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—ltcg-tax-equity-shares-mutual-funds-section-112a-india [2026/07/10 21:00] (current) – created - external edit 127.0.0.1
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 +{{htmlmetatags>metatag-title=(LTCG Tax Shares Mutual Funds Section 112A 2026)&metatag-description=(LTCG on listed shares and equity mutual funds is taxed at 12.5 percent under Section 112A beyond Rs 1.25 lakh a year. Learn how to compute and file it.)&metatag-keywords=(section 112A, LTCG tax shares, equity mutual fund capital gains, schedule 112A ITR, grandfathering 31 January 2018)&metatag-robots=(index,follow)&metatag-og:title=(LTCG Tax on Shares and Mutual Funds Section 112A 2026)&metatag-og:description=(LTCG on listed shares and equity mutual funds is taxed at 12.5 percent under Section 112A beyond Rs 1.25 lakh a year. Learn how to compute and file it.)&metatag-og:type=(article)}}
  
 +====== 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.
 +
 +<WRAP info>
 +**Quick answer:** Long-term capital gains on listed equity shares, equity-oriented mutual fund units and business-trust units where STT is paid are taxed under Section 112A of the Income Tax Act 1961. Holding period for "long-term" is more than 12 months. The first ₹1.25 lakh of such gains in a financial year is exempt; the balance is taxed at 12.5 percent for transfers on or after 23 July 2024. No indexation applies, and the Section 87A rebate cannot reduce this tax.
 +</WRAP>
 +
 +===== What this is =====
 +
 +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.
 +
 +===== Legal position =====
 +
 +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**.
 +
 +===== Step-by-step to compute and report LTCG =====
 +
 +  - Confirm the holding period for each sale. Only assets held more than 12 months from purchase to sale fall under Section 112A.
 +  - Check that STT was paid on the sale through a recognised stock exchange. Off-market transfers usually fall outside 112A.
 +  - 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.
 +  - Compute the gain for each scrip: sale value minus cost of acquisition minus transfer expenses.
 +  - Add up all such long-term gains for the financial year and subtract the ₹1.25 lakh exemption.
 +  - Apply 12.5 percent to the balance for transfers on or after 23 July 2024.
 +  - Log in to the e-filing portal, open ITR-2 or ITR-3, and enter each sale scrip-wise in Schedule 112A.
 +  - Cross-check the figures against your Annual Information Statement before submitting, then verify the return.
 +
 +===== Documents required =====
 +
 +  * 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
 +
 +===== Common mistakes =====
 +
 +  * 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.
 +
 +<WRAP center round box 80%>
 +**Worked example.** Kashvi Pathak bought 200 listed shares at ₹500 each on 10 March 2021 for ₹1,00,000. She sold all 200 on 5 September 2024 at ₹1,200 each for ₹2,40,000. The holding period is over 12 months and STT was paid, so Section 112A applies. As the shares were bought after 1 February 2018, the cost is the actual ₹1,00,000. Her gain is ₹2,40,000 minus ₹1,00,000 equals ₹1,40,000. After the ₹1.25 lakh exemption, ₹15,000 is taxable. At 12.5 percent, the tax is ₹1,875 plus applicable cess. She reports the sale scrip-wise in Schedule 112A of ITR-2.
 +</WRAP>
 +
 +===== RTI angle =====
 +
 +Tax computation and filing happen on the e-filing portal, not through RTI. But you can use the [[https://righttoinformation.wiki/book|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.
 +
 +<code>
 +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
 +</code>
 +
 +You can also prepare a clean request with the [[https://righttoinformation.wiki/tools/ai-rti-draft-app.html|AI RTI Drafter]] and escalate a delayed or denied reply using the [[https://righttoinformation.wiki/tools/first-appeal-app.html|First Appeal Builder]].
 +
 +===== FAQ =====
 +
 +==== Q. What is the LTCG tax rate under Section 112A in 2026? ====
 +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.
 +
 +==== Q. How much LTCG is exempt each year? ====
 +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.
 +
 +==== Q. What is the holding period to qualify as long-term? ====
 +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.
 +
 +==== Q. Does the grandfathering rule still apply? ====
 +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.
 +
 +==== Q. Can I use the Section 87A rebate against this tax? ====
 +No. The rebate under Section 87A cannot be set off against tax computed under Section 112A.
 +
 +==== Q. Which ITR form and schedule do I use? ====
 +Report the gains scrip-wise in Schedule 112A of ITR-2 or ITR-3. Do not use ITR-1 when you have capital gains.
 +
 +==== Q. Does indexation apply to gains under Section 112A? ====
 +No. Section 112A specifically denies the indexation benefit, so the cost is not adjusted for inflation.
