Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Short answer: For listed equity or equity-oriented mutual funds (with STT paid), short-term capital gains tax is 15% if you sell on or before 23 July 2024, and 20% if you sell on or after 24 July 2024. The deciding factor is your sale date, not when you bought the shares. Both rates are under Section 111A of the Income-tax Act, 1961, as amended by the Finance (No. 2) Act, 2024. Health and education cess of 4% applies on top. (Rates auto-synced, last built 2026-08-04.)
If you are filing for FY 2025-26 (AY 2026-27) and sold shares this year, you are almost certainly in the 20% bracket — unless the sale happened in the narrow window before the cut-over still falls in this financial year (only relevant for sales between 1 April and 23 July 2024, which belong to FY 2024-25 anyway).
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Why everyone argues about 15% vs 20%
Search for “STCG tax rate equity 2025” and you will find both numbers. That is not a mistake in the law — it is two different eras of the same provision.
The Finance (No. 2) Act, 2024 restructured capital gains taxation with effect from 23 July 2024 (the cut-over date in our tax config). For equity listed on a recognised stock exchange where Securities Transaction Tax (STT) has been paid:
The same Act also changed long-term rates (Section 112A): 10% pre-cutover vs 12.5% post-cutover, with the LTCG exemption moving from ₹1,00,000 to ₹1,25,000. But for STCG, the jump from 15% to 20% is what catches most retail investors off guard.
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Sale date matters — not purchase date
This is the mistake the headline warns about.
Example of the confusion: You bought Reliance shares in January 2023. You sold them in March 2025. Many investors assume the rate is tied to the purchase year or “when I became an investor.” It is not. Your sale in March 2025 is squarely in the post-cutover era → 20% STCG under Section 111A.
Counter-example: You bought the same shares in 2020 but sold on 20 July 2024 → 15% STCG, because the sale preceded the cut-over.
The holding period still matters for a different reason: equity held for 12 months or less is short-term; held for more than 12 months is long-term (and taxed under Section 112A instead). But once you know the gain is short-term, the 15% vs 20% split is purely about when you sold, not when you bought.
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Section 111A: what it actually covers
Section 111A is the charging provision for STCG on specified assets. For individual investors, the practical scope is:
- Listed equity shares on a recognised stock exchange in India
- Units of equity-oriented mutual funds (again, where STT applies on the transfer)
- Units of a business trust
Gains must be computed under Section 48 (full value of consideration minus cost of acquisition and expenditure wholly and exclusively connected with the transfer). Indexation is not available for these assets in either era.
Section 111A sets a preferential rate — lower than your slab rate — but only for qualifying transfers. Unlisted shares, debt mutual funds acquired on or after 1 April 2023 (treated as slab-rate STCG under Section 50AA), and other non-specified assets follow different rules entirely.
Pin to remember: s. 111A = STCG rate | s. 112A = LTCG rate | s. 48 = how you compute the gain.
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Cess and surcharge: the number on your tax challan
The rates in Section 111A are before cess.
- Health and education cess: 4% on the tax (cess rate from tax config, applicable in both regimes).
- Surcharge: Applies only if your total income crosses ₹50 lakh, ₹1 crore, ₹2 crore, or ₹5 crore — with rates of 10%, 15%, 25%, and 37% respectively on the income tax. Note: the 37% surcharge cap does not apply in the new tax regime (capped at 25% under Section 115BAC), but capital gains tax computation often sits alongside salary income, so check your overall picture.
For a typical salaried investor with total income under ₹50 lakh, you pay 20% + 4% cess = 20.8% effective STCG tax in the post-cutover era.
