Section 111A, 112A and 112 on LTCG and STCG

Section 111A, 112A and 112 of Income Tax Act apply for tax rates on:

• Transfer / sale of shares, debentures, bonds,
• Units of mutual funds, units of business trust,
• Immovable property and other capital assets.

On transfer of capital assets gain is computed as per long term or short term.

So, tax should be calculated as per section 111A, 112A and 112 as the case may be.

In the following, we have explained in details with examples about these sections:

 

How to determine LTCG and STCG under section 111A, 112A and 112?

Under Section 111A, 112A and 112 gains are taxable on the basis of long term or short term capital gain.

Capital gain tax is computed on transfer of capital assets and that gain may be long term or short term.

For determining whether the capital assets transfer contributes to LTCG or STCG, it depends on the period of assets.

If Capital asset transferred till 22/07/2024 then period to be looked as per below table:

Capital Assets Transferred	STCG	LTCG
1) Any securities (other than units) listed in recognised stock exchange of India, Units of UTI, Units of equity oriented Mutual Fund, Zero-coupon Bond	If transferred asset held for not more than 12 months	If transferred asset held for more than 12 months
2) Shares of any company (of India or Foreign) (other than mentioned in point 1), immovable property (land or building or both)	If transferred asset held for not more than 24 months	If transferred asset held for more than 24 months
3)  Other capital asset	If transferred asset held for not more than 36 months	If transferred asset held for more than 36 months

 

If Capital asset transferred on or after 23/07/2024 then period to be looked as per below table:

Capital Assets Transferred	STCG	LTCG
1) Any securities listed in recognised stock exchange of India, Units of UTI, Units of equity oriented Mutual Fund, Zero-coupon Bond	If transferred asset held for not more than 12 months	If transferred asset held for more than 12 months
2) Shares of any company ( of India or foreign ) (other than mentioned in point 1) , immovable property (land or building or both)	If transferred asset held for not more than 24 months	If transferred asset held for more than 24 months
3)  Other capital asset	If transferred asset held for not more than 24 months	If transferred asset held for more than 24 months

 Once you decide the assets transfer is long term or short term, then points come for tax rate applicable on such gain.

So, tax rate applied on capital gain is given under section 111A, 112A and 112, which are explained one by one in the following paragraphs.

 

What is Section 111A of the Income Tax Act?

As per Section 111A, if you transfer / sale of equity shares, units of equity oriented mutual fund or unit of a business trust and there is STCG then it is taxable as per following:

• If transfer took place till 22/07/2024 then tax rate is 15%.
• If transfer took place on or after 23/07/2024 then tax rate is 20%.

 

Important conditions for section 111A

For applying tax rate under section 111A, you must look for important conditions which need to be fulfilled:

• Only transactions upon which securities transaction tax (STT) is paid on sale of equity shares, units of equity oriented mutual funds or units of business trust is covered under this section.
• If STT is not applicable then such a transaction is not covered under section 111A then it is taxable as per normal slab rate. 
• The condition of STT is also applicable on STCG arising from transactions undertaken in foreign currency on a recognized stock exchange located in the international finance services centre (IFSC) even if STT is not paid. In such a case the tax rate will be 15% / 20% as the case may be.

 

What is section 112A of Income Tax Act?

On transfer of equity shares, units of an equity oriented mutual fund or unit of business trust, if long term capital gain arises then in such a case LTCG  upto Rs. 1,25,000  shall be exempt and LTCG exceeding Rs. 1,25,000 shall be taxable in the following manner:

• If transfer took place till 22/07/2024 then tax rate is 10%.
• If transfer took place on or after 23/07/2024 then tax rate is 12.5%

Example:

If LTCG on sale of shares on 05/05/2025 is Rs. 500000 then upto Rs. 125000 no tax is levied. Excess of Rs.125000 is taxable at 12.50%. So, here tax shall be calculated on Rs. 375000 * 12.50% = Rs. 46875.

 

Important conditions for section 112A

• Here the transactions must be STT (securities transaction tax) based. If STT is not applicable (paid) on transfer of above mentioned asset i.e. equity shares, unit of equity oriented mutual fund or unit of a business trust then this section 112A is not applicable.
• However, there is no requirement of STT conditions to be fulfilled in Long term capital gains arising from transactions undertaken on a recognized stock exchange located in an International Financial Service Centre (IFSC). Here the rate of tax would be 10% / 12.5% irrespective of the fact that STT is not paid.
• In case of transfer of equity shares, STT must be paid on both acquisition and transfer.
• In case of transfer of a unit of equity oriented mutual fund or unit of business trust, STT must be paid on transfer.
• Indexation benefit would not be available in section 112A.

Also Read: Section 269SS, 269T, and 269ST (Penalty & Limit)

 

What is section 112 of Income Tax Act?

