For listed equity shares in India, holding the shares for more than 12 months generally makes the gain long-term; holding them for 12 months or less makes it short-term. For transfers on or after 23 July 2024, eligible short-term gains under section 111A are taxed at a 20% base rate. Eligible long-term gains under section 112A are taxed at 12.5% only on the aggregate amount above ₹1,25,000. Transfers before 23 July 2024 use the earlier 15% short-term rate and 10% long-term rate above ₹1,00,000. The concessional rates depend on satisfying the securities transaction tax (STT) conditions, and surcharge plus 4% health and education cess can increase the final bill.
What changes the tax treatment of a listed-share sale?
Three tests determine the starting point for the calculation:
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- Holding period: more than 12 months is long-term for listed equity shares; 12 months or less is short-term.
- Transfer date: 23 July 2024 separates the former rates from the rates introduced by the Finance (No. 2) Act, 2024.
- STT conditions: sections 111A and 112A provide the special rates only when the statutory STT requirements are met. They do not automatically apply to every transfer involving a listed share.
The rates below are base income-tax rates. A surcharge, where applicable, and a 4% health and education cess on income-tax plus surcharge are added later.
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| Test | Short-term listed-share gain | Long-term listed-share gain |
|---|---|---|
| Holding period | 12 months or less | More than 12 months |
| Special section when STT conditions are met | Section 111A | Section 112A |
| Transfer on or after 23 July 2024 | 20% of the eligible gain | 12.5% of aggregate eligible LTCG above ₹1,25,000 |
| Transfer before 23 July 2024 | 15% of the eligible gain | 10% of eligible LTCG above ₹1,00,000 |
| Indexation for the post-23 July 2024 transfer | Not relevant to STCG | Removed |
| Loss set-off | Short-term capital loss (STCL) can offset capital gains | Long-term capital loss (LTCL) can offset only LTCG |
The 20%, 12.5%, 15% and 10% figures are not complete tax bills: surcharge and cess can apply. The ₹1,25,000 and ₹1,00,000 amounts are aggregate long-term-gain thresholds for the relevant transfer-date regime, not a per-share exemption.
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How to classify your holding period
More than 12 months is long-term
For listed equity shares, a holding period exceeding 12 months produces a long-term capital gain or loss. A holding period of exactly 12 months does not qualify as long-term under this rule; it remains short-term. Count the period for the particular shares sold rather than assuming that every share in a demat account has the same acquisition date.
Use the transfer date before applying a rate
First establish the date on which the transfer took place. A transfer before 23 July 2024 is tested against the earlier rates and threshold. A transfer on or after 23 July 2024 is tested against the revised rates. Do not apply the new rate merely because you are filing the return after the 2024 Budget, and do not apply the old rate merely because the shares were purchased before that date.
Keep evidence for each parcel
Broker contract notes, demat statements, trade confirmations and acquisition records show the purchase and sale dates, quantities and consideration. They help you identify which acquisition lot was sold when shares were bought in several tranches. Preserve the STT details associated with the transaction as well.
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Section 111A is the special regime for STT-eligible listed-equity short-term capital gains. For a transfer on or after 23 July 2024, the base rate is 20%; for a qualifying transfer before that date, the base rate was 15%.
STT eligibility is a condition, not a formality. The concessional section should not be assumed for an off-market or otherwise non-qualifying transfer. The Income Tax Department’s guidance also notes that equity shares generally involve STT at acquisition as well as on transfer, subject to statutory exceptions. Check the specific transaction against the applicable STT rules before using section 111A.
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Simple post-23 July 2024 illustration
Assume, solely for illustration, that qualifying shares bought for ₹2,00,000 are sold after a short-term holding for ₹2,80,000, with no adjustment for transfer expenses in this simplified example. The gain is ₹80,000. At the 20% base rate, the income-tax component is ₹16,000. Any applicable surcharge and the 4% cess are added to that amount.
Earlier transfer illustration
If the same type of qualifying short-term transfer occurred before 23 July 2024 and produced an ₹80,000 gain, the former 15% base rate would produce ₹12,000 before surcharge and cess. The filing year does not change the transfer-date test.
