Section 196 — Tax on short-term capital gains in certain cases

(1) Where the total income of an assessee includes any income chargeable
under the head “Capital gains”, arising from the transfer of a short-term capital
asset—
( a) being an equity share in a company or a unit of an equity oriented fund
or a unit of a business trust; and
( b) the transaction of sale of such equity share or unit is chargeable to secu-
rities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004
(23 of 2004), then,
the tax payable by the assessee on the total income, subject to the provisions of
sub-section (2), shall be the aggregate of—
24. Substituted for “60%” by the Finance Act, 2026, w.e.f. 1-4-2026.
( i) income-tax calculated on such short-term capital gains at the rate of
20%;
( ii) income-tax payable on the balance amount of the total income as if such
balance amount were the total income of the assessee.
(2) In the case of an individual or a Hindu undivided family, being a resident, where
the total income, as reduced by short-term capital gains computed under sub-section
(1), is below the maximum amount which is not chargeable to income-tax, then,—
( a) such short-term capital gains shall be reduced by the amount by which
the total income as so reduced falls short of the maximum amount which
is not chargeable to income-tax; and
( b) the tax on the balance of such short-term capital gains shall be computed
at the rate as applicable in sub-section (1)(i).
(3) The provisions of sub-section (1)(b) shall not apply to a transaction undertaken
on a recognised stock exchange located in any International Financial Services
Centre and where the consideration for such transaction is paid or payable in for-
eign currency.
(4) Where the gross total income of an assessee includes any short-term capital gains
referred to in sub-section (1), the deduction under Chapter VIII shall be allowed
from the gross total income as reduced by such capital gains.
(5) For the purposes of this section, the expression “equity oriented fund” shall have
the meaning assigned to it in section 198.