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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchFor a qualifying long-term transfer under section 112A made on or after 23 July 2024, calculate each eligible gain using the correct cost basis, add all qualifying stock and equity-oriented mutual-fund gains for the financial year, subtract the single annual threshold of ₹1,25,000, and apply 12.5% to the balance. Add any applicable surcharge and the 4% health and education cess. This produces the section 112A tax before taxpayer-specific adjustments; residence, other income, unused basic exemption, losses and return details can change the final liability.
The date of sale controls the rate. The acquisition date of 31 January 2018 controls whether the special grandfathered cost rule is available. Those are separate tests, and confusing them is a common source of incorrect calculations.
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What changed in the LTCG calculation
India changed the section 112A treatment for qualifying listed equity shares and equity-oriented fund units transferred on or after 23 July 2024. The rate rose from 10% to 12.5%, while the annual aggregate threshold rose from ₹1,00,000 to ₹1,25,000. The new threshold applies for financial year 2024–25 and later years according to the Income Tax Department’s capital-gains FAQ.
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| Transfer date | Section 112A rate | Annual aggregate amount below which section 112A tax is not charged |
|---|---|---|
| Before 23 July 2024 | 10% | ₹1,00,000 under the earlier rule |
| On or after 23 July 2024 | 12.5% | ₹1,25,000 under the amended rule |
The ₹1,25,000 amount is not a separate allowance for every share, mutual fund or demat account. It is one threshold for the year’s aggregate qualifying section 112A gains. A taxpayer who sells three stocks and two qualifying funds must combine their eligible gains before applying the threshold.
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Section 112A tax is only one part of the return computation. The final amount can also depend on the taxpayer’s residential status, total income, unused basic exemption limit, brought-forward losses, surcharge and cess. The simple expression 12.5% × (gain − ₹1,25,000) is a useful starting point for a wholly post-change year, not a universal final-tax formula.
First confirm that section 112A applies
Do not start with the rate. First establish that each asset and transaction falls within the statutory category.
Assets generally covered
- Listed equity shares of an Indian company that satisfy the applicable Securities Transaction Tax (STT) conditions.
- Units of an equity-oriented mutual fund that meet the statutory definition and STT requirements.
- Units of a business trust in circumstances covered by section 112A; these are included in the law even though this guide focuses on shares and equity mutual funds.
STT conditions
STT must generally have been paid on the transfer. For equity shares, STT is also generally required at acquisition, subject to specified exceptions notified under the law. A broker contract note or exchange statement should show the relevant charges. Never assume that the words “equity fund” in a product name prove statutory eligibility: verify the fund’s classification and the transaction’s STT treatment.
Investments that should not be treated automatically as section 112A assets
- Overseas shares or overseas funds.
- Debt-oriented or hybrid funds that do not satisfy the equity-oriented-fund definition.
- Unlisted shares, unless another provision specifically applies.
- Transactions for which the required STT condition is not met and no statutory exception applies.
If an investment fails section 112A, it may fall under a different capital-gains provision with a different holding period, rate and cost rule. Keep it out of the section 112A total until its classification is established.
Use the transfer date and holding period correctly
The 12-month long-term test
Listed equity shares and units of equity-oriented funds generally become long-term assets after a 12-month holding period under the post-change holding-period framework. Determine the period separately for every lot sold. The purchase date and sale date in the contract note, statement or registrar report should support the calculation.
23 July 2024 is a rate boundary, not an acquisition boundary
A security bought in 2017 and sold in August 2024 is tested under the post-23 July 2024 rate because the transfer occurred after the change. A security bought in 2024 and sold on 22 July 2024, if long-term under the applicable holding rules, remains in the pre-change rate category. Keep the sale date visible in the calculation file.
FIFO for dematerialised holdings
When identical securities are held in a demat account at different times, the Income Tax Department states that first-in, first-out (FIFO) is used to identify the holdings sold. The earliest acquired units are treated as sold first. This affects both the holding-period test and the cost of the lots used in the gain calculation. Do not select the most expensive or most recent purchase simply because it gives a more favourable result.
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Determine the cost of acquisition
Acquisitions after 31 January 2018
For a qualifying asset acquired after 31 January 2018, use the actual acquisition cost. Section 112A gains are calculated without indexation. Use the documented purchase price and quantities for the FIFO lots that were sold.
Grandfathered acquisitions on or before 31 January 2018
For qualifying securities acquired on or before 31 January 2018, the deemed cost is the higher of:
- the actual acquisition cost; and
- the lower of the fair market value on 31 January 2018 and the sale consideration.
In shorthand, the deemed cost is higher of (actual cost, lower of (31 January 2018 fair market value, sale consideration)). This prevents a pre-2018 appreciation that existed before the original section 112A regime from being taxed as a post-regime gain, while also preventing a notional fair-market value above the eventual sale price from creating an artificial loss.
