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Short answer: For transfers made on or after 23 July 2024, listed equity shares and equity-oriented mutual-fund units become long-term after more than 12 months. When Securities Transaction Tax (STT) conditions are met, short-term gains are taxed at 20% under Section 111A. Qualifying long-term gains are taxed at 12.5% under Section 112A only on the aggregate amount above the annual ₹1.25 lakh threshold. Land and buildings need more than 24 months for long-term treatment; their long-term gain is generally taxed at 12.5% without indexation. A resident individual or Hindu Undivided Family (HUF) selling property acquired before 23 July 2024 can, if the grandfathering conditions apply, compare that result with 20% taxation using indexation and use the lower statutory tax.
Those rates do not apply automatically to every share, fund or property sale. The asset’s statutory category, transfer date, STT eligibility, taxpayer status, costs, exemptions, losses, surcharge and cess all affect the final liability.
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What LTCG and STCG mean
Capital gains are classified by how long an asset was held before it was transferred. A short-term capital gain (STCG) uses the short-term rules; a long-term capital gain (LTCG) uses the long-term rules. The holding period is only the first test. You must also identify the legal category of the asset and the date of transfer.
The decisive reform boundary for the rules discussed here is 23 July 2024. A sale completed before that date generally falls under the earlier rates and thresholds. A transfer on or after that date uses the revised rates, subject to specific grandfathering provisions for certain property owners.
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At-a-glance comparison for transfers on or after 23 July 2024
| Asset or transaction | When it is long-term | Short-term treatment | Long-term treatment |
|---|---|---|---|
| Listed equity shares | Held for more than 12 months | 20% under Section 111A when the required STT conditions are met | 12.5% under Section 112A on qualifying aggregate gains above ₹1.25 lakh, when the required STT conditions are met |
| Equity-oriented mutual-fund units | Held for more than 12 months | 20% under Section 111A when the required STT conditions are met | 12.5% under Section 112A on qualifying aggregate gains above ₹1.25 lakh, when the required STT conditions are met |
| Land or building | Held for more than 24 months | Generally taxed at the taxpayer’s applicable rate for STCG | Generally 12.5% without indexation; qualifying pre-23 July 2024 acquisitions may use the grandfathering comparison |
| Specified mutual funds and other assets covered by deeming provisions | May remain short-term regardless of the actual holding period | Apply the statutory short-term rule for that category | Do not assume the equity-fund LTCG treatment |
The 12.5% and 20% figures are base rates. Applicable surcharge and health and education cess are added separately, and the final result depends on the taxpayer and transaction.
What changed on 23 July 2024
Equity rates increased
For qualifying listed-equity and equity-oriented-fund transfers before 23 July 2024, the official material records a 15% Section 111A STCG rate and a 10% Section 112A LTCG rate on aggregate gains above ₹1 lakh. For transfers on or after 23 July 2024, those rates became 20% and 12.5%, while the Section 112A annual threshold rose to ₹1.25 lakh.
Most other long-term gains moved to 12.5%
Before the reform, other LTCG was generally taxed at 20%, ordinarily with indexation. For transfers on or after 23 July 2024, most other LTCG, including qualifying property LTCG, is generally 12.5% without indexation. Property acquired before the reform date can receive a limited comparison benefit described below; that is not a universal restoration of indexation.
The transfer date controls the rate
Use the date on which the transfer takes place, not merely the date on which an agreement was signed or an investment decision was made. Keep the contract note, sale deed, redemption statement or other transfer record that establishes the relevant date. If a transaction straddles the reform date through instalments, staged transfers or unusual settlement terms, each transfer should be reviewed under the rule that applies to it.
Step 1: identify the statutory asset category
Start with legal classification rather than a product label. “Share” and “mutual fund” are not sufficient descriptions for tax purposes.
Listed equity shares
A listed equity share can use the Section 111A and Section 112A framework only when the applicable STT requirements are satisfied. For a post-23 July 2024 transfer held for more than 12 months, the qualifying LTCG rate is 12.5% on the aggregate amount above ₹1.25 lakh. A holding period of 12 months or less is short-term; the qualifying STCG rate is 20% when the STT conditions are met.
Equity-oriented mutual-fund units
Units of an equity-oriented fund follow the same 12-month threshold and the same 20%/12.5% special-rate framework when all statutory conditions are met. Confirm the fund’s classification from its scheme and tax documents rather than inferring it from a high equity allocation or a marketing description.
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Specified mutual funds
The law lists specified mutual funds among assets that can be deemed short-term regardless of how long they were held. A three-year holding period therefore does not, by itself, create equity-style LTCG treatment. Determine whether the fund falls into the specified category for the relevant acquisition and transfer before applying any rate.
Other deemed short-term assets
Market-linked debentures, depreciable assets, unlisted bonds and unlisted debentures are among the categories identified as potentially short-term under deeming rules. Do not transfer the listed-equity holding-period test to these instruments simply because they were held for more than a year.
