For listed Indian equity shares sold on or after 23 July 2024, qualifying short-term capital gains (STCG) are taxed at 20% when securities transaction tax (STT) was charged on the transfer. Qualifying long-term capital gains (LTCG) under section 112A are taxed at 12.5% only on the aggregate amount above ₹1,25,000 in a financial year. The rates apply to the gain, not the sale proceeds, and cess and any applicable surcharge are added afterward.
Your result depends on the holding period, whether the transaction qualifies for sections 111A or 112A, the cost and allowable transfer expenses, capital losses, residency, and whether you held the shares as an investment rather than as trading stock.
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Current tax rates for Indian share sales
The following table covers the principal concessional regimes for investment transactions. The date is the date of transfer (normally the sale date).
| Transaction | Transfer date | Rate and threshold | Main condition |
|---|---|---|---|
| Qualifying STCG under section 111A | On or after 23 July 2024 | 20% of the gain | Listed equity shares, equity-oriented fund units or business-trust units, with STT paid on transfer |
| Qualifying STCG under section 111A | Before 23 July 2024 | 15% of the gain | Earlier section 111A regime and its conditions |
| Qualifying LTCG under section 112A | On or after 23 July 2024 | 12.5% on aggregate gains above ₹1,25,000 in the financial year | Section 112A asset and the required STT conditions |
| Qualifying LTCG under section 112A | Before 23 July 2024 | 10% on aggregate gains above ₹1,00,000 in the financial year | Earlier section 112A regime and its conditions |
| Other LTCG | On or after 23 July 2024 | 12.5%, generally without indexation | Asset and taxpayer must fall under the applicable general LTCG provisions |
These are base rates. A 4% health and education cess and any applicable surcharge are added to the calculated income-tax. Rates, thresholds and section references should be checked for the financial year in which you sell because a later Finance Act can change them.
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First decide whether the gain is short term or long term
Holding period
Match each sale to the date and cost of the shares sold. For listed equity, the usual distinction is a holding period of up to 12 months for short-term treatment and more than 12 months for long-term treatment. Apply the holding-period rule that legally covers the particular security and acquisition, especially where the asset is not a listed equity share.
Investment or trading business
This guide addresses shares held as investments and reported as capital assets. If you buy and sell shares as a trading business, the income may need to be reported as business income instead of capital gains. The correct treatment depends on your facts, records and accounting position; do not apply section 111A or 112A automatically to business stock.
When the 20% STCG rate under section 111A applies
Section 111A covers qualifying short-term gains from listed equity shares, equity-oriented fund units and business-trust units when STT was charged on the transfer. For a sale on or after 23 July 2024, the base rate is 20%. A transaction that fails the section’s conditions does not receive this concessional rate; its gain must be taxed under the provision that applies to that asset and taxpayer.
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- Check the contract note for STT on the transfer.
- Confirm that the lot meets the short-term holding-period test.
- Calculate the gain after allowable transfer expenses and the correct cost of acquisition.
When the 12.5% LTCG regime under section 112A applies
Section 112A covers listed equity shares, equity-oriented fund units and units of business trusts. For transfers on or after 23 July 2024, tax is 12.5% on the aggregate section 112A gains above ₹1,25,000 for the financial year. The ₹1,25,000 amount is an annual threshold across qualifying gains, not a separate allowance for each share, broker account or sale.
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For equity shares, STT generally must have been paid both when the shares were acquired and when they were transferred. The law contains exceptions, including certain acquisitions before 1 October 2004, court or regulatory transactions, specified foreign-direct-investment routes, employee stock-option acquisitions and specified restructurings. Keep evidence of the applicable exception instead of assuming that every off-market or special acquisition qualifies.
How to calculate tax on a share sale
- Collect the records. Download contract notes, the broker’s tax or capital-gains report, demat statements and bank records. Record the quantity, acquisition date, sale date, purchase price, sale proceeds and each charge connected with the transfer.
- Match the lots. Identify which acquisition lots were delivered or sold. Apply the broker’s documented lot methodology and reconcile it with your demat statement. Do not use an average price if it changes the legally required cost calculation.
- Classify each lot. Apply the holding-period rule and mark each disposal as short term or long term. Then test the STT and security conditions for section 111A or section 112A.
- Compute each gain. Use this formula: capital gain = sale consideration − allowable transfer expenses − cost of acquisition. Use the original cost for transfers on or after 23 July 2024 where the applicable regime no longer provides indexation. Retain invoices or statements supporting any expense you deduct.
- Aggregate by category. Add qualifying section 111A STCG separately from section 112A LTCG and from gains that fall under other provisions. Combine all relevant transactions for the financial year, including sales through different brokers.
- Apply capital losses. Use eligible current-year and brought-forward losses in the permitted order. Short-term capital loss can offset capital gains from any capital asset; long-term capital loss can offset only long-term capital gains.
- Apply the rate and threshold. Tax qualifying post-23 July 2024 STCG at 20%. For section 112A, subtract the ₹1,25,000 annual threshold from the aggregate qualifying LTCG, never below zero, and apply 12.5% to the balance.
- Add cess and surcharge. Add the 4% health and education cess and any surcharge that applies to your total tax position, not merely to the individual share transaction.
