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For an eligible Indian listed share or equity-oriented mutual-fund unit sold on or after 23 July 2024, calculate the long-term capital gain (LTCG), combine it with your other qualifying Section 112A gains for the period, subtract the single aggregate exemption of ₹1,25,000, and apply 12.5% to the positive balance. A holding generally becomes long-term only after more than 12 months. The result is then added to your other tax liabilities, with applicable surcharge and health-and-education cess.
This method applies to individual investment transactions covered by Section 112A. Trading treated as business income, derivatives, debt funds, foreign securities, non-resident regimes, companies and trusts can follow different rules.
Quick reference: the rules that determine your calculation
| Question | Current treatment |
|---|---|
| Which assets can qualify under Section 112A? | Listed Indian equity shares, units of equity-oriented mutual funds and units of business trusts, subject to the specified securities transaction tax (STT) conditions. |
| When is a listed share or equity-fund unit long-term? | Generally when held for more than 12 months. |
| What about unlisted shares? | Generally 24 months for long-term treatment. The general capital-asset rule is 36 months where a special period does not apply. |
| Rate for a transfer on or after 23 July 2024 | 12.5% on eligible Section 112A LTCG above the aggregate ₹1,25,000 threshold. |
| Rate for a transfer before 23 July 2024 | 10% on eligible Section 112A LTCG above the aggregate ₹1,00,000 threshold under the earlier rule. |
| Is indexation available for a transfer on or after 23 July 2024? | No. Use the applicable original or grandfathered cost without an inflation index. |
| How are pre-1 February 2018 holdings costed? | For a qualifying holding acquired on or before 31 January 2018, use the grandfathered formula described below. |
The ₹1,25,000 amount is not an exemption for each stock, fund or sale. It is one aggregate threshold for all eligible Section 112A gains in the applicable period.
1. Classify the asset and holding period
Listed equity shares
A listed Indian equity share is generally long-term when the period between acquisition and transfer exceeds 12 months. Count each lot separately because shares bought on different dates can have different tax treatment.
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Equity-oriented mutual-fund units
Units of an equity-oriented mutual fund generally use the same more-than-12-month test. Confirm that the scheme is equity-oriented for the relevant tax period; a debt-oriented or other non-qualifying fund is not automatically covered by Section 112A.
Unlisted shares and other assets
Unlisted shares generally require a 24-month holding period for long-term classification. Assets without a specific shorter rule generally use the 36-month period. Do not apply the listed-share rule to an unlisted holding merely because the company is an Indian company.
Use exact dates
Record the acquisition date and sale or transfer date shown in your contract note or fund statement. A transaction that has not crossed the required period remains short-term, even if it is only one day short. Short-term gains follow different provisions and are not included in the Section 112A LTCG calculation described here.
2. Check whether Section 112A applies
Section 112A covers long-term gains from an equity share in a company, a unit of an equity-oriented fund or a unit of a business trust when the statutory STT conditions are met. The Income Tax Department describes the covered property as “the capital gains arise from the transfer of a long-term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust.”
Listed shares
For shares, verify the required STT treatment on acquisition and transfer. The acquisition-side requirement has exceptions in specified situations, so check the rule that applies to the way you acquired the shares rather than assuming every off-market or corporate-action acquisition qualifies.
Mutual-fund units
For equity-oriented fund units, check STT on transfer and any applicable statutory exception. Your mutual-fund capital-gains statement and transaction statement can help, but you remain responsible for confirming eligibility.
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When Section 112A does not fit
- A share or fund gain that is short-term because the holding period is not met.
- Debt-oriented or otherwise non-qualifying fund units.
- Transactions whose STT facts do not satisfy the applicable conditions.
- Trading activity that must be reported as business income rather than investment capital gains.
3. Apply the correct transfer-date rate
The transfer date, not the date on which you calculate tax, determines which Section 112A rate and threshold apply.
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|---|---|---|---|
| Before 23 July 2024 | ₹1,00,000 | 10% | Eligible Section 112A LTCG for the applicable period |
| On or after 23 July 2024 | ₹1,25,000 | 12.5% | Eligible Section 112A LTCG from shares, equity-oriented funds and qualifying business-trust units |
For transfers on or after 23 July 2024, Section 112A states that the rate is “twelve and one-half per cent” for the relevant transfers. The departmental guidance describes the charge as 12.5% on gains “in excess of Rs. 1,25,000.”