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Worked example: pre-cutover sale (15%)
Facts
- Bought 500 shares of a listed company at ₹400 each in May 2023 (cost: ₹2,00,000)
- Sold all 500 on 15 July 2024 at ₹550 each (sale value: ₹2,75,000)
- Holding period: ~14 months → actually long-term, so this would be 112A, not 111A
Let us fix the facts for a true STCG example:
- Bought 500 shares at ₹400 in June 2024 (cost: ₹2,00,000)
- Sold on 20 July 2024 at ₹550 (sale value: ₹2,75,000)
- Holding period: ~1.5 months → short-term
Computation (s. 48)
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Worked example: post-cutover sale (20%)
Same purchase, different sale date:
- Bought 500 shares at ₹400 in June 2024 (cost: ₹2,00,000)
- Sold on 10 January 2025 at ₹550 (sale value: ₹2,75,000)
- Holding period: ~7 months → short-term
Computation (s. 48)
Difference: Identical gain of ₹75,000, but selling after 23 July 2024 costs ₹3,900 more in tax purely because of the rate change. No change in purchase logic, holding period treatment, or exemption — only the sale date moved the rate.
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Pre vs post cut-over: full comparison
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Which ITR form — and why ITR-1 is a trap
Capital gains cannot be reported in ITR-1 (Sahaj). ITR-1 is only for individuals with income from salary, one house property, other sources (interest, etc.), and agricultural income up to ₹5,000 — with no income under the head “Capital Gains.”
If you have any STCG under Section 111A — even ₹1 — you must file ITR-2 (or ITR-3 if you also have business income).
Filing ITR-1 when you have capital gains makes your return defective. Under Section 139(9), the department can treat it as invalid, issue a notice, and require you to file a revised return in the correct form within the stipulated period. The practical risk: delayed refunds, interest under Section 234A/B/C, and unnecessary scrutiny.
In ITR-2, STCG on equity goes in Schedule CG. You will need:
- ISIN / scrip name
- Sale date and sale value
- Purchase date and cost (or FIFO details if multiple lots)
- STT paid (broker contract note)
- Whether the asset is 111A-specified
Your broker’s P&L statement is a starting point, not a substitute for verifying sale dates against the cut-over.
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FY 2025-26: what rate applies to you?
For the financial year 2025-26 (assessment year 2026-27), any equity sale from 1 April 2025 onward is post-cutover. You pay 20% on STCG under Section 111A, plus 4% cess.
The 15% rate is only relevant if you are:
- Amending or revising a return for FY 2024-25 where the sale was on or before 23 July 2024, or
- Explaining a historical transaction to your CA
Do not use 15% for any sale in FY 2025-26.
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Use the calculator — don’t guess the era
Manual rate lookup is error-prone when you have multiple trades across years. Use our Capital Gains Calculator 2025 to split pre- and post-cutover lots, apply the correct 111A/112A rates, and factor in the LTCG exemption (₹1,00,000 vs ₹1,25,000 depending on sale date).
(Rates auto-synced, last built 2026-08-04.)
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Frequently asked questions
1. I bought shares in 2019 and sold in FY 2025-26. Which STCG rate applies?
20%. Purchase date is irrelevant for the 15% vs 20% split. Your sale in FY 2025-26 is after 23 July 2024, so Section 111A applies at the post-cutover rate of 20% (plus 4% cess), provided the gain is short-term (held ≤ 12 months).
2. Is the 15% rate completely abolished?
No. It still applies to short-term sales of listed equity (with STT) that occurred on or before 23 July 2024. It is not available for sales from 24 July 2024 onward.
3. Does STT payment affect whether Section 111A applies?
Yes. Section 111A benefits apply to transfers where STT is paid on the sale (for equity shares and equity-oriented MF units on recognised exchanges). If STT was not paid, the gain may be taxed at slab rates instead of the 111A concessional rate.
4. I have both STCG and salary. Can I still file ITR-1?
No. The moment you have capital gains income, ITR-1 is off the table. File ITR-2 and report salary in the appropriate schedules along with Schedule CG for your equity STCG.
5. What if I sold some shares before 23 July 2024 and some after?
Each sale is judged independently by its own sale date. Pre-cutover lots attract 15%; post-cutover lots attract 20%. Maintain lot-wise records (FIFO is the default method unless you can identify specific lots).
6. Are debt mutual funds taxed like equity for STCG?
No. Specified debt mutual funds acquired on or after 1 April 2023 are taxed at slab rate as deemed STCG under Section 50AA, regardless of holding period. The 15%/20% Section 111A rates apply to equity and equity-oriented funds, not debt MFs.
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This article is for education only and does not constitute tax advice. Consult a qualified chartered accountant for your specific facts.
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