- Report the result. Enter the transaction, losses, tax and supporting details in the income-tax return relevant to your circumstances. Preserve the working papers and statements in case the return is reviewed.
Worked calculations
Example 1: qualifying post-23 July 2024 STCG
An investor buys qualifying listed shares for ₹2,00,000 and sells them after a short holding period for ₹2,80,000. Allowable transfer expenses are ₹5,000.
Gain = ₹2,80,000 − ₹5,000 − ₹2,00,000 = ₹75,000.
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Example 2: section 112A LTCG below the annual threshold
Assume the same ₹75,000 economic gain is from a qualifying section 112A long-term sale and the investor has no other section 112A gains in the financial year. The gain is below the ₹1,25,000 aggregate threshold, so section 112A tax on that gain is nil before considering the investor’s wider tax position.
Example 3: threshold applied across several sales
Suppose three qualifying long-term sales in one financial year produce section 112A gains of ₹80,000, ₹95,000 and ₹50,000. The aggregate is ₹2,25,000. The taxable amount under section 112A is ₹2,25,000 − ₹1,25,000 = ₹1,00,000, and the base tax is ₹12,500 before cess, surcharge and loss adjustments. Splitting the sales among brokers does not create three separate ₹1,25,000 thresholds.
How capital losses change the calculation
Capital losses are not treated like ordinary expenses. A short-term capital loss may be set off against both short-term and long-term capital gains. A long-term capital loss may be set off only against long-term capital gains. Apply the statutory set-off rules before calculating the final tax on the remaining gains.
Unused capital losses can generally be carried forward for up to eight assessment years, provided the required return-filing conditions are met. Keep the year-by-year loss schedule: the amount, type, year of origin, set-offs used and balance carried forward. A loss that is not reported or carried forward in accordance with the filing rules may not be available later.
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Resident taxpayers, deductions and other tax adjustments
Unused basic exemption limit
A resident individual or Hindu Undivided Family may be able to use an unused portion of the basic exemption limit against qualifying section 111A STCG or section 112A LTCG. The calculation depends on total income, the taxpayer’s status and the applicable tax regime for that year. It is not an automatic reduction of 20% or 12.5%; calculate the unused limit within the full return.
Chapter VI-A deductions
Chapter VI-A deductions do not reduce concessional STCG under section 111A. Section 112A also has its own restrictions on deductions and rebates. Do not subtract investments or insurance deductions directly from a section 111A gain unless the applicable law expressly permits it.
Non-residents
Residency can affect rates, withholding, treaty positions, reporting and the use of losses or exemption limits. A non-resident should reconcile the broker statement with the Indian return and review treaty and documentation requirements rather than assuming that the resident calculation applies unchanged.
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Special dates, costs and acquisition rules
Sales before 23 July 2024
The post-23 July 2024 rates do not apply to an earlier transfer. Qualifying section 111A STCG for an earlier transfer used a 15% base rate, while qualifying section 112A LTCG used 10% on aggregate gains above ₹1,00,000. Separate the transactions by transfer date before aggregating them.
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Indexation after the rate change
For transfers on or after 23 July 2024, long-term gains generally use the original cost without indexation. Do not inflate the purchase cost with an indexation factor unless a specific rule for the asset and transaction says otherwise.
Acquisitions with unusual STT treatment
Rights issues, gifts, employee stock options, mergers, demergers, court-directed transfers, regulatory transactions and foreign-investment routes can have special cost or STT rules. The section 112A acquisition test also has specified exceptions. Obtain the original allotment, exercise, merger or transfer records and document why the transaction qualifies.
Records checklist before filing
- Contract notes showing trade dates, quantities, prices, brokerage and STT.
- Demat statements proving acquisition and delivery of the lots sold.
- Broker capital-gains or tax reports, checked against your own lot matching.
- Evidence for inherited, gifted, employee-option, merger or other special acquisitions.
- A schedule separating section 111A STCG, section 112A LTCG, other gains and each loss category.
- Prior returns showing capital losses carried forward and the assessment years still available.
- Working papers for the ₹1,25,000 section 112A threshold, resident exemption-limit adjustment, cess and surcharge.
Common mistakes to avoid
- Taxing the sale value: tax is based on the calculated gain, not the full amount credited by the broker.
- Using the old rates: a qualifying post-23 July 2024 sale uses 20% STCG and 12.5% section 112A LTCG above ₹1,25,000.
- Applying the LTCG threshold per trade: all qualifying section 112A gains in the financial year share one threshold.
- Ignoring STT conditions: section 111A requires STT on transfer, and section 112A equity shares generally require STT on acquisition and transfer.
- Deducting every account charge: include only expenses that are allowable in computing the transfer gain and retain support for them.
- Mixing investment and trading records: business stock may not receive capital-gains treatment.
- Forgetting losses: current-year and carried-forward losses can materially change the taxable amount, but their set-off rules differ.
- Leaving out cess or surcharge: the published 20% and 12.5% figures are base rates, not always the final bill.
When professional review is sensible
Get tax advice when you are non-resident, have large or frequent trades, sold unlisted securities, received shares through a corporate action, exercised employee options, inherited or received shares by gift, used an STT exception, or have substantial carried-forward losses. Those facts can change the cost basis, holding period, eligibility for a concessional section, or filing position.
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