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Listed shares and equity mutual fund gains, Sec 196 and 198 (old 111A and 112A; ₹1.25 lakh exemption, 31 January 2018 grandfathering)

  • When you sell listed shares or equity mutual funds, short-term gains are taxed at 20% and long-term gains above ₹1.25 lakh at 12.5% (for sales from 23 July 2024).
  • Deadline: With the ITR: AY 2026-27 due date 31 July 2026 for ITR-2 (non-audit). Advance tax due in the quarter of sale to avoid Sec 425 (old 234C) interest.
  • Done in 2 working days after all broker and CAS statements
  • Prepared by your Savvy, checked by a CA
  1. Broker tax P&L
  2. Did you trade intraday or in F&O as well as selling delivery holdings?
  3. Download tax P&L from each broker and the consolidated MF capital gains statement
  4. Capital gains working
The law and the stepsPay and start · ₹1,999Yearly, + 18% GST

Answer in brief

When you sell listed shares or equity mutual funds, short-term gains are taxed at 20% and long-term gains above ₹1.25 lakh at 12.5% (for sales from 23 July 2024). We pull your broker and mutual fund statements, apply the 31 January 2018 cost rule for old holdings, and fill Schedule CG and Schedule 112A so the return matches your AIS.

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From the official sources

What the law says, and what trips people up

From the official portal's manuals and FAQs, with the source for each point.

The law

  • Income-tax Act 1961, Sec 111A (now Sec 196)

    Short-term gain on STT-paid listed equity, equity fund and business trust units: 15% for transfers before 23 July 2024, 20% on or afterSource

  • Income-tax Act 1961, Sec 112A(1) (now Sec 198) and (2)

    Long-term gain above ₹1,25,000 taxed at 10% before 23 July 2024 and 12.5% on or after; the ₹1,25,000 limit applies to the total under both rates; STT on acquisition and transfer for shares, on transfer for unitsSource

  • Income-tax Act 1961, Sec 112A(5) (now Sec 198) and (6)

    Chapter VI-A deductions and Sec 156 (old Sec 87A) rebate cannot be used against Sec 198 (old Sec 112A) gains or tax on themSource

  • Income-tax Act 1961, Sec 2(42A) (now Sec 2(101))

    Listed shares and equity fund units are long term if held more than 12 monthsSource

  • Income-tax Act 1961, Sec 55(2)(ac) (now Sec 90; grandfathering)

    For shares and units bought before 1 February 2018, cost is the higher of actual cost and the lower of FMV on 31 January 2018 (highest quoted price that day; NAV for units) and the sale priceSource

  • Income-tax Act 1961, Sec 48 (now Sec 72) proviso

    STT is not deductible; brokerage, exchange charges, stamp duty and GST on brokerage are transfer expensesSource

  • Income-tax Act 2025, Sec 196

    From tax year 2026-27: short-term gain on STT-paid equity at 20% (replaces Sec 111A)Source

  • Income-tax Act 2025, Sec 198

    From tax year 2026-27: long-term gain above ₹1,25,000 at 12.5% (replaces Sec 112A); basic exemption shortfall adjustment for residents retainedSource

  • Income-tax Act 2025, commencement

    1961 Act repealed on 1 April 2026; returns for AY 2026-27 (FY 2025-26) use old Act formsSource

  • Government fee

    No government fee to report capital gains. Tax at 20% or 12.5% plus surcharge and 4% cess is paid by challan (advance tax or self-assessment tax) before filing. Source: https://incometaxindia.gov.in/Tutorials/15-%20LTCG.pdf

  • Late fee or penalty

    Return after the Sec 263(1) (old Sec 139(1)) due date: fee under Sec 428 (old Sec 234F) of ₹5,000, capped at ₹1,000 where total income does not exceed ₹5 lakh (the official page opened shows the original 2017 text, which also had a ₹10,000 tier after 31 December). Source: https://www.incometaxindia.gov.in/w/section-234f . A belated return also loses the right to carry forward any capital loss (Sec 121, old Sec 80). Source: https://www.incometaxindia.gov.in/w/section-80-7

On the portal

  1. Log in to the e-Filing portal and download AIS and TIS (Services > Annual Information Statement)
  2. e-File > Income Tax Returns > File Income Tax Return > AY 2026-27 > Online
  3. Select status Individual and choose ITR-2 (or let the portal guide you)
  4. In Schedule 112A, add scrip-wise rows for shares bought on or before 31 January 2018 (ISIN, units, sale value, cost, FMV on 31 January 2018); other 112A sales can be entered as per the form
  5. In Schedule CG, enter short-term gains under Sec 111A and any other capital gains, split by date of transfer
  6. Fill Schedule CYLA, BFLA and CFL if there are losses; check Part B-TTI
  7. Pay any balance via e-Pay Tax, then Proceed to Verification and e-verify

What trips people up

  • Grandfathered shares entered as one consolidated row in Schedule 112A

    The official ITR-2 user manual makes scrip-wise details mandatory for shares bought on or before 31 January 2018Source

  • Practitioners disagree on whether post-2018 112A sales can be clubbed in one row

    Use the CSV bulk upload with one row per ISIN; it never fails validationSource

  • Broker FMV on 31 January 2018 not adjusted for later splits or bonuses

    Recompute FMV per share from exchange data after the corporate actionSource

  • Shares transferred in from another broker show no buy price, so the whole sale value looks like gain

    Enter acquisition details in the broker back office or edit the working from the original contract noteSource

  • Return figures differ from AIS and a notice follows

    Reconcile AIS sale values with broker statements before filing; give feedback in AIS where AIS is wrongSource

  • Sec 87A rebate claimed against 112A tax

    Not allowed under Sec 112A(6); compute rebate on other income onlySource

People ask

My long-term gain is ₹1.1 lakh. Do I still report it?

Yes. It is tax free up to ₹1,25,000 but must be reported. ITR-1 now allows 112A gains up to ₹1,25,000 if you have no other capital gains or losses to carry forward.Source

Is STT deductible from my gain?

No. Brokerage, exchange fees, stamp duty and GST are deductible; STT is not.Source

Which FMV do I use for 31 January 2018?

The highest price quoted on the exchange that day, or on the last earlier trading day if it did not trade; NAV for mutual fund units.Source

Did the ₹1.25 lakh limit apply for the whole of FY 2024-25?

Yes. The limit applies to the total of 112A gains for the year, under both the 10% and 12.5% rates.Source

Does the new Income-tax Act 2025 change the rates from April 2026?

No change in rates: Sec 196 keeps 20% and Sec 198 keeps 12.5% above ₹1,25,000. Only the section numbers change.Source

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  • Broker tax P&L, all brokers
  • CAMS or KFintech capital gains statement
  • AIS and TIS download
  • Purchase proof for pre-2018 shares
  • Off-market transfer and gift detailsOptional
  • Brought forward capital loss detailsOptional
  • Advance tax challans paidOptional

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Yearly. Delivered in 2 working days after all broker and CAS statements. Due: With the ITR: AY 2026-27 due date 31 July 2026 for ITR-2 (non-audit). Advance tax due in the quarter of sale to avoid Sec 425 (old 234C) interest.

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