 +
 +==== Q. Are debt or unlisted shares covered by Section 112A? ====
 +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.
 +
 +===== Sources =====
 +
 +  * 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
 +
 +===== Related =====
 +
 +  * [[https://righttoinformation.wiki/wrong-capital-gains-ais-share-mutual-fund-sale|Wrong capital gains in AIS after share or mutual fund sale]]
 +  * [[https://righttoinformation.wiki/capital-gains-account-scheme-property-sale-section-54-india|Capital Gains Account Scheme and Section 54]]
 +  * [[https://righttoinformation.wiki/ais-form-26as-mismatch-property-sale-fd-interest-salary|AIS and Form 26AS mismatch on property, FD interest and salary]]
 +  * [[https://righttoinformation.wiki/tools/ai-rti-draft-app.html|AI RTI Drafter]]
 +  * [[https://righttoinformation.wiki/tools/first-appeal-app.html|First Appeal Builder]]
 +  * [[:act|RTI Act, 2005]]
 +  * [[:cases|Case-law database]]
 +
 +
 +**See also:** [[https://righttoinformation.wiki/sebi-closing-auction-session-cas-2026|SEBI Closing Auction Session: the new stock closing price method]]
 +  * [[https://righttoinformation.wiki/share-buyback-tax-capital-gains-promoter-2026-india|Buyback tax 2026: capital gains return, promoters pay extra]]
 +  * [[https://righttoinformation.wiki/stt-hike-futures-options-budget-2026-india|STT hike 2026: new futures and options rates]]
 +===== LTCG tax on equity shares and mutual funds: Section 112A complete guide? =====
 +
 +Section 112A of the Income Tax Act governs Long-Term Capital Gains (LTCG) tax on equity shares and equity-oriented mutual funds. Here is the complete guide:
 +
 +  - **Step 1: What is Section 112A?** Introduced in FY 2018-19, it taxes long-term capital gains on equity shares and equity-oriented mutual funds. Before 112A, LTCG on these was tax-free. Key rates (as amended through Budget 2024): (a) LTCG exceeding Rs 1.25 lakh per year (raised from Rs 1 lakh) is taxed at 12.5% (raised from 10%), (b) the exemption of Rs 1.25 lakh is per financial year, (c) the rate applies to gains on equity shares (STT paid) and equity-oriented mutual funds.
 +  - **Step 2: What qualifies?** (a) equity shares listed on a recognized stock exchange (STT paid at the time of purchase and sale), (b) equity-oriented mutual funds (at least 65% in equity), (c) units of business trusts, (d) the holding period for long-term: more than 12 months for equity shares and equity-oriented MFs.
 +  - **Step 3: How to calculate.** (a) determine the sale price minus the cost of acquisition, (b) for shares purchased BEFORE January 31, 2018: cost of acquisition = higher of (i) actual purchase price, (ii) lower of (a) highest price on Jan 31, 2018, (b) highest price in the preceding 12 months, (c) for shares purchased AFTER Jan 31, 2018: cost = actual purchase price, (d) subtract the Rs 1.25 lakh exemption, (e) apply 12.5% rate on the remaining gain.
 +  - **Step 4: Grandfathering (Jan 31, 2018).** (a) gains accrued before Jan 31, 2018 are grandfathered (tax-free), (b) only gains AFTER Jan 31, 2018 are taxed under 112A, (c) the cost of acquisition is adjusted as described above.
 +  - **Step 5: STT compliance.** (a) STT must be paid at the time of BOTH purchase and sale for equity shares, (b) for mutual funds: STT is paid by the fund house at the time of sale, (c) if STT was not paid: the gain is taxed at 20% with indexation (regular LTCG rate for non-112A assets).
 +  - **Step 6: Reporting in ITR.** (a) report LTCG under "Capital Gains" schedule in ITR-2 or ITR-3, (b) specify: scrip-wise details (for shares) or folio-wise (for MFs), (c) the AIS/TIS may show the transactions — verify, (d) the exemption of Rs 1.25 lakh is automatically applied by the ITR utility.
 +  - **Step 7: File RTI.** File RTI with CBDT asking for: (a) the number of returns with Section 112A gains, (b) the total LTCG reported under 112A, (c) the average LTCG per return.
 +
 +See [[https://righttoinformation.wiki/old-vs-new-tax-regime|Old vs New Tax Regime]] and [[https://righttoinformation.wiki/which-itr-form-to-file-2026-27-india|Which ITR Form]].
 +
 +{{tag>ltcg section 112a equity shares mutual funds 12.5 percent 1.25 lakh grandfathering stt 2026}}