LTCG on Shares FY 2025-26: ₹1.25 Lakh Exemption at 12.5% (Post–Jul 2024 Rules)
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Long-term capital gains (LTCG) on listed equity shares and equity-oriented mutual funds are taxed at 12.5% under Section 112A of the Income-tax Act, 1961, with an annual exemption of ₹1,25,000 on such gains for Financial Year 2025-26 (Assessment Year 2026-27). This applies to qualifying assets held for more than 12 months and sold on or after 23 July 2024—the cutover date specified in the Finance (No. 2) Act, 2024 amendment. Short-term gains on the same class of assets are taxed at 20% under Section 111A. Gain computation follows Section 48 (cost of acquisition and improvement, without indexation for these assets). Harun Raaj tracks the parallel mapping to the Income Tax Act, 2025 at harunraaj.com/ita-2025/.
Staleness alert: A large share of blogs, broker explainers, and even some government-adjacent PDFs still quote 10% LTCG with a ₹1 lakh exemption. Those numbers applied only to the pre–23 July 2024 regime. They have been superseded for nearly two years. If a source does not mention the July 2024 cutover, treat its numbers as outdated.
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At a glance: post–23 July 2024 vs pre-cutover rules
Rates auto-synced from harunraaj.com tax config; last built 2026-08-04.
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Which shares does Section 112A cover?
Section 112A applies to long-term capital gains arising from the transfer of:
- Equity shares listed on a recognised stock exchange in India, where Securities Transaction Tax (STT) has been paid on the purchase and sale (subject to notified exceptions); and
- Units of equity-oriented mutual funds, where STT has been paid on the transfer.
The holding-period threshold for “long term” on these assets is 12 months. If you sell within 12 months of purchase, the gain is short-term and falls under Section 111A at the applicable STCG rate—not Section 112A.
Gains are computed under Section 48: from the full value of consideration, you deduct the cost of acquisition (and cost of improvement, if any). For equity covered by Section 112A, indexation is not available—the post–July 2024 rules explicitly continue this position.
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How the ₹1.25 lakh exemption works in practice
The exemption of ₹1,25,000 is an annual limit on taxable LTCG from assets chargeable under Section 112A. It is not a blanket deduction from your total income; it applies specifically to this category of capital gains.
Mechanically:
- Calculate LTCG on each qualifying sale during the financial year (1 April 2025 to 31 March 2026) using Section 48.
- Aggregate all Section 112A gains (and set off eligible capital losses per the general rules, where applicable).
- Reduce the net positive LTCG by up to ₹1,25,000.
- Apply 12.5% on the balance.
Important nuance for FY 2025-26: If you bought shares before 23 July 2024 but sold them after that date, the post-cutover rate and exemption apply to that sale. The cutover is tied to the date of transfer, not the date of acquisition. Conversely, any transfer completed on or before 22 July 2024 would have been governed by the pre-cutover slab (10% with ₹1 lakh exemption)—but such sales fall in earlier financial years, not FY 2025-26.
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Worked example: Priya sells HDFC Bank and a flexi-cap fund
Persona: Priya Sharma, salaried resident individual, FY 2025-26.
Facts:
Step 1 — Compute gains under Section 48
- HDFC Bank LTCG: ₹5,50,000 − ₹3,00,000 = ₹2,50,000
- MF LTCG: ₹2,80,000 − ₹2,00,000 = ₹80,000
- Total Section 112A LTCG: ₹2,50,000 + ₹80,000 = ₹3,30,000
Step 2 — Apply the Section 112A exemption
- Exemption available: min(₹3,30,000, ₹1,25,000) = ₹1,25,000
- Taxable LTCG: ₹3,30,000 − ₹1,25,000 = ₹2,05,000
Step 3 — Tax at 12.5%
- Tax on LTCG: ₹2,05,000 × 12.5% = ₹25,625
Priya’s LTCG tax on shares and equity MF for FY 2025-26 is ₹25,625, before any surcharge or cess that may apply on her total income. (Section 112A gains are computed separately from salary income taxed under the old or new regime slabs.)
You can reproduce this arithmetic using our Capital Gains Calculator 2025.
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STCG on shares: the paired rate under Section 111A
If Priya had sold the HDFC Bank shares within 12 months of purchase, the gain would be short-term and taxed at 20% under Section 111A—not 12.5%. There is no ₹1.25 lakh exemption for STCG under this section.
The STCG rate also moved at the 23 July 2024 cutover (from 15% to 20%). Many stale articles miss this paired change.
