Section 112A deals with the taxation of long-term capital gains (LTCG) arising from the sale of listed equity shares, equity-oriented mutual funds, and units of business trusts. From 23rd July 2024, the applicable LTCG tax rate on such listed securities is 12.5% for gains exceeding ₹1.25 lakh. Prior to this date, the rate was 10% for gains exceeding ₹1 lakh. The revised exemption limit of ₹1.25 lakh applies to the entire financial year 2024–25, and not just from 23rd July 2024.
In the Income Tax Return (ITR) forms, Schedule 112A is provided to report scrip-wise details of these listed securities sold during the financial year. Taxpayers with long-term capital gains under the grandfathering provisions of Section 112A must compulsorily enter these details in Schedule 112A.
Introduction to Section 112A
Section 112A was introduced through the Finance Act, 2018 to levy tax on long-term capital gains from the transfer of listed equity shares, units of equity-oriented mutual funds, and units of business trusts. This provision made taxable the gains that were earlier exempt until FY 2017–18 (AY 2018–19). Before Section 112A came into force, Section 10(38) provided an exemption for such capital gains.
Scope of Section 112A
The taxation of capital gains under Section 112A applies only if the following conditions are satisfied:
- The sale must involve listed equity shares, units of equity-oriented mutual funds, or units of a business trust.
- These securities should qualify as long-term capital assets, i.e., held for more than one year.
- In the case of equity shares, both purchase and sale transactions must be subject to Securities Transaction Tax (STT). For equity-oriented mutual funds and business trusts, the sale transaction is required to attract STT.
- No deductions under Chapter VI-A are allowed against such capital gains.
- Rebate under Section 87A cannot be claimed on these gains.
Long-Term Capital Gains Under Section 112A
Section 112A governs long-term capital gains (LTCG) on the transfer of listed equity shares, equity-oriented mutual funds, or business trust units. A holding period exceeding one year makes them long-term. The tax rates are as follows:
- Before 23rd July 2024: 10% on gains exceeding the exemption threshold.
- From 23rd July 2024: 12.5% on gains exceeding the exemption threshold.
The exemption limit was ₹1 lakh until FY 2023–24 and has been increased to ₹1.25 lakh from FY 2024–25 onwards.
Example:
If Mr. A realizes LTCG of ₹2,00,000 on listed equity shares on 1st August 2024, the tax is calculated as follows:
Tax Payable = ₹9,375 (12.5% on ₹75,000, i.e., ₹2,00,000 – ₹1,25,000).
Additional Notes
- For resident individuals or HUFs, if the total income (excluding such long-term capital gains) falls below the basic exemption limit, the shortfall reduces the LTCG chargeable to tax.
- A surcharge on LTCG from listed equity shares, mutual fund units, or business trusts is capped at 15%.
Set-Off of Long-Term Capital Loss Against Long-Term Capital Gains
Any loss from the sale of long-term listed equity shares or eligible units is treated as a long-term capital loss. Such a loss can be adjusted only against long-term capital gains. If there are losses from certain securities and gains from others, the losses can be set off against the gains. Only the net gain, if it exceeds ₹1,25,000 (₹1,00,000 prior to 23rd July 2024), is taxable.
Unadjusted long-term capital losses can be carried forward for up to eight assessment years following the year in which the loss was incurred.
Grandfathering Provisions Under Section 112A
The Finance Act, 2018 introduced grandfathering provisions to ensure that long-term capital gains accrued up to 31st January 2018 remain exempt. For specified securities purchased before 1st February 2018, the cost of acquisition is determined as follows:
- Take the lower of the fair market value (FMV) as on 31st January 2018 and the actual sale price.
- Compare this with the original purchase price.
- The higher of the two becomes the cost of acquisition.