Keep transactions on opposite sides of 23 July 2024 in their respective calculation buckets. Do not apply the post-July rate to a transfer completed before that date, and do not give each sale a separate ₹1,25,000 allowance.
4. Determine the cost of each lot
Acquisitions after 31 January 2018
For a post-31 January 2018 acquisition, start with the actual acquisition cost shown in your records. Include the correct lot cost, not an average that mixes purchases made at different prices.
Qualifying acquisitions on or before 31 January 2018
For a qualifying pre-1 February 2018 listed share or equity-oriented fund holding, the grandfathered cost is:
Grandfathered cost = higher of (actual cost) and (lower of 31 January 2018 fair market value and sale value).
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This prevents a pre-2018 appreciation from being taxed as though it arose entirely after the old regime changed. You need evidence of the 31 January 2018 fair market value (FMV) applicable to the asset. If the sale value is below that FMV, the sale value limits the inner “lower of” amount.
FIFO matching in a demat account
Demat holdings are matched using first-in, first-out (FIFO). When you sell part of a position, match the sale to the oldest available units in that demat account, then use those lots’ dates and costs. A broker’s tax report may perform this matching, but reconcile it with your own transaction statement, especially after transfers between accounts or corporate actions.
Sale consideration and expenses
Start with the full sale consideration and subtract transfer expenses that are allowable under the applicable capital-gains rules. Then subtract the applicable actual or grandfathered cost. Keep the calculation separate from the tax withheld or charges shown by your broker; those entries do not automatically change the capital-gain formula.
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For long-term capital assets transferred on or after 23 July 2024, the current treatment does not permit indexation. Use the original or grandfathered cost rather than an inflation-adjusted cost. This is distinct from identifying the holding as long-term; the holding-period test still applies first.
5. Calculate the gain step by step
- List every disposal. Enter the asset, quantity, acquisition date, acquisition cost, sale date, sale value and transfer expenses for each lot.
- Classify the holding period. Mark each listed share or equity-fund lot held for more than 12 months as potentially long-term. Apply 24 months to unlisted shares and 36 months where the general rule applies.
- Test Section 112A eligibility. Check the asset category and the required STT facts, including any applicable exception.
- Choose the cost basis. Use actual cost for post-31 January 2018 acquisitions. For qualifying earlier holdings, apply the 31 January 2018 grandfathering formula and document the FMV.
- Compute each LTCG. Subtract allowable transfer expenses and the applicable cost from the sale consideration. Do not apply indexation to a transfer on or after 23 July 2024.
- Aggregate qualifying gains. Add all eligible Section 112A LTCG for the relevant transfer-date regime, including gains from shares, equity-oriented funds and qualifying business-trust units. Losses and gains must be handled under the capital-loss rules applicable to your return; do not silently net an ineligible amount into this total.
- Apply the single threshold. For post-23 July 2024 transfers, subtract ₹1,25,000 from the aggregate eligible amount, never below zero. Apply 12.5% to the positive excess. For an earlier transfer, use the earlier ₹1,00,000 threshold and 10% rate.
- Finish the tax computation. Add the resulting base tax to tax on your other income and apply any applicable surcharge and health-and-education cess. The final liability depends on your total income and status, not only on the share transaction.
Worked calculations
Example 1: one post-July 2024 share sale
Assume eligible shares bought after 31 January 2018 cost ₹4,00,000 and were sold on 1 September 2026 for ₹6,00,000. Assume there is no allowable transfer expense, the shares were held for more than 12 months and all STT conditions are satisfied.
| Item | Amount |
|---|---|
| Sale consideration | ₹6,00,000 |
| Actual cost | ₹4,00,000 |
| LTCG | ₹2,00,000 |
| Less: aggregate Section 112A threshold | ₹1,25,000 |
| Taxable excess | ₹75,000 |
| Base Section 112A tax at 12.5% | ₹9,375 |
The ₹9,375 is before any surcharge and health-and-education cess. The threshold is assumed to be unused by every other eligible Section 112A gain in the relevant period.