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What changed: Finance (No. 2) Act, 2024 snapshot
The restructure was effective from 23 July 2024 (cutoverDate in our config). All equity LTCG and STCG calculations for transfers in FY 2025-26 use the right-hand column.
For the parallel Income Tax Act, 2025 transition and section mapping, see harunraaj.com/ita-2025/.
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LTCG vs income-tax slabs: do not mix the buckets
A common planning mistake is assuming the ₹1.25 lakh exemption “uses up” part of the basic exemption limit under the old or new tax regime. It does not. Section 112A gains are a separate charge at a flat 12.5% (after the dedicated exemption), independent of whether you opt for the old regime (with Chapter VI-A deductions) or the new regime under Section 115BAC.
If your only income is salary and you are comparing regimes, that analysis belongs in a different calculator—use our Old vs New Regime Calculator for slab-rate salary tax. Capital gains under Sections 111A and 112A sit outside that comparison unless they form part of your total income for surcharge purposes.
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Filing and documentation checklist for FY 2025-26
When reporting LTCG on shares in your ITR for AY 2026-27:
- Contract notes for each sale (broker, date, STT line item).
- Purchase records—contract notes, allotment statements, or MF statements showing cost of acquisition per Section 48.
- Holding-period proof—purchase date vs sale date to confirm >12 months.
- STT payment confirmation on both legs (purchase and sale), where applicable.
- Capital-gains schedule in the ITR—Section 112A gains are reported separately from salary and other heads.
Losses from other capital assets may be set off against LTCG subject to general provisions, but crypto/VDA losses cannot be set off against share gains (VDA is taxed under Section 115BBH at 30% with no loss set-off—a different bucket entirely).
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Planning notes (honest, not prescriptive)
- The exemption is use-it-or-lose-it annually. There is no carry-forward of the unused portion of the ₹1.25 lakh Section 112A exemption to the next year.
- Batching sales across years can legitimately utilise the exemption in each financial year, but triggering sales solely for tax timing carries market risk and transaction costs (STT, brokerage).
- STCG at 20% makes short-term trading materially more expensive post–July 2024; the old 15% figure is obsolete.
- No indexation means long-held shares bought decades ago still use nominal cost—often favourable, but verify corporate actions (splits, bonuses) that adjust cost.
This is general information, not personalised advice. Complex cases—ESOPs, buybacks, off-market transfers, or shares acquired without STT—need individual review.
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Frequently asked questions
1. What is the LTCG tax rate on shares for FY 2025-26?
12.5% under Section 112A of the Income-tax Act, 1961 (as amended by the Finance (No. 2) Act, 2024), on gains from listed equity shares and equity-oriented mutual funds held for more than 12 months, after a ₹1,25,000 annual exemption.
2. Is the ₹1 lakh LTCG exemption still valid?
No. The exemption is ₹1,25,000 for transfers on or after 23 July 2024. The ₹1,00,000 figure applied only to the pre-cutover regime and is frequently misquoted online.
3. What is the short-term capital gains rate on shares after July 2024?
20% under Section 111A for listed equity and equity-oriented MF units where STT is paid, if sold within 12 months of acquisition.
4. How long must I hold shares for LTCG treatment?
More than 12 months. The holding-period threshold for listed equity STT-paid assets is 12 months under the Section 112A framework.
5. Can I claim indexation on long-term share gains?
No. Indexation is not available for equity LTCG covered by Section 112A—both before and after the July 2024 amendment. Gains are computed under Section 48 using actual cost of acquisition.
6. I bought shares in 2023 but sold in FY 2025-26—which rate applies?
12.5% with the ₹1,25,000 exemption, because the sale occurred after 23 July 2024. The post-cutover rates apply based on the date of transfer, not the purchase date.
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Tools and further reading
- Capital Gains Calculator 2025 — compute LTCG/STCG with post–July 2024 rates
- Old vs New Regime Calculator — compare salary tax slabs (separate from s. 112A)
- ITA 2025 Section Mapping — track how s. 112A, s. 111A, and s. 48 map to the new Act
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Last verified: 2026-08-04
Sources: Finance (No. 2) Act, 2024 (capital gains restructure w.e.f. 23-07-2024); Income-tax Act, 1961 Sections 48, 111A, 112A; Income Tax Act 2025 transition (see section-map.json). Reviewer: pending CA sign-off. Rates in this article are auto-synced from the harunraaj.com tax config; last built 2026-08-04.
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