Example: Capital Gains Calculation under Section 112A
| Sale Price | Cost | FMV | Lower of Sale & FMV | Cost of Acquisition (Higher of Cost & Lower Value) | Capital Gain |
| 3,00,000 | 50,000 | 1,50,000 | 1,50,000 | 1,50,000 | 1,50,000 |
| 4,00,000 | 1,00,000 | 2,00,000 | 2,00,000 | 2,00,000 | 2,00,000 |
| 3,00,000 | 75,000 | 1,50,000 | 1,50,000 | 1,50,000 | 1,50,000 |
| 1,00,000 | 1,20,000 | 1,50,000 | 1,00,000 | 1,20,000 | (20,000) |
| 1,00,000 | 1,50,000 | 1,80,000 | 1,00,000 | 1,50,000 | (50,000) |
| 1,00,000 | 1,70,000 | 1,60,000 | 1,00,000 | 1,70,000 | (70,000) |
| 13,00,000 | 6,65,000 | 9,90,000 | 8,00,000 | 9,40,000 | 3,60,000 |
In the above illustration, the taxpayer can offset losses against gains, resulting in a net taxable LTCG of ₹3,60,000. Since gains up to ₹1,25,000 are exempt, the taxable amount becomes ₹2,45,000.
Fair Market Value (FMV):
- For listed securities, FMV is the highest quoted price on the recognized stock exchange as of 31st January 2018.
- If no trades occurred on 31st January 2018, FMV is taken as the highest quoted price on the last trading day prior to that date.
- For unlisted units, FMV is based on the Net Asset Value (NAV) as of 31st January 2018.
- For equity shares listed after 31st January 2018, or those acquired through mergers/other transfers covered under Section 47, FMV is computed as:
Purchase Price × Cost Inflation Index (FY 2017–18) ÷ Cost Inflation Index of purchase year or FY 2001–02, whichever is later.
Reporting Under Schedule 112A of the ITR
For Assessment Year (AY) 2025–26, the Income Tax Return (ITR) includes Schedule 112A for scrip-wise reporting of long-term capital gains where the grandfathering provisions apply. In this schedule, details such as the ISIN code, name of the security, number of shares or units sold, sale value, purchase cost, and the Fair Market Value (FMV) as on 31st January 2018 must be provided. These disclosures are required to correctly compute long-term capital gains covered by the grandfathering rules.
While filling Schedule 112A, information relating to long-term capital gains has to be entered in the ITR. However, scrip-wise reporting is mandatory only for shares or mutual fund units acquired before 31st January 2018 and sold in the relevant assessment year. For securities purchased after 31st January 2018 and sold in the same year, scrip-wise details are not required.
FAQ’s
1. How is capital gain calculated on listed shares?
For listed equity shares, capital gains are calculated as:
Capital Gain = Sale Value – Cost of Acquisition
If you have held listed equity shares or equity-oriented mutual funds for more than one year and STT (Securities Transaction Tax) has been paid, the gains are treated as long-term capital gains (LTCG). These LTCG details must be reported in Schedule 112A of your Income Tax Return.
2. What details do I fill in Schedule 112A?
If you have long-term capital gains from the sale of listed equity shares or equity-oriented mutual funds, you must disclose these in Schedule 112A of your ITR. This schedule requires scrip-wise details of all stocks and mutual funds sold during the financial year. Details include ISIN code, number of units/shares sold, sale price, purchase cost, and Fair Market Value (FMV) as on 31st January 2018 (if grandfathering provisions apply).
3. Can I file ITR-2 if I have capital gains?
Yes. Taxpayers with capital gains should file ITR-2. If you also have business or professional income along with capital gains, you are required to file ITR-3.
4. When is a capital gain considered long-term?
A capital gain is considered long-term if the listed shares or equity mutual funds are held for more than one year and STT has been paid on the transaction.
5. Is STT mandatory for LTCG under Section 112A?
Yes, for long-term capital gains on listed shares and equity-oriented mutual funds, the transaction must be subject to Securities Transaction Tax (STT).
6. Do I need to report short-term capital gains in Schedule 112A?
No. Schedule 112A is only for long-term capital gains where the grandfathering provisions or long-term holding criteria are applicable. Short-term capital gains are reported separately in the ITR.
7. What is the exemption limit for long-term capital gains?
Long-term capital gains up to ₹1.25 lakh (FY 2024–25) are exempt from tax. Gains exceeding this limit are taxable at 12.5%.
8. Can I carry forward long-term capital losses?
Yes. Unadjusted long-term capital losses can be carried forward for up to eight assessment years to offset against future long-term capital gains.
9. Is scrip-wise reporting mandatory for all shares and mutual funds?
Scrip-wise reporting in Schedule 112A is mandatory only for securities purchased before 31st January 2018 and sold in the current assessment year. For shares or mutual funds acquired after 31st January 2018, scrip-wise disclosure is not required.