Grandfathering examples
| Fact pattern | Calculation of deemed cost | Result before expenses |
|---|---|---|
| Actual cost ₹100, 31 January 2018 fair market value ₹180, sale value ₹220 | Lower of ₹180 and ₹220 is ₹180; higher of ₹100 and ₹180 is ₹180 | Gain ₹40 |
| Actual cost ₹100, 31 January 2018 fair market value ₹180, sale value ₹150 | Lower of ₹180 and ₹150 is ₹150; higher of ₹100 and ₹150 is ₹150 | Gain ₹0 |
| Actual cost ₹200, 31 January 2018 fair market value ₹180, sale value ₹220 | Lower of ₹180 and ₹220 is ₹180; higher of ₹200 and ₹180 is ₹200 | Gain ₹20 |
Use the fair-market-value figure prescribed for the security and retain the supporting statement or valuation record. The grandfathering rule applies only when the acquisition falls on or before 31 January 2018 and the asset otherwise qualifies for section 112A.
Transfer expenses
Calculate the eligible gain after allowable transfer-related expenditure that is supported by records and permitted in the Schedule 112A instructions. Enter the amount and nature of the expense exactly as required by the return schedule. Do not deduct an unsupported charge merely because it appears on a broker statement.
Calculate each transaction before combining the year
For every lot, create a worksheet containing:
- Security or fund name and identifier.
- Quantity sold and the FIFO acquisition lot.
- Acquisition date and transfer date.
- Actual cost or the grandfathered deemed cost, as applicable.
- Sale value and any allowable transfer expense.
- Long-term status and STT confirmation.
- Applicable rate category: before 23 July 2024 or on/after 23 July 2024.
A practical per-lot formula is:
Eligible long-term gain = sale consideration − eligible cost of acquisition − allowable transfer-related expenditure
Apply the formula separately to shares and fund units. A loss on one qualifying lot should not be silently omitted; it may affect the year’s capital-gains computation under the applicable set-off and carry-forward rules.
Aggregate the annual section 112A gains
Add the eligible long-term gains from all qualifying section 112A transfers in the financial year. The threshold is shared across:
- all qualifying listed shares;
- all qualifying equity-oriented mutual funds; and
- other section 112A assets included in the same year.
For a year containing only post-change transfers, the core computation is:
- Calculate the combined eligible section 112A gain.
- Subtract up to ₹1,25,000 from that combined amount. The result cannot be below zero.
- Apply 12.5% to the excess.
- Add applicable surcharge and the 4% health and education cess.
Example: several post-change sales
Suppose a taxpayer has a ₹90,000 eligible gain on one listed share and an ₹80,000 eligible gain on a qualifying equity mutual fund, both transferred after 23 July 2024. The aggregate gain is ₹1,70,000, not two separate gains each receiving a ₹1,25,000 threshold. The excess is ₹45,000, and the base section 112A tax is ₹5,625 (₹45,000 × 12.5%) before surcharge and cess.
Example: gain below the annual threshold
If the year’s total qualifying gain is ₹1,20,000 and all transfers are in the post-change category, the section 112A tax on that aggregate is nil because it does not exceed ₹1,25,000. Other income-tax obligations can still exist.
Example: larger post-change gain
With an aggregate eligible gain of ₹3,00,000, the excess over ₹1,25,000 is ₹1,75,000. The base section 112A tax is ₹21,875 before surcharge and cess. This is not necessarily the final amount payable because the taxpayer-level adjustments described below still have to be considered.
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How a year with both old- and new-rate transfers works
The transition year can contain transfers before 23 July 2024 and transfers on or after that date. The earlier transfers use the 10% rate and the earlier ₹1,00,000 framework; the later transfers use 12.5%. The Income Tax Department’s guidance and the statutory text provide that the ₹1,25,000 threshold applies in aggregate to the gains covered by the two rate clauses. It is not two independent exemptions.
Keep the two categories separate in the transaction schedule, then apply the threshold and rate treatment required by section 112A and the return computation. Do not give a full ₹1,25,000 threshold to the pre-change sales and another ₹1,25,000 to the post-change sales. Because the allocation of the common threshold can affect the result when both categories are present, use the populated Schedule 112A computation in the applicable return utility or obtain professional advice rather than relying on a home-made split.
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| Question | What to record |
|---|---|
| Was the transfer before 23 July 2024? | Place the gain in the pre-change 10% category. |
| Was the transfer on or after 23 July 2024? | Place the gain in the 12.5% category. |
| Were there sales in both periods? | Use one common annual threshold; never duplicate it. |
Adjustments that can change the personal tax result
Unused basic exemption for eligible residents
An eligible resident individual or Hindu Undivided Family may be able to use an unutilized portion of the basic exemption limit against section 112A gains when other taxable income does not consume the full limit. Determine the available shortfall under the applicable tax regime and return-year rules before applying the 12.5% rate. This adjustment is not a general benefit available on identical terms to every assessee.
