If you’ve ever sold a stock or an equity mutual fund and then stared at your ITR wondering, “Is this short-term or long-term… and which section applies?”, this is for you. In plain language, we’ll decode Section 112A vs 111A, show exactly when each kicks in, what tax rate you’ll pay after the 2024 changes, and how to calculate your tax with real examples and dates you can copy into your files.
Updated for FY 2024–25 (AY 2025–26), with the Budget changes effective 23 July 2024. Reuters
Quick answer in one sentence
- Section 111A = Short-term capital gains (STCG) on listed equities/equity MFs/business trust units (where STT applies).
- Section 112A = Long-term capital gains (LTCG) on the same equity assets (where STT applies). Angel One
Why this matters now (and what changed)
On 23 July 2024, India tweaked capital-gains taxes on market-linked assets. Since that date:
- STCG under Section 111A is 20% (earlier 15%).
- LTCG under Section 112A is 12.5% (earlier 10%), with the annual exemption raised to Rs 1.25 lakh (earlier Rs 1 lakh).
- These rates apply based on date of sale (transfers before 23 July 2024 follow the old rates/limits).
Hold this thought—we’ll use it in the tables and examples.
Section 112A vs 111A at a glance
| Feature | Section 111A (STCG) | Section 112A (LTCG) |
|---|---|---|
| What it taxes | Short-term gains on listed equity shares, equity-oriented mutual funds, units of business trusts (where STT is applicable) | Long-term gains on the same equity assets (where STT is applicable) |
| Holding period test | ≤ 12 months = short-term | > 12 months = long-term |
| Core tax rate (sales on/after 23 Jul 2024) | 20% | 12.5% (only on gains exceeding Rs 1.25 lakh in a financial year) |
| Core tax rate (sales before 23 Jul 2024) | 15% | 10% (on gains exceeding Rs 1 lakh) |
| STT condition | Generally required (with limited IFSC exceptions) | Generally required |
| Indexation | Not available | Not available |
| Grandfathering (31 Jan 2018 FMV) | Not relevant | Relevant for equity bought before 1 Feb 2018 |
| Rebate u/s 87A | Departmental stance often denies 87A rebate on 111A; litigation views exist | Not available against tax under Section 112A |
| Cess/Surcharge | As applicable | As applicable |
The single most important trigger: your holding period
For listed equities and equity-oriented units:
- More than 12 months ➜ Section 112A (LTCG).
- 12 months or less ➜ Section 111A (STCG).
After the 2024 simplification, listed securities broadly track the 12-month rule, while the government signalled a 12/24-month two-tier framework for different asset classes. For our equity focus, the 12-month line is the key.
Section 112A: deep dive (your long-term bucket)
Because Section 112A is your long-term equity bucket, it deserves extra attention:
- What qualifies
- Listed equity shares, equity-oriented mutual funds, business trust units.
- STT must be paid at purchase/sale as prescribed (with typical exceptions for certain genuine cases).
- The 2018 “grandfathering” cushion
- If you bought before 1 Feb 2018, your cost for LTCG is the higher of (a) actual cost or (b) lower of (i) FMV as on 31 Jan 2018 and (ii) sale value. This shields pre-2018 appreciation from taxation.
- Tax rate & threshold (by sale date)
- Sold before 23 Jul 2024: 10% on LTCG exceeding Rs 1,00,000.
- Sold on/after 23 Jul 2024: 12.5% on LTCG exceeding Rs 1,25,000.
- No indexation.
- 87A rebate
- Rebate cannot be used to wipe off tax under Section 112A. Even if your other income is low, 112A tax stands alone.
- Set-off basics
- Long-term capital losses can only be set off against long-term capital gains (including those under Section 112A).
- Carry forward rules apply as usual (subject to return filing timelines).
You’ll see Section 112A referenced throughout this guide so you can quickly spot where long-term rules differ from short-term.
