STCG Tax on Equity Shares Under Section 111A: Guide 2026

If you sold listed equity shares or equity mutual fund units within 12 months and paid Securities Transaction Tax, your short-term capital gain is taxed under Section 111A of the Income Tax Act 1961. This is the single rule that decides how much tax you owe on a quick stock or fund exit.

The Finance (No. 2) Act 2024, announced in Budget 2024, raised the Section 111A rate. The cut-off is the date of transfer, not your purchase date.

So a share you bought in March 2024 and sold in August 2024 is taxed at 20%, because the sale fell after 23 July 2024.

Section 111A applies a single concessional flat rate to short-term gains on a narrow set of assets. To qualify, all of these must be true 📌:

• The asset is a listed equity share, a unit of an equity-oriented mutual fund, or a unit of a business trust.
• It was held for 12 months or less before sale (this makes the gain short-term).
• The sale is routed through a recognised stock exchange and Securities Transaction Tax (STT) was paid.

If STT was not paid, or the asset is something else (unlisted shares, debt funds, gold, property), Section 111A does not apply. Those gains are taxed at slab rates or under other provisions instead. Gains on these assets often need ITR-3 reporting if you trade actively. See our guide on F&O and trading losses in ITR-3.

The Section 111A rate is regime-independent. Whether you opt for the old regime or the default new regime for AY 2026-27 (FY 2025-26), your qualifying STCG is taxed at the same flat 20%. Special-rate capital gains are not part of your slab income, so changing regimes does not change this number. Your regime choice only affects how your other income is taxed. If you are unsure which return applies to you, read which ITR form to file for 2026-27.

A resident individual or resident HUF gets one useful relief. If your other income (everything except the 111A gain) is below the basic exemption limit, you can set the shortfall against the STCG before the 20% rate is applied. 💡

• Suppose a retiree's only other income is ₹2,40,000 and the basic exemption limit is ₹3,00,000 (new regime, AY 2026-27).
• The unused exemption is ₹60,000.
• If the STCG is ₹2,00,000, only ₹1,40,000 is taxed at 20% after using up the ₹60,000 shortfall.

This adjustment is available only to residents. A non-resident individual or HUF cannot set the basic exemption against 111A gains.

This is where many small investors slip. For AY 2026-27, the Section 87A rebate cannot be claimed against tax on special-rate income, including Section 111A STCG. Finance Act 2025 made this explicit: the rebate does not apply to income chargeable at special rates. So even if your total income is within the rebate threshold, the tax on your STCG portion stands and must be paid.

(An ITAT order had earlier allowed the rebate in some AY 2024-25 cases, but for the current AY 2026-27 the law now clearly bars it. Treat 111A STCG tax as payable regardless of the rebate.)

The 20% is the base rate. On top of it:

• Surcharge applies if your total income crosses the surcharge thresholds. Importantly, the surcharge on 111A and 112A capital gains is capped at 15%, even if higher slabs would otherwise push it to 25% or 37%.
• Health and Education Cess of 4% is charged on the income-tax plus surcharge.

So a high-income investor's effective 111A rate is 20% + capped surcharge + 4% cess on the total.

If you held the same listed shares or equity fund units for more than 12 months, the gain becomes long-term and is taxed under Section 112A, not 111A. The LTCG rate is 12.5% on gains above ₹1.25 lakh a year for sales on or after 23 July 2024. The holding period is the dividing line: 12 months or less means 111A short-term, more than 12 months means 112A long-term. For the full long-term picture, read our companion guide on LTCG tax on equity shares and mutual funds under Section 112A.

This is illustrative only. Your actual liability depends on your brokerage statement, total income, residency, and surcharge band.

• Using the old 15% rate for a post-23 July 2024 sale. The rate is 20% now under Section 111A.
• Counting the purchase date for the cut-off. The trigger is the sale (transfer) date.
• Assuming the 87A rebate wipes out STCG tax. It does not apply to 111A gains for AY 2026-27.
• Forgetting STT. If STT was not paid on sale, Section 111A and its concessional rate do not apply.
• Mixing up debt and equity funds. Only equity-oriented funds qualify; debt fund gains are taxed differently.

Stay on top of your filing window with the RTI deadline calculator, and read The RTI Playbook for using right-to-information to get records from public authorities.

For any sale on or after 23 July 2024, the flat rate is 20%, plus surcharge (capped at 15% for these gains) and 4% cess. The earlier rate was 15%.

No. The Section 111A rate is the same in both the old and new regimes for AY 2026-27. Special-rate gains are taxed separately from your slab income.

No. For AY 2026-27, the 87A rebate does not apply to Section 111A special-rate income, even if your total income is within the rebate threshold.

Yes, if you are a resident individual or HUF and your other income is below the basic exemption limit. The shortfall is set against the STCG before the 20% rate applies. Non-residents cannot do this.

Then the gain is long-term under Section 112A, taxed at 12.5% above ₹1.25 lakh a year, not under Section 111A.

No. Virtual digital assets are taxed under a separate flat 30% regime. See our guide on crypto and VDA tax under Section 115BBH and 194S.

• Income Tax Department, Section 111A page: https://www.incometaxindia.gov.in/w/section-111a-22
• Income Tax Department, Capital Gain and Tax rates: https://www.incometaxindia.gov.in/w/capital-gain
• Finance (No. 2) Act 2024 / Budget 2024 (rate raised to 20% w.e.f. 23 July 2024)
• Finance Act 2025 (87A rebate excluded for special-rate income from FY 2025-26)