Section 111A, 112A & 112 Under Income Tax Act Provisions

This article is going to be helpful for taxpayers confused about the provisions under Sections 111A, 112, and 112A of the Income Tax Act, 1961, regarding the capital gains taxes of Shares, Debentures, Mutual Funds, and other types of movable and immovable properties.

Note: From 1 st April 2026 onwards (Tax Year 2026-27), Sections 111A, 112, and 112A are changed by Section 196, Section 197 and Section 198, respectively, under the New Income Tax Act, 2025.

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Section 111A Under Income Tax Act

Under Section 111A, an assessee is required to file a tax at the rate of 20% on the capital gained by him on short-term capital assets defined under Section 2 (42A) of the Income Tax Act, 1961. The listed securities on which Securities Transaction Tax is applicable come under this section, like listed equity shares, listed mutual funds and listed units of business trusts.

The benefits of the slabs do not apply to the Non-Residents