Section 112 is applicable on long term capital gain on transfer of capital asset (other than capital asset under section 112A).

Here tax rate of long term capital gain is applicable as follow:

• If transfer took place till 22/07/2024 then tax rate is 20%
• If transfer took place on or after 23/07/2024 then tax rate is 12.5%

Point to be noted: From 23/07/2024 benefit of indexation is removed. If any transfer took place till 22/07/2024 then indexation benefit can be taken but not on transfer on or after 23/07/2024. But there is one exception in case of Individual or HUF being resident in case of transfer of immovable property LTCG is computed at 12.5% without indexation or 20% with indexation, whichever is lower. Means while computing total income of transfer of immovable property if transfer took on or after 23/07/2024 then not to take benefit of indexation but while computing tax we have to take lower of 20% with indexation or 12.5% without indexation. This condition is only applicable if immovable property acquired till 22/07/2024 and transfer on or after 23/07/2024.

Let’s understand this with some examples:

Example:

1. If there is LTCG on transfer took place till 22/07/2024 is Rs.500000 then tax rate applicable is 20% with indexation.
2. If there is LTCG on transfer took place on or after 23/07/2024 is Rs.500000 then tax rate applicable is 12.5% without indexation.
3. An individual has PGBP income of Rs.600000 and Sale price on transfer of immovable property on 1/01/2025 of Rs.130000 which is acquired on 15/08/2012 of Rs.50000. Then we have to compute tax in the following manner:

Computation of Total Income

Particulars	Amount
Income under head PGBP	600000
Income under head Capital gain LTCG: as asset transferred on or after 23/07/2024 hence no indexation is computed here (130000-50000)	80000
Total income	680000

Computation of Tax

Particulars	Amount
Tax on LTCG 12.5% without Indexation (80000*12.5%) = 10000 20% with indexation (80000*363/200) = 29040 Whichever lower is 10000 (As in this case there is an individual and transfer is of immovable property after 23/07/2024 and acquired till 22/07/2024, that’s why we have taken lower)  (CII of 2024-25 is 363 and 2012-13 is 200)	10000
Tax on PGBP Upto 250000 – nil Next 250000 tax rate 5% - 12500 Remaining 100000 tax rate 20% - 20000	32500
Total Tax	42500
Cess	1700
Total Tax after cess	44200

  

Also Read: Section 115ba, 115baa, 115bab of Income Tax Act 1961

 

What are the other benefits in section 111 A, 112 A and 112? (Comparative analysis)

Section 111A	Section 112A	Section 112
1) In case of resident individual or HUF (Deficiency to be adjusted from LTCG)
Allowed	Allowed	Allowed
2) Deduction under chapter V1-A [ 80C to 80U] from LTCG
Not Allowed	Not Allowed	Not Allowed
3) Rebate under section 87A
Allowed	Not Allowed	Allowed

 

How to adjust deficiency from LTCG under section 111A, 112A & 112?

Deficiency to be adjusted from LTCG in case of resident individual or HUF (Srl. 1 above)

Suppose, normal income is less than the basic exemption limit (i.e. Rs. 250000, Rs 300000 or Rs. 500000 as the case may be in old regime) then the amount of income which is less than the exemption limit is known as deficiency and that deficiency can be adjusted from long term capital gain as well as short term capital gain.

Example:

Mr. X has total income Rs. 300000 which includes long term capital gain under section 112 of Rs. 140000 and normal income (i.e. salary) is Rs. is 160000. And if Mr. X age is 45 years then the basic exemption limit is Rs 250000.

So, here deficiency is calculated as Rs. 90000 (Rs. 250000 – Rs. 160000) and that is to be adjusted with LTCG.

Particulars	Amount Rs.
Tax on normal income (with deficiency Rs.90,000)	NIL
Tax on LTCG under section 112 = [Rs.140000 – Rs. 90000] = Rs. 50000 * 12.50% (assuming transfer after 23/07/2024	6250

So, in this way deficiency is adjusted.

 

What are the tax rate in section 111 A, section 112A and 112? (comparative view)

STCG	LTCG
Section 111A	Section 112A	Section 112
1) Transfer of Equity Shares, Unit of Equity oriented mutual fund and units of business trust
If STT Paid
Transfer till 22/07/2024 = 15% Transfer on or after 23/07/2024 = 20%	Transfer till 22/07/2024 = 10% Transfer on or after 23/07/2024 = 12.50% (on excess of Rs. 1,25,000)	N.A.
If STT not paid
Normal Slab Rate	-----	Transfer till 22/07/2024 = 20% (with indexation) Transfer on or after 23/07/2024 = 12.5% (without indexation) (separate condition for immovable property refer topic above)

Summary

Section 111A, section 112A and 112 of Income Tax is for long term / short term capital gain tax rates. After analysing capital gain, tax is applicable as per these sections.