LTCG Tax on Shares and Mutual Funds Section 112A 2026

If you sold listed shares or equity mutual fund units held for more than 12 months, the profit beyond ₹1.25 lakh a year is taxed at a flat 12.5 percent under Section 112A, and you must report every sale scrip-wise in Schedule 112A of your ITR. Get the cut-off dates wrong and you overpay or invite a notice.

Section 112A is the special rule that taxes long-term profit when you sell listed equity shares or equity mutual fund units on which Securities Transaction Tax has been paid. It replaced the earlier tax-free status of such gains from 1 April 2018 and now charges a flat rate above a yearly exemption.

Section 112A of the Income Tax Act, 1961 governs long-term capital gains (LTCG) on three asset types where Securities Transaction Tax (STT) has been paid: listed equity shares, units of equity-oriented mutual funds, and units of a business trust. An asset is “long-term” if held for more than 12 months.

The rate and exemption changed through the Finance (No.2) Act, 2024. For transfers made on or after 23 July 2024, the LTCG rate rose from 10 percent to 12.5 percent, and the annual exemption rose from ₹1 lakh to ₹1.25 lakh. The higher ₹1.25 lakh exemption applies for the whole financial year 2024-25. Section 112A allows no indexation benefit, and the rebate under Section 87A is not available against tax computed under 112A.

A grandfathering rule protects gains that built up before the tax existed. For shares or units acquired before 1 February 2018, the cost of acquisition is the higher of (a) the actual cost, and (b) the lower of (i) the fair market value as on 31 January 2018 and (ii) the actual sale consideration. This ensures only the gain accrued after 31 January 2018 is taxed.

The administering authority is the Income Tax Department through the e-filing portal at incometax.gov.in. You report these gains in Schedule 112A of ITR-2 or ITR-3.

1. Confirm the holding period for each sale. Only assets held more than 12 months from purchase to sale fall under Section 112A.
2. Check that STT was paid on the sale through a recognised stock exchange. Off-market transfers usually fall outside 112A.
3. Work out the cost of acquisition. For purchases on or after 1 February 2018, use the actual cost. For earlier purchases, apply the grandfathering rule above.
4. Compute the gain for each scrip: sale value minus cost of acquisition minus transfer expenses.
5. Add up all such long-term gains for the financial year and subtract the ₹1.25 lakh exemption.
6. Apply 12.5 percent to the balance for transfers on or after 23 July 2024.
7. Log in to the e-filing portal, open ITR-2 or ITR-3, and enter each sale scrip-wise in Schedule 112A.
8. Cross-check the figures against your Annual Information Statement before submitting, then verify the return.

• Broker or mutual fund capital gains statement for the financial year
• Contract notes or transaction statements showing purchase and sale dates
• Demat account holding statement
• Fair market value as on 31 January 2018 for shares or units bought earlier
• Annual Information Statement and Form 26AS from the portal
• PAN and registered e-filing credentials

• Misreading the 23 July 2024 split. Only the rate changes at this date: transfers before it are taxed at 10 percent, on or after it at 12.5 percent. The ₹1.25 lakh annual exemption applies to the whole of financial year 2024-25 regardless of the transfer date. Splitting the exemption by date understates or overstates tax.
• Skipping the grandfathering step for pre-1 February 2018 holdings and paying tax on gains that legally accrued before the tax existed.
• Expecting the Section 87A rebate to wipe out 112A tax. It cannot be applied against gains taxed under this section.
• Claiming indexation. Section 112A allows none.
• Filing ITR-1 when you have capital gains. Use ITR-2 or ITR-3 with Schedule 112A.
• Reporting a single lump sum instead of scrip-wise entries, which triggers AIS mismatch queries.

Tax computation and filing happen on the e-filing portal, not through RTI. But you can use the The RTI Playbook approach to seek records or policy clarifications from a public authority, such as a CPIO in the Income Tax Department, about circulars, processing of a refund, or a grievance already filed. RTI cannot ask the department to calculate your gains or give tax advice, only to share existing records or decisions.

To: The Central Public Information Officer
Office of the Income Tax Department, [your jurisdiction]

Subject: Request for information under the RTI Act, 2005

Under Section 6(1) of the RTI Act, 2005, please provide:
1. Certified copies of any circular or instruction relied upon while processing
   my income tax return for AY 2025-26 (PAN: XXXXX0000X).
2. The current status and file notings of grievance reference number [number]
   filed by me on [date].

I request this information within the 30-day limit under Section 7(1).
If part of this information is held by another office, kindly transfer that part
under Section 6(3). If access is refused, please cite the exemption and the name
of the First Appellate Authority under Section 19(1).

Fee of Rs 10 is enclosed.

Name, address, signature, date

You can also prepare a clean request with the AI RTI Drafter and escalate a delayed or denied reply using the First Appeal Builder.

For transfers on or after 23 July 2024, long-term capital gains above ₹1.25 lakh in a financial year are taxed at a flat 12.5 percent, with no indexation.

The first ₹1.25 lakh of long-term gains under Section 112A in a financial year is exempt. The higher ₹1.25 lakh limit applies for the whole of FY 2024-25.

More than 12 months from the date of purchase to the date of sale for listed equity shares and equity-oriented mutual fund units where STT is paid.

Yes. For shares or units bought before 1 February 2018, the cost is the higher of the actual cost and the lower of the 31 January 2018 fair market value and the sale price, so only post-31 January 2018 gains are taxed.

No. The rebate under Section 87A cannot be set off against tax computed under Section 112A.

Report the gains scrip-wise in Schedule 112A of ITR-2 or ITR-3. Do not use ITR-1 when you have capital gains.

No. Section 112A specifically denies the indexation benefit, so the cost is not adjusted for inflation.

No. Section 112A covers only listed equity shares, equity-oriented mutual fund units and business-trust units on which STT is paid. Other assets follow different capital gains rules.

• Income Tax Department e-filing portal: https://www.incometax.gov.in
• Income Tax Department: https://incometaxindia.gov.in
• Finance (No.2) Act, 2024, Section 112A amendment
• Income Tax Act, 1961, Section 112A and Section 87A

• Wrong capital gains in AIS after share or mutual fund sale
• Capital Gains Account Scheme and Section 54
• AIS and Form 26AS mismatch on property, FD interest and salary
• AI RTI Drafter
• First Appeal Builder
• RTI Act, 2005
• Case-law database