ITR
Small equity mutual fund gain in ITR-1
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Facts
Yes, from AY 2026-27 ITR-1 allows long-term capital gains under Sec 112A up to ₹1.25 lakh, as long as there are no short-term gains and no carried-forward losses.
Provisions and law
- Sec 112A, Income-tax Act 1961 (now Sec 198)Long-term gains on listed equity shares and equity funds are taxed at a special rate, with gains up to ₹1.25 lakh exempt.
- Rule 12, Income-tax Rules 1962 (now Rule 164, Income-tax Rules 2026)Sets which ITR form applies, its eligibility conditions and how it is verified.
Analysis
A ₹70,000 long-term gain is within the ₹1.25 lakh exemption, so no tax arises on it, but you still report it. If the same year you also had a short-term gain of even ₹2,000 from switching funds, you must use ITR-2. Use the capital gains statement from your fund house or registrar to check.
Conclusion
- Download the capital gains statement for FY 2025-26.
- Check for any short-term gains.
- If only long-term equity gains up to ₹1.25 lakh, report them in ITR-1.
- Otherwise use ITR-2.
- Keep the statement with your records.
A Savvy can do this for you
Income tax return for salaried and pensioners, ITR-1 (Sahaj)
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