Profit from redeeming equity fund units held for 12 months or less — taxed at a flat 20% rate (Budget 2024), regardless of your income bracket.
STCG arises when you redeem mutual fund units before the qualifying long-term holding period. For equity-oriented funds, units held for 12 months or less attract STCG at a flat rate irrespective of the investor's income tax bracket. Budget rates are updated annually — verify the current rate.
Invest today, redeem in 11 months. Your profit is STCG — taxed at 20% flat. Hold just one more month past 12 months: the same gain becomes LTCG at 12.5% (with the first ₹1.25 lakh exempt). One extra month of patience can cut your tax bill dramatically.
Equity funds held ≤12 months: STCG taxed at 20% flat (Budget 2024 rate, up from the previous 15%).
Debt funds: taxed at your income slab rate regardless of holding period (post Budget 2023).
For SIPs, each instalment has its own 12-month clock — some may be STCG while others qualify as LTCG.
STCG losses can be set off against STCG or LTCG gains from other capital assets in the same year.