STCG (Short-Term Capital Gains) and LTCG (Long-Term Capital Gains) refer to the profits earned from the sale of investments.

Short-Term Capital Gains (STCG):

  • STCG applies to assets held for a short duration (less than 12 months for equities and less than 36 months for other assets like real estate).

  • These gains are taxed at a higher rate compared to long-term gains. For example, in India, short-term gains on equity investments are taxed at 15%.

Long-Term Capital Gains (LTCG):

  • LTCG applies to assets held for a longer duration (more than 12 months for equities and more than 36 months for other assets like real estate).

  • These gains are taxed at a lower rate to encourage long-term investments. For example, in India, long-term gains on equity investments above ₹1 lakh are taxed at 10% without the benefit of indexation.

Understanding the difference between STCG and LTCG is crucial for tax planning and making informed investment decisions. Long-term investments are often more tax-efficient compared to short-term trades.