Chapter VI-A deductions
Chapter VI-A deductions do not reduce section 112A gains. A deduction claimed elsewhere in the return should not be subtracted from the qualifying long-term gain to enlarge the ₹1,25,000 threshold or lower the 12.5% base.
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Section 87A rebate cannot be used against the tax attributable to section 112A gains. It may still apply to tax on other income when the statutory conditions are met. Separate the tax on qualifying gains from tax on salary, interest or other income when checking the rebate calculation.
Surcharge and cess
After the section 112A base tax is determined, add any surcharge applicable to the taxpayer and the 4% health and education cess. The surcharge depends on the assessee and total-income facts, so a percentage should not be assumed without completing the return computation.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to report the gains in the income-tax return
Schedule 112A is transaction-oriented. It asks for information such as the security or fund identification, acquisition date, transfer date category, quantity, sale value, cost information and applicable transfer expenditure. For assets acquired on or before 31 January 2018, the schedule captures the grandfathering calculation.
- Reconcile every sale with the broker contract note, demat statement or mutual-fund account statement.
- Apply FIFO to dematerialised holdings where identical securities were acquired in multiple lots.
- Enter pre-23 July 2024 and post-23 July 2024 transfers in their correct categories.
- Enter the actual or deemed cost, rather than a broker’s unadjusted average cost if that average ignores grandfathering or FIFO.
- Check that the annual aggregate gain and common threshold are reflected once across the schedule.
- Compare the schedule total with the capital-gains figure carried to the computation section of the return.
Is ITR-1 available?
The Income Tax Department’s ITR-1 (Sahaj) FAQ for AY 2026–27 says a taxpayer with section 112A long-term capital gains above ₹1.25 lakh is excluded from ITR-1 eligibility. The same FAQ lists other restrictions, including short-term capital gains, business or professional income, certain foreign-asset or foreign-income situations and total income above ₹50 lakh.
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That is a return-year-specific eligibility check, not a rule that every investor with a small stock gain may use ITR-1. Review the instructions for the relevant assessment year and all sources of income before selecting a form. If any disqualifying condition applies, use the prescribed alternative return.
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Records to keep before filing
- Contract notes showing purchase and sale dates, quantities and consideration.
- Demat statements showing the lot history needed for FIFO.
- Mutual-fund account statements and proof of the fund’s equity-oriented classification.
- STT details and evidence of any notified acquisition exception.
- 31 January 2018 fair-market-value evidence for grandfathered holdings.
- Invoices or statements for allowable transfer-related expenditure.
- Working papers showing each lot’s gain, the annual aggregate and the threshold used.
- Earlier-year capital-loss records if losses may be set off or carried forward.
Common calculation errors and how to correct them
Giving every investment its own ₹1,25,000 allowance
Correct the worksheet so that all qualifying section 112A gains for the financial year are combined before the threshold is applied.
Using the purchase date to choose the 12.5% rate
Replace it with the transfer date. The 23 July 2024 boundary concerns the sale or other transfer, not when the asset was bought.
Using 31 January 2018 for every investment
The date is relevant only to assets acquired on or before that date. Later acquisitions use actual cost without indexation.
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Remove indexation from the section 112A calculation. Use the actual or grandfathered deemed cost as prescribed.
Ignoring STT or fund classification
Obtain the transaction and fund records first. A product label or an assumption about an equity allocation is not a substitute for the statutory tests.
Subtracting deductions or 87A rebate from section 112A tax
Keep Chapter VI-A deductions out of the gain computation and do not use section 87A rebate against the tax attributable to these gains.
Reporting only the net figure from a broker’s annual statement
Rebuild the transaction-level calculation when the statement does not show FIFO, grandfathered cost, transfer-date categories or allowable expenses. The return schedule requires those details.
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- Confirm that the share or fund is within section 112A and that STT conditions are met.
- Separate each sale by lot, acquisition date and transfer date.
- Apply the 12-month long-term test and FIFO where relevant.
- Use actual cost for post-31 January 2018 acquisitions.
- Use the higher-of-actual-and-lower-of-FMV/sale rule for qualifying pre- or on-31 January 2018 acquisitions.
- Deduct only allowable, documented transfer expenses.
- Classify each transfer as before or on/after 23 July 2024.
- Aggregate all qualifying section 112A gains for the financial year and apply the ₹1,25,000 threshold once.
- Apply the relevant rate, then check unused basic exemption, surcharge and cess.
- Exclude Chapter VI-A deductions and section 87A rebate from the section 112A tax calculation.
- Complete Schedule 112A and verify the correct return form for the assessment year.
The Bottom Line
The reliable method is transaction-first: establish section 112A eligibility, use FIFO and the correct cost rule, classify every transfer by its date, aggregate the year’s qualifying gains, apply the single ₹1,25,000 threshold, and then apply the appropriate rate and taxpayer adjustments. For a wholly post-23 July 2024 year, the excess over ₹1,25,000 is taxed at 12.5% before surcharge and cess; mixed-date years require the two rate categories to be retained without duplicating the threshold.
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