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Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minuteFor qualifying long-term gains on covered shares, India’s Income-tax Act, 2025 applies a 12.5% rate to the portion of aggregate gains above ₹1.25 lakh for transfers on or after 23 July 2024. The special rate is conditional: asset type, holding period and securities transaction tax (STT) treatment all matter. For transfers before 23 July 2024, official guidance states the earlier rate of 10% above ₹1 lakh. The 2025 Act took effect on 1 April 2026; its relevant provision is section 198. Older references to section 112A refer to the corresponding regime under the Income-tax Act, 1961.
What rate applies to long-term gains on shares?
For a qualifying transfer on or after 23 July 2024, the special regime taxes covered long-term capital gains at 12.5% on the amount above an aggregate ₹1.25 lakh threshold. The threshold applies across covered transfers, not separately to each share or sale. The special rate and threshold are set out in section 198 of the Income-tax Act, 2025 and related official guidance (Income Tax Department section 198 materials; Finance Bill, 2025).
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For relevant transfers before 23 July 2024, the Income Tax Department’s share-sale guidance gives the earlier rate as 10% on qualifying gains above ₹1 lakh (Tax on Sale of Shares in India). These are different transfer-date regimes; use the date of transfer to identify the applicable rate and threshold, rather than the date you file your return.
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The figures are statutory rates and thresholds, not a complete calculation of every taxpayer’s final liability. Surcharge, cess, eligible losses or exemptions, residency and other income may affect the amount payable.
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Which shares qualify, and when are they long-term?
Section 198 covers qualifying long-term gains from equity shares, equity-oriented fund units and business-trust units, subject to the applicable conditions. It does not mean every share sale—including every unlisted-share transaction—automatically receives the special rate.
Holding period for listed Indian equity shares
The Income Tax Department’s ITR-2 FAQ generally treats listed Indian equity shares as long-term when held for more than 12 months. Classification depends on the asset and its applicable holding-period rule; do not apply the listed-share period to a different asset without checking its treatment (File ITR-2 Online FAQs).
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STT conditions
For the equity-share route, STT generally must have been paid on both acquisition and transfer. Statutory exceptions may apply, so the acquisition route and relevant exception must be checked before assuming the special rate is available. For equity-oriented fund and business-trust units, official guidance describes an STT condition on transfer. The conditions differ by asset and transaction; retain the transaction records needed to establish them.
How to work out which rule applies to a sale
- Identify the transfer date. Transfers on or after 23 July 2024 use the 12.5% rate and ₹1.25 lakh aggregate threshold for qualifying gains; earlier transfers use the earlier 10% rate and ₹1 lakh threshold stated in official guidance.
- Classify the asset. Confirm whether the sale concerns a listed equity share or another asset covered by section 198. Do not assume an unlisted share qualifies for this special regime.
- Check the holding period. For listed Indian equity shares, the official FAQ’s general long-term period is more than 12 months. Verify the applicable rule for other assets.
- Verify STT and any exception. For shares, check acquisition and transfer; for fund or business-trust units, check the applicable transfer condition.
- Aggregate covered gains against the relevant threshold. The ₹1.25 lakh or earlier ₹1 lakh limit is aggregate, not a per-share allowance.
- Check the full tax and filing position. Other income, losses, exemptions, residency and return-form eligibility can affect the computation or reporting route.
Illustrative calculation for a post-23 July 2024 transfer
Assume, solely for illustration, that a taxpayer has ₹2,00,000 of qualifying aggregate long-term gains covered by the post-23 July 2024 regime, satisfies the applicable conditions and has no other adjustments relevant to this simplified example. The amount above the ₹1.25 lakh threshold is ₹75,000; 12.5% of that amount is ₹9,375. This illustrates the rate-and-threshold arithmetic only, not a complete tax bill or advice for a specific trade.
Which return should you use?
Reporting a capital gain and choosing a return form are separate steps. Do not assume ITR-1 or ITR-4 is available merely because you meet other simplified-return conditions. Official AY 2026-27 guidance states that eligibility for simplified returns is constrained; capital gains above the stated section 112A limit and other circumstances can disqualify a person. Because section 112A is the older Act’s numbering, check the current assessment-year form criteria and instructions rather than treating that reference as the new Act’s section number. Use the current Income Tax Department return guidance and utility materials (Salaried Individuals for AY 2026-27 and return utility downloads).
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why section 112A may still appear in older guidance
The Income-tax Act, 2025 commenced on 1 April 2026, and section 198 is the relevant provision under the new Act. Older official pages and filing guidance may still refer to section 112A of the Income-tax Act, 1961 for the comparable regime. Treat the references as belonging to different Acts; do not combine a section number from the old Act with a rule from the new one without checking which tax year and transfer the guidance addresses (Income-tax Act, 2025; section 198; commencement information).
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