For Indian listed equity shares held as an investment, the decisive test is the holding period on the transfer date: 12 months or less is generally short-term capital gain (STCG), while more than 12 months is generally long-term capital gain (LTCG). For qualifying STT-paid sales transferred on or after 23 July 2024, STCG is taxed at 20% under Section 111A. Qualifying Section 112A LTCG is taxed at 12.5% after the ₹1.25 lakh annual exemption, with indexation removed for this regime.
The result can change if the shares are not qualifying listed equity, the required securities transaction tax (STT) conditions are not met, the activity is treated as a business, or you are dealing with a non-standard taxpayer or transaction. Establish those facts before applying the rates.
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The rule in one sentence
For delivery-based sales of listed equity shares held as investments, classify the gain by the time between acquisition and transfer. A holding period of 12 months or less is generally STCG; a period of more than 12 months is generally LTCG. The broker contract note date is treated as the transfer date for this holding-period test.
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The tax rate then depends on whether the sale satisfies the statutory conditions for Section 111A (STCG) or Section 112A (LTCG), and on whether the transfer occurred before or on/after 23 July 2024.
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How to determine whether your gain is short term or long term
Use the transfer date, not the date you withdraw the money
For a delivery-based listed-share sale, use the date shown on the broker note as the transfer date. Compare that date with the acquisition date and count the holding period. Settlement, bank-credit and withdrawal dates do not replace the transfer date for this test.
Apply the 12-month threshold
- 12 months or less: the gain is generally STCG.
- More than 12 months: the gain is generally LTCG.
For example, shares bought on 10 August 2025 and sold on 10 August 2026 have not been held for more than 12 months under this threshold. A sale transferred on 11 August 2026 crosses the more-than-12-month test, assuming the shares otherwise qualify.
Keep each purchase lot separate
If you acquired the same company’s shares on several dates, calculate the holding period for each lot. A single sale may therefore contain both short-term and long-term lots. Use the acquisition records and contract notes that identify each lot rather than applying one average purchase date to the entire holding.
Rates for qualifying listed-equity sales
The following table applies to qualifying transactions in listed equity shares where the relevant STT and statutory conditions are met. The special rates are applied to the capital gain, not to the sale proceeds.
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| Situation | Classification and rate guidance |
|---|---|
| Held 12 months or less; qualifying STT-paid sale transferred on or after 23 July 2024 | STCG under Section 111A at 20% |
| Held more than 12 months; qualifying Section 112A sale transferred on or after 23 July 2024 | LTCG at 12.5% after the ₹1.25 lakh annual exemption; indexation is not available under this post-change regime |
| Qualifying transfer before 23 July 2024 | Apply the rules in force on the earlier transfer date. The official schedule shows a 15% STCG rate and the then-applicable listed-securities LTCG framework |
| Sale with non-standard residence, STT, trading-status or transaction facts | Obtain a fact-specific review before applying the special rates |
The 20% STCG rate replaced the earlier 15% rate for qualifying transfers on or after 23 July 2024. The 12.5% Section 112A LTCG rate and ₹1.25 lakh exemption likewise apply to qualifying post-change transfers. The exemption is an annual amount, so it is shared across all of your qualifying Section 112A LTCG for that financial year.
What the ₹1.25 lakh LTCG exemption does
The Section 112A exemption removes up to ₹1.25 lakh of qualifying listed-equity LTCG for the year before the 12.5% rate is applied. It is not a per-share, per-company or per-sale allowance.
- Add the qualifying Section 112A LTCG from all relevant sales in the financial year.
- Subtract the portion of the ₹1.25 lakh annual exemption that remains available.
- Apply 12.5% to the resulting taxable special-rate gain.
If your aggregate qualifying LTCG is ₹1 lakh, the entire amount falls within the annual exemption. If the aggregate is ₹2 lakh and no exemption has been used elsewhere, ₹75,000 is taxable at 12.5%, producing a basic tax of ₹9,375 before any applicable surcharge and health-and-education cess.
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The exemption does not convert an STCG into LTCG. A gain from shares held for 12 months or less remains outside this Section 112A LTCG allowance.
Step-by-step calculation workflow
- Identify the asset. Confirm that the security is equity listed on a recognised Indian stock exchange. Record the company, quantity and each acquisition date.
- Confirm the transaction type. Determine that the shares were held as an investment and that the sale is a delivery-based transfer. Frequent trading or another business-income treatment can take the profit outside the capital-gains framework.
- Establish the transfer date. Use the broker contract note date for the sale and retain the note with your tax records.
- Test the holding period. Classify each lot as STCG when the period is 12 months or less, and as LTCG when it is more than 12 months.
- Test Section 111A for STCG. Check the required STT and other statutory conditions. For a qualifying transfer on or after 23 July 2024, apply 20% to the gain.
- Test Section 112A for LTCG. Check the listed-equity, STT and other statutory conditions. For a qualifying transfer on or after 23 July 2024, aggregate the year’s gains, use the available ₹1.25 lakh exemption, and apply 12.5% to the balance.
- Handle earlier transfers under earlier law. If the transfer date is before 23 July 2024, use the rates and listed-securities framework that applied on that date rather than the post-change rates.
- Add tax-layer adjustments. Surcharge and health-and-education cess may apply. Their amount depends on your total income and taxpayer particulars, so they must be calculated with the rest of the return.
- Complete return disclosures. Check the applicable schedule, loss set-off or carry-forward rules and filing disclosures separately. These depend on your complete tax return, not just the share transaction.