Step 2: apply the holding-period test
For the post-reform transactions covered here, use more than 12 months for listed equity and equity-oriented-fund units, and more than 24 months for land or buildings. “More than” matters: an asset held exactly for the stated period does not satisfy a test that requires a period longer than that threshold.
Establish the acquisition and transfer dates from reliable records. For multiple purchases, calculate each lot under the applicable rule and preserve lot-level cost and date information. Corporate actions, switches, redemptions, gifts, inheritances and other non-standard events can require a separate statutory analysis; do not assume that a platform’s average holding-period display is the legal answer.
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Listed equity and equity-oriented funds: how the special rates work
Short-term gains under Section 111A
A post-23 July 2024 short-term gain on a listed equity share or equity-oriented-fund unit is taxed at 20% when the Section 111A STT conditions are met. The STT requirement is not a formality. The Department also notes acquisition-side STT conditions for equity shares, subject to exceptions. Check transaction statements and contract notes for the relevant STT charges and any applicable exception before using the special rate.
Long-term gains under Section 112A
For a qualifying post-reform long-term transfer, Section 112A applies 12.5% to the aggregate qualifying gains above ₹1.25 lakh for the year. The threshold is annual and aggregate, not a separate ₹1.25 lakh allowance for every share, fund or broker account. Combine qualifying gains across transactions before determining the amount subject to the rate.
The threshold does not convert a non-qualifying asset into an eligible one. A gain from a specified mutual fund or a transfer that fails the required STT conditions must be classified under its own rule, even if the taxpayer has unused room below ₹1.25 lakh from qualifying equity gains.
Illustrative equity calculation
Assume a resident investor sells qualifying listed shares after holding them for more than 12 months, on 1 September 2024. After eligible transfer costs, the investor has ₹2,00,000 of qualifying Section 112A gains for the entire year. The amount above the ₹1,25,000 threshold is ₹75,000. Base tax at 12.5% is ₹9,375, before any applicable surcharge and cess. This illustration assumes the STT conditions and all other statutory requirements are met; it is not a personal tax computation.
For comparison, an ₹80,000 qualifying short-term gain from a post-23 July 2024 transfer would produce ₹16,000 of base tax at 20% under Section 111A, before surcharge and cess. The holding-period classification therefore changes both the rate and, for LTCG, the operation of the annual threshold.
Mutual funds: classification matters more than the label
Before calculating a mutual-fund gain, record the scheme category, purchase date, redemption date, units sold and cost. Equity-oriented funds can use the 12-month and Section 111A/112A rules. Specified mutual funds may be deemed short-term regardless of holding period. Other funds can fall under different statutory provisions, so the rate cannot be selected from the word “mutual fund” alone.
Why a long holding period may not be enough
Suppose units in a specified mutual fund were held for 36 months. The deeming rule can still classify the gain as short-term. In that situation, the investor should not apply the 12.5% Section 112A rate or the ₹1.25 lakh Section 112A threshold merely because the investment was held for three years. Use the short-term treatment prescribed for that category and verify the applicable taxpayer-rate consequences.
Switches and redemptions
A redemption or taxable switch is a transfer event for which the holding period and cost must be established. Keep statements showing the original allotment, subsequent switches and final redemption. If a statement aggregates transactions, reconcile it to the underlying lots before deciding whether the units were short-term or long-term.
Property: the 24-month test and the indexation grandfathering rule
Property sold after 23 July 2024
Land or a building held for more than 24 months is generally long-term. The normal post-reform calculation uses 12.5% without indexation. A property held for 24 months or less is generally short-term and is taxed at the taxpayer’s applicable rate rather than the special equity rates.
Who can compare indexed and non-indexed tax
A resident individual or HUF that acquired the land or building before 23 July 2024 may qualify for a grandfathering comparison when the property is transferred after that date. The taxpayer computes the post-reform result at 12.5% without indexation and separately computes the statutory 20% result using indexation. Where the conditions are satisfied, the lower of those two results is used.
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This is a comparison election, not a blanket right to index every property sale. It does not automatically apply to every seller, every ownership structure or every acquisition date. Establish residency, HUF status, acquisition date and the property’s documented cost before relying on it.
Illustrative property comparison
Assume a qualifying resident individual bought a property before 23 July 2024 and sells it after holding it for more than 24 months. After eligible costs, the unindexed gain is ₹30,00,000. The normal post-reform base tax is ₹3,75,000 at 12.5%. If the statutory indexed computation produces a gain of ₹18,00,000, the 20% indexed base tax is ₹3,60,000. If all grandfathering conditions are met, the taxpayer uses the lower ₹3,60,000 result, before surcharge and cess. The figures are illustrative; the actual indexed amount must be calculated from the legally permitted cost and records.
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How to calculate any LTCG or STCG correctly
- Classify the asset. Decide whether it is listed equity, an equity-oriented fund, a specified fund, land or building, or another category subject to a deeming rule.
- Fix the transfer date. Apply the pre- or post-23 July 2024 rule that corresponds to the actual transfer.