Section 111A: the short-term side
When your equity holding period is 12 months or less, Section 111A applies—provided STT conditions are met (standard market trades do). The big change since 23 July 2024 is the rate hike from 15% to 20%. If you sold before that date, the old 15% applies.
Before vs After: one clean table you can bookmark
| Sale Date (Date of Transfer) | Section 111A (STCG) | Section 112A (LTCG) | Notes |
|---|---|---|---|
| Up to 22 Jul 2024 | 15% | 10% on LTCG exceeding Rs 1,00,000 | Old regime applies |
| On/After 23 Jul 2024 | 20% | 12.5% on LTCG exceeding Rs 1,25,000 | New regime (Budget 2024) |
| Cess/Surcharge | + cess/surcharge as applicable | + cess/surcharge as applicable | No indexation on these equity gains |
Practical examples (with dates)
Example A — Long-term sale after 23 Jul 2024 (Section 112A)
- Buy: 10 June 2023 @ Rs 100,000 (equity fund).
- Sell: 30 August 2024 @ Rs 260,000.
- Holding: ~14.5 months ➜ long-term, so Section 112A.
- Gain: Rs 160,000.
- 112A annual exemption: Rs 1,25,000.
- Taxable LTCG = 160,000 − 125,000 = Rs 35,000.
- Tax = 12.5% of 35,000 = Rs 4,375 (+ cess/surcharge).
- Why: sale is after 23 Jul 2024 ➜ new threshold/rate.
Example B — Short-term sale after 23 Jul 2024 (Section 111A)
- Buy: 15 February 2025 @ Rs 400,000 (listed shares).
- Sell: 10 July 2025 @ Rs 460,000.
- Holding: ~5 months ➜ short-term, Section 111A.
- Gain: Rs 60,000.
- Tax = 20% of 60,000 = Rs 12,000 (+ cess/surcharge).
- Why: sale is after 23 Jul 2024 ➜ 20% applies.
Example C — Long-term sale before 23 Jul 2024 (Section 112A, old rate)
- Buy: 12 April 2022 @ Rs 300,000 (equity MF).
- Sell: 30 June 2024 @ Rs 430,000.
- Holding: > 12 months ➜ Section 112A.
- Gain: Rs 130,000.
- Exemption (old): Rs 1,00,000.
- Taxable LTCG = 130,000 − 100,000 = Rs 30,000.
- Tax = 10% of 30,000 = Rs 3,000 (+ cess/surcharge).
- Why: sale before 23 Jul 2024 ➜ old 10%/1-lakh limit.
Example D — Grandfathering under Section 112A
- Buy: 10 July 2016 @ Rs 80,000 (listed share).
- FMV on 31 Jan 2018: Rs 150,000.
- Sell: 5 September 2025 @ Rs 210,000.
- Compute cost = higher of actual (80,000) or lower of FMV (150,000) and sale (210,000) ➜ Rs 150,000.
- LTCG = 210,000 − 150,000 = Rs 60,000.
- Within the Rs 1.25 lakh annual exemption ➜ No tax under Section 112A.
The “Is my gain short-term or long-term?” checklist
- Check the holding period from trade date to trade date (broker contract notes show this clearly).
- > 12 months ➜ Section 112A.
- ≤ 12 months ➜ Section 111A.
- Check the sale date vs 23 July 2024 for the correct rate/exemption. Reuters
- Confirm STT was paid as required (market/AMC statements reflect this). Limited IFSC exceptions exist.
- If bought before 1 Feb 2018, apply the grandfathering rule while computing cost (use 31-Jan-2018 FMV).
- Remember: rebate u/s 87A doesn’t offset 112A tax; don’t plan around it.
Section 112A vs 111A — Frequently tripped-over nuances
- Multiple sales in one year: Under Section 112A, the Rs 1.25 lakh exemption is per financial year, per assessee across all qualifying LTCG. Plan redemptions accordingly.
