding clicking on. Some of them are dead-weight you'd hold for years out of stubbornness.

Booking the loss converts a sunk position into a tax shield against your winners. Buy them back later if you still believe in the story, but respect the 12-month clock if it matters for the next gain.

What Didn't Change (and Still Trips People Up)

Three things that didn't change, but get asked about in every tax season:

The 87A rebate still doesn't apply to equity LTCG. If your total income is below the threshold for the 87A rebate, every other type of income gets the rebate, except your LTCG under Section 112A. This was true before the budget, it's still true now. The rebate position for STCG under 111A has also been contested by the tax department in recent years and is not reliably available.

80C, 80D and other deductions don't reduce capital gains. Your PPF contribution, your ELSS lock-in, your medical insurance premium: none of these reduce STCG or LTCG. Capital gains are "special rate" income and the Chapter VI-A deductions you're used to don't touch them. The only way to reduce capital gains tax is to offset them with capital losses, or use Sections 54 / 54F / 54EC if you reinvest into specified assets (mostly relevant to property, not equity).

The 12-month line is still 12 months. For listed equity and equity mutual funds, the short/long boundary stays at one year. Budget 2024 simplified holding periods to just two (12 months for listed financial assets, 24 months for everything else), but the equity rule didn't change.

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