- Establish the holding period. Use the more-than-12-month test for listed equity and equity-oriented funds, the more-than-24-month test for property, or the special deeming rule where applicable.
- Compute the gain. Start with sale or redemption consideration, subtract eligible transfer costs, and establish the cost under the rule applicable to that asset and transaction.
- Check STT eligibility. Use Sections 111A and 112A only when the required STT conditions, including any acquisition-side condition and exception, are met.
- Apply the rate and threshold. Use 20% for qualifying post-reform STCG under Section 111A; use 12.5% for qualifying Section 112A LTCG above the annual ₹1.25 lakh aggregate threshold; use the applicable general rule for other assets.
- Run the property comparison if eligible. For a qualifying resident individual or HUF with a pre-23 July 2024 property acquisition, compare 12.5% without indexation against 20% with indexation and select the lower statutory result.
- Add final adjustments. Calculate applicable surcharge and cess, then test exemptions and capital-loss set-off separately. Keep the supporting records for each conclusion.
Costs, exemptions and losses can change the result
The headline rate applies to a taxable gain, not automatically to the gross sale price. Eligible transfer expenses and the legally determined cost affect the gain. Preserve brokerage statements, transaction charges, purchase invoices, stamp-duty records, improvement documents and sale expenses so that the calculation can be supported.
Exemptions and capital-loss set-off are separate tests. A taxpayer may need to examine whether a specific exemption is available for the asset and reinvestment pattern, and whether eligible losses can be set off under the rules for the relevant year. Do not reduce a gain twice by applying an exemption and a loss treatment without checking the statutory order and limits.
Taxpayer status also matters. The special rates discussed above do not eliminate questions about residency, HUF status, surcharge, cess or other provisions. Non-residents and taxpayers with special statuses may require additional analysis that is not captured by this general comparison.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Common mistakes and how to correct them
Using the old 10% or 15% rates for a post-reform sale
Those were the pre-23 July 2024 rates recorded for qualifying equity transactions. Recheck the transfer date and use the revised 20% STCG rate or 12.5% LTCG rate and threshold where the transaction qualifies.
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Confirm whether the scheme is equity-oriented or a specified mutual fund. A specified fund can remain short-term regardless of holding period, so a three-year investment is not proof of LTCG.
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Assuming every property sale gets indexation
For a post-reform property transfer, the normal rule is 12.5% without indexation. Indexed taxation is available only through the stated grandfathering comparison for qualifying resident individuals and HUFs whose property was acquired before 23 July 2024.
Ignoring STT evidence
A security’s name does not establish Section 111A or 112A eligibility. Reconcile contract notes and other records to verify the required STT conditions before selecting a special rate.
Treating the ₹1.25 lakh threshold as a per-investment exemption
Section 112A uses an annual aggregate threshold for qualifying gains. Combine eligible transactions for the year; do not apply a separate threshold to each scrip, fund or account.
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Broker or fund statements may not reflect every legally relevant cost, lot, corporate action or transfer classification. Reconcile the statement to acquisition records and the statutory category before filing.
Pre-reform and post-reform rates in one table
| Rule | Transfers before 23 July 2024 | Transfers on or after 23 July 2024 |
|---|---|---|
| Qualifying listed equity or equity-oriented-fund STCG | 15% under Section 111A, when conditions were met | 20% under Section 111A, when conditions are met |
| Qualifying listed equity or equity-oriented-fund LTCG | 10% under Section 112A on aggregate gains above ₹1 lakh | 12.5% under Section 112A on aggregate gains above ₹1.25 lakh |
| Most other LTCG | Generally 20%, ordinarily with indexation | Generally 12.5% without indexation |
| Qualifying pre-reform property acquisition held by a resident individual or HUF | Earlier rules apply to the earlier transfer date | Compare 12.5% without indexation with 20% using indexation where grandfathering conditions are met |
Official rate wording
“Long-term capital gains arising from transfer of listed equity share, or a unit of an equity oriented fund or a unit of a business trust as referred to in Section 112A shall be chargeable to tax at the rate of: 12.5% for any transfer which takes place on or after 23-07-2024.”
— Income Tax Department, Ministry of Finance, Government of India
“Short-term capital gains arising from the transfer of equity shares, units of an equity-oriented fund, or units of business trust shall be chargeable to tax at 20% for any transfer which takes place on or after 23-07-2024.”
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A practical record checklist
- Acquisition date and cost for each lot or unit purchase.
- Transfer, sale or redemption date and consideration.
- Contract notes or statements showing STT and other transaction charges.
- Fund documents identifying whether the scheme is equity-oriented or specified.
- Property sale deed, purchase deed, improvement evidence and eligible transfer expenses.
- Residency or HUF-status information where the property grandfathering rule is being considered.
- Records of other qualifying gains and losses for the same financial year.
- Documents supporting any exemption, loss set-off, surcharge or cess calculation.
The reliable way to choose between LTCG and STCG treatment is to work through classification, transfer date, holding period, STT eligibility and the applicable computation in that order. Rates are the final step, not the starting point.
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