The key difference between short-term capital gains (STCG) and long-term capital gains (LTCG) on shares lies in the holding period and tax treatment. In India, if shares are sold within 12 months of purchase, the profit is classified as STCG, taxed at 15% (for equity shares under Section 111A) or as per the investor’s income tax slab (for non-equity shares). Conversely, if shares are held for more than 12 months, the profit qualifies as LTCG, which is taxed at 10% (for gains exceeding ₹1 lakh in a financial year) with no indexation benefit for equity shares.

Another major distinction is set-off and carry-forward rules. Short-term losses can be adjusted against any capital gains (short-term or long-term), while long-term losses can only be set off against LTCG. Additionally, Securities Transaction Tax (STT) applies to both, but LTCG on equity shares enjoys a ₹1 lakh annual exemption. Long-term holdings benefit from lower tax rates and are generally considered more tax-efficient, whereas short-term trades attract higher taxes, making them less favorable for buy-and-hold investors. Understanding these differences helps investors optimize their tax liability and investment strategies.