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Example 2: gains from shares and a fund use one threshold
Suppose your qualifying post-23 July 2024 LTCG is ₹90,000 from listed shares and ₹80,000 from an equity-oriented fund. The aggregate is ₹1,70,000, not two separate calculations. The taxable excess is ₹45,000 (₹1,70,000 − ₹1,25,000), and the base Section 112A tax is ₹5,625 at 12.5%, before surcharge and cess.
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Assume a qualifying holding acquired before 1 February 2018 had an actual cost of ₹1,00,000, a 31 January 2018 FMV of ₹1,80,000 and a sale value of ₹2,50,000. The lower of FMV and sale value is ₹1,80,000; the higher of that amount and actual cost is ₹1,80,000. The LTCG before any allowable expense is therefore ₹70,000.
If the same holding were sold for ₹1,50,000, the lower of FMV and sale value would be ₹1,50,000, and the grandfathered cost would be ₹1,50,000 because it is higher than the ₹1,00,000 actual cost. The resulting gain would be nil before expenses. These examples illustrate the formula; your FMV must be supported by the evidence applicable to your security.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to report the gain in your income-tax return
Use the income-tax return form and assessment-year instructions applicable to your filing year. The exact form and schedule labels can change, so confirm the current instructions before submitting the return. Individuals commonly need the capital-gains schedule, with the Section 112A details reported in the relevant fields for listed equity, equity-oriented funds or business-trust units.
- Reconcile your broker contract notes and demat transaction statement with the mutual-fund capital-gains statement.
- Separate short-term, long-term and non-Section 112A transactions before entering figures.
- Enter sale consideration, cost, eligible expenses, dates and the resulting gain for the correct transfer-date regime.
- Check that the ₹1,25,000 threshold has been used once across all qualifying post-23 July 2024 gains, rather than once per transaction.
- Compare the populated return with information shown on the income-tax portal and resolve unexplained differences before verification.
- Retain the computation and supporting records after filing.
Records to keep
- Broker contract notes and trade confirmations.
- Demat transaction statements showing dates, quantities and FIFO-relevant lots.
- Mutual-fund statements and scheme classification details.
- Purchase invoices, acquisition costs and records of transfers between demat accounts.
- Corporate-action documents for splits, bonuses, mergers or other events that affect cost or holding period.
- Evidence of the 31 January 2018 FMV for qualifying pre-2018 holdings.
- STT information and documentation for any exception to an acquisition-side condition.
- Your filed computation and the applicable assessment-year return instructions.
Common errors and how to correct them
Using the sale date to decide every lot
A single sale can contain lots purchased on different dates. Reconstruct the lots and apply FIFO instead of assigning one purchase date to the whole position.
Applying the allowance per stock or fund
The threshold is aggregate. Recalculate the combined eligible Section 112A gain before applying ₹1,25,000 or the earlier ₹1,00,000 amount.
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Using the wrong rate because the purchase was old
The transfer date controls the rate regime. A share bought years earlier but sold on or after 23 July 2024 falls into the post-change rate calculation, subject to the other conditions.
Indexing a post-July 2024 cost
Remove the inflation adjustment for a transfer on or after 23 July 2024 and use the applicable actual or grandfathered cost.
Assuming every equity-labelled fund qualifies
Confirm that the fund is equity-oriented and that the relevant STT condition is met. A name containing “equity” is not, by itself, a tax conclusion.
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Ignoring the investment-versus-business distinction
Frequent trading, organized activity and the facts of your books may lead to business-income treatment. If your activity is treated as business income, do not force it into the Section 112A investment calculation.
Important scope limits
This guide addresses individual investment capital gains under the cited Indian rules. It does not determine the treatment of derivatives, debt-oriented funds, foreign securities, gifts, complex corporate reorganisations, company or trust taxpayers, non-resident special regimes or activity classified as business income. Tax treaties, notifications, later amendments and return instructions can affect a particular assessment year. Check the law and the return guidance for the year in which the transfer occurred, and obtain professional advice when your records or transaction structure are unusual.
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