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When section 112A applies to long-term gains
Section 112A covers eligible listed-equity long-term capital gains when its STT conditions are met. For transfers on or after 23 July 2024, the base rate is 12.5% on the aggregate eligible LTCG above ₹1,25,000. The first ₹1,25,000 of that aggregate is outside the 12.5% charge; it is not a separate ₹1,25,000 allowance for each company or sale.
For qualifying transfers before 23 July 2024, the earlier framework used a 10% rate on aggregate LTCG above ₹1,00,000. Apply the threshold to the relevant year’s aggregate eligible long-term gains under that transfer-date regime.
Post-23 July 2024 illustration
Suppose qualifying listed shares sold after a long-term holding generate aggregate eligible LTCG of ₹2,00,000 in the relevant year. The amount above ₹1,25,000 is ₹75,000. At 12.5%, the base income-tax is ₹9,375, before any surcharge and 4% cess. This illustration assumes the entire ₹2,00,000 is eligible under section 112A and does not calculate cost or expenses for you.
Earlier transfer illustration
If qualifying transfers before 23 July 2024 produced aggregate eligible LTCG of ₹2,00,000, the amount above the former ₹1,00,000 threshold would be ₹1,00,000. At the former 10% rate, the base tax would be ₹10,000, before surcharge and cess.
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Indexation after the 2024 change
The 2024 reform removed the indexation benefit for long-term capital gains on transfers on or after 23 July 2024. In practical terms, do not inflate the acquisition cost for inflation when calculating a post-23 July 2024 listed-share LTCG under the revised regime. The Finance (No. 2) Act, 2024 described the change as a uniform 12.5% long-term rate for capital assets together with removal of indexation.
Indexation is not a short-term calculation in any event. For a post-23 July 2024 long-term listed-share transfer, calculate the gain using the eligible cost and transfer figures required in the return rather than inserting an inflation-indexed cost.
How to calculate the taxable gain: a practical sequence
- Identify the transfer date. Decide whether the sale occurred before 23 July 2024 or on/after that date. This selects the old or revised rate and threshold.
- Determine the holding period. Match the sold shares to their acquisition date. More than 12 months is long-term; 12 months or less is short-term for listed equity shares.
- Calculate the capital gain. Start with the sale consideration, subtract the eligible cost and allowable transfer expenses under the return rules, and retain the documents supporting each figure. The special-rate guidance identifies the classification and rate but does not replace the transaction-specific cost calculation.
- Verify STT eligibility. Confirm that the transfer meets the statutory STT requirements for section 111A or 112A. Review acquisition-side STT and any statutory exception where relevant.
- Apply the long-term threshold, if applicable. For a post-23 July 2024 section 112A calculation, tax only aggregate eligible LTCG above ₹1,25,000 at 12.5%. For a qualifying pre-date transfer, use the earlier ₹1,00,000 threshold and 10% rate.
- Apply losses in the permitted way. Use current-year and eligible carried-forward losses only against the type of gain allowed by the loss rules.
- Add surcharge and cess. The headline rate is a base rate. Add any applicable surcharge and the 4% health and education cess on income-tax plus surcharge.
- Reconcile the return figures. Match the computation to broker statements, contract notes, demat records and the tax-return schedules for capital gains and loss carry-forward.
How capital losses can be set off
Short-term capital loss
STCL can offset capital gains. For example, an STCL of ₹50,000 could be used against ₹30,000 of STCG and the remaining ₹20,000 against LTCG, subject to the applicable return rules and available gains. The loss does not become a deduction from salary or another non-capital category merely because the share sale produced it.
Long-term capital loss
LTCL has the narrower rule: it can be set off only against LTCG. An LTCL of ₹40,000 cannot be used to reduce STCG, but it can reduce ₹40,000 of eligible LTCG. This distinction is important when a portfolio contains both profitable short-term trades and a long-term loss.
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Carry-forward period
Eligible capital losses may be carried forward for up to eight assessment years under section 74, subject to the statutory conditions and the disclosure required in the tax return. Keep the computation and the return acknowledgement that establishes the loss, then track the balance used in each later year. A loss that is not documented or is used against the wrong category can be rejected or leave an incorrect balance for future years.