- Set-offs: Long-term loss can offset only long-term gains (including Section 112A gains). Short-term loss can offset both.
- Dividend vs buyback vs capital gains: Post-2024, the Budget also tweaked some related securities taxes; stay focused on the sale date rules for your CG.
- Switching in equity funds: Many AMCs treat “switch” as redemption + purchase; if your switch generates a gain, Section 111A or Section 112A applies based on holding period of the old fund units.
Worked comparison (numbers side by side)
| Scenario | A: Sell in 10 months | B: Sell in 14 months |
|---|---|---|
| Asset | Listed equity MF | Listed equity MF |
| Buy | 1 Sep 2024 @ Rs 5,00,000 | 1 Sep 2024 @ Rs 5,00,000 |
| Sell | 1 July 2025 @ Rs 5,80,000 | 10 Dec 2025 @ Rs 5,80,000 |
| Holding period | ~10 months | ~15 months |
| Section | 111A (STCG) | 112A (LTCG) |
| Gain | Rs 80,000 | Rs 80,000 |
| Exemption | Not applicable | Within Rs 1.25 lakh – effectively nil taxed |
| Tax rate | 20% | 12.5% on excess over Rs 1.25 lakh |
| Tax | Rs 16,000 (+ cess) | Rs 0 (since 80k < 1.25L) |
This is why many investors manage redemptions to fall under Section 112A where sensible (without distorting their asset mix).
Filing pointers: where to put what
- Section 111A gains go into the Schedule CG (short-term), separately disclosed as taxed at special rates.
- Section 112A gains go into the Schedule CG (long-term on equity), with the exemption applied to the aggregate gain.
- Cross-check that your Section 112A totals don’t claim 87A rebate in error.
Common mistakes (and quick fixes)
- Mis-tagging period
Counting exact days matters. If your 12th month crosses on a weekend/holiday, the trade date still rules. When in doubt, ask your broker for the “period of holding” line item. - Ignoring STT
Off-market transfers generally won’t meet the Section 111A/112A conditions. Confirm STT in your contract note/AMC statement. - Forgetting grandfathering
If you bought before Feb-2018, Section 112A lets you use 31-Jan-2018 FMV logic. Missing this can overstate tax. - Assuming 87A rebate wipes out 112A tax
It doesn’t. Plan liquidity accordingly. - Mixing pre- and post-23-Jul-2024 sales
In FY 2024-25, you might have both old and new rate sales. Keep a date-wise working for Section 111A and Section 112A separately.
Mini-FAQ on Section 112A vs 111A
Q1. What counts as “long-term” for equity?
For listed equity/equity-oriented units: holding period > 12 months ➜ Section 112A.
Q2. What’s the current exemption under Section 112A?
Rs 1.25 lakh per financial year for sales on/after 23 Jul 2024; Rs 1 lakh for sales before that date.
Q3. Does indexation apply to equity LTCG under Section 112A?
No. Section 112A is a flat-rate regime without indexation.
Q4. Can I use 87A rebate against 112A tax?
No; Section 112A specifically disallows using 87A rebate to erase LTCG tax.
Q5. Do I pay STCG at slab rates or a special rate?
For eligible equity sales, Section 111A levies a special rate (20% post 23 Jul 2024; 15% earlier).
Final take (and how to use this guide)
- Use the 12-month line to decide Section 112A vs 111A.
- Use the sale date to choose the correct rate/exemption (pre/post 23 Jul 2024).
- For legacy holdings, apply the grandfathering rule under Section 112A.
- Keep your Section 112A and Section 111A workings separate in your ITR files to avoid mismatches.
If you want a quick review of your trades or a ready-to-file Section 112A/Section 111A schedule, our team can help.
Need help with your capital gains working?
We routinely prepare date-wise working papers for Section 112A and Section 111A, apply grandfathering, and optimize the Rs 1.25 lakh annual window—so you don’t overpay. Contact Indefine and we’ll sort it out end-to-end.