Worked examples
Example 1: qualifying STCG after 23 July 2024
You buy listed equity shares as an investment and transfer them after eight months. The sale is delivery-based, STT-paid and otherwise satisfies Section 111A. The capital gain is ₹80,000 and the transfer date is 5 September 2025.
- Holding period: 12 months or less, so the gain is STCG.
- Applicable special rate: 20%.
- Basic tax: ₹80,000 × 20% = ₹16,000.
Surcharge and health-and-education cess, if applicable, are added when your complete return is prepared.
Example 2: qualifying LTCG with unused annual exemption
You transfer qualifying listed equity on 15 December 2025 after holding it for more than 12 months. Your qualifying Section 112A LTCG from all sales during the year totals ₹2,00,000, and none of the annual exemption has been used.
- Total qualifying LTCG: ₹2,00,000.
- Less available annual exemption: ₹1,25,000.
- Taxable LTCG: ₹75,000.
- Basic tax at 12.5%: ₹9,375.
No indexation adjustment is made for this post-23 July 2024 Section 112A calculation.
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Example 3: one sale containing different lots
You sell 300 shares in one order, but 150 were bought five months earlier and 150 were bought 18 months earlier. The order’s proceeds do not make the lots identical for tax purposes. Allocate the cost and gain to each lot, classify the first lot as STCG and the second as LTCG, then apply the relevant qualifying conditions and rates to each portion.
Why 23 July 2024 matters
The transfer date controls which rate regime applies. For qualifying listed-equity transfers on or after 23 July 2024, the special STCG rate is 20%, not the earlier 15%. Qualifying Section 112A LTCG is 12.5% after the ₹1.25 lakh annual exemption, and indexation was removed for this post-change regime.
A contract note issued for a sale before 23 July 2024 does not become a post-change transaction merely because the broker settles funds later. Conversely, a sale transferred on or after that date is tested under the post-change rates even if the shares were purchased years earlier. Keep the transfer date and the applicable law together in your working papers.
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Listed status and recognised exchange
The simple table is for equity shares listed on a recognised Indian stock exchange. Unlisted shares follow a different analysis and should not be placed in the listed-equity table.
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STT and statutory eligibility
The 20% and 12.5% special rates are not automatic for every share sale. The relevant STT and statutory conditions must be satisfied. Check the contract note and transaction records; do not infer eligibility solely from seeing an exchange ticker.
Investment versus business income
A person who holds shares as investments may report qualifying profits as capital gains. A taxpayer whose activity is treated as a trading business can have business income instead. Frequency, intention, accounting treatment and the surrounding facts matter, and the listed-share holding-period table does not decide that classification by itself.
Residence and taxpayer status
Resident and non-resident taxpayers can face different reporting and withholding issues. The rules summarized here do not resolve every non-resident fact pattern, treaty question or special filing requirement.
Transaction type
Intraday trades, derivatives, employee stock arrangements, corporate-action acquisitions and transactions lacking the relevant statutory conditions require separate analysis. Do not force them into the delivery-based listed-equity workflow.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Common mistakes and how to correct them
- Counting from the purchase date to the settlement date: Recalculate using the broker-note transfer date for the delivery-based sale.
- Calling exactly 12 months “long term”: The listed-equity threshold is more than 12 months. A holding of 12 months or less is generally short term.
- Applying 12.5% to every share profit: First establish that the gain is LTCG and that Section 112A conditions are met.
- Using the ₹1.25 lakh exemption for STCG: That annual allowance is for qualifying Section 112A LTCG, not Section 111A STCG.
- Using indexation after 23 July 2024: Indexation is removed for the post-change Section 112A regime.
- Using the old 15% STCG rate for a later transfer: Qualifying transfers on or after 23 July 2024 use 20%.
- Applying one holding period to several purchase lots: Split the sale by acquisition lot and calculate each portion separately.
- Ignoring other income and cess: The displayed special-rate calculation is basic tax; surcharge and health-and-education cess can change the final amount.
- Assuming every listed transaction is a capital gain: Trading-status, residence, STT and transaction details can move the case outside this simplified treatment.
Records to keep before filing
- Broker contract notes showing acquisition and transfer dates.
- Demat statements establishing quantities and lot history.
- Contract-note cost, sale consideration and charges used in the gain calculation.
- Evidence relevant to STT and the listed status of the shares.
- A year-to-date schedule of qualifying Section 112A gains so the ₹1.25 lakh exemption is not claimed twice.
- Workings that separate investment capital gains from any activity reported as business income.
These records let you reconcile the broker’s annual statement with your own lot-by-lot calculation and support the classification used in the return.
When to obtain a fact-specific review
Get professional advice before filing if you are a non-resident, trade frequently, sold unlisted securities, used derivatives or employee stock plans, received shares through a corporate action, cannot establish the transfer date, or are unsure whether STT and Section 111A or 112A conditions were met. The simplified rates answer the ordinary qualifying listed-equity case; they do not settle those exceptions.
“Section 45 of the Income-tax Act, 1961, governs the taxation of profits or gains arising from the transfer of a capital asset.” — Income Tax Department, Government of India.
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Quick decision checklist
- Is the asset equity listed on a recognised Indian stock exchange?
- Were the shares held as an investment rather than in an activity treated as a trading business?
- What is the broker-note transfer date?
- Was each lot held for 12 months or less, or for more than 12 months?
- Does the sale satisfy the STT and other conditions for Section 111A or Section 112A?
- Did the transfer occur before 23 July 2024 or on/after that date?
- For post-change LTCG, how much of the ₹1.25 lakh annual exemption remains?
- Have surcharge, health-and-education cess, loss treatment and return disclosures been checked?
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