STT: does it have to be paid?
For the special section 111A or 112A rates, STT rules matter. The rates are conditional and should not be presented as applying to every sale of a listed security. Equity shares generally also require STT on acquisition, in addition to STT on transfer, although statutory exceptions exist. Use the broker’s contract note and transaction statement to confirm the levy and examine whether an exception changes the result.
If the STT condition is not met, do not simply substitute 20% or 12.5% because the asset was listed. The applicable capital-gains provision and rate can differ, so the transaction needs to be reviewed under the rules that apply to its facts.
What the headline rates leave out
- Surcharge: where applicable, it increases the amount calculated at the base rate.
- Health and education cess: 4% is charged on the income-tax plus surcharge amount.
- Aggregate threshold: the ₹1,25,000 post-change threshold applies to aggregate eligible section 112A LTCG, not each individual trade.
- Losses: a gain shown by a broker before loss set-off is not necessarily the taxable gain after permitted adjustments.
- Transaction-specific figures: sale consideration, eligible cost and transfer expenses must come from your records and the return rules; a rate table cannot calculate them automatically.
Common mistakes and how to correct them
Calling a 12-month holding long-term
“Twelve months” is not the same as “more than 12 months.” Recheck the acquisition and transfer dates for the exact lot sold. If the period is 12 months or less, classify it as short-term.
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Using 20% for an earlier sale
The 20% STCG rate is for qualifying transfers on or after 23 July 2024. A qualifying transfer before that date uses 15%. Separate transactions by transfer date instead of applying one rate to the entire year’s portfolio.
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Using 10% after the reform
The former 10% section 112A rate and ₹1,00,000 threshold belong to qualifying pre-23 July 2024 transfers. For qualifying post-date transfers, use 12.5% above the ₹1,25,000 aggregate threshold.
Applying indexation to a post-date sale
Indexation was removed for long-term transfers on or after 23 July 2024. Recalculate the cost without an inflation adjustment for the revised regime.
Setting LTCL against STCG
LTCL is restricted to LTCG. Review the loss type before entering a set-off; use STCL for the broader capital-gain set-off permitted by the rules.
Ignoring surcharge and cess
A calculation that stops at 20% or 12.5% understates the final amount whenever surcharge applies. Add the 4% cess on income-tax plus surcharge after the base tax is computed.
Records and return preparation checklist
- Broker contract notes showing trade dates, quantities, sale consideration and STT.
- Demat statements and acquisition records for each lot sold.
- Evidence of eligible cost and transfer expenses used in the calculation.
- A schedule separating short-term and long-term transactions.
- A second split separating transfers before 23 July 2024 from transfers on or after that date.
- Working papers showing the ₹1,25,000 or ₹1,00,000 aggregate LTCG threshold used.
- Loss schedules showing current-year set-off, any balance carried forward and the assessment years remaining within the eight-year limit.
- Documentation supporting any STT exception, corporate action or unusual acquisition route.
Situations that need a transaction-specific review
The rate summary is designed for the ordinary listed-equity cases described in sections 111A and 112A. Your result can change with residency, taxpayer category, exempt income, treaty treatment, corporate actions, acquisition exceptions and the return year. A broker’s profit figure is a useful starting record, not a determination that the special rate, threshold, loss set-off or STT condition applies.
For a portfolio containing several acquisition lots, pre- and post-23 July 2024 sales, corporate actions or carried-forward losses, prepare a lot-level schedule before filing. If the facts do not clearly satisfy the STT conditions or the applicable section, obtain advice based on the documents rather than selecting a rate from the comparison table alone.
Bottom line for an Indian listed-share investor
Hold listed equity shares for more than 12 months to meet the long-term holding-period test. For a qualifying transfer on or after 23 July 2024, use 20% for STCG under section 111A and 12.5% for section 112A LTCG above aggregate ₹1,25,000, without indexation. Use the earlier 15% and 10%/₹1,00,000 framework for qualifying transfers before that date. Confirm STT, classify losses correctly, carry eligible losses for no more than eight assessment years, and add surcharge and 4% cess before treating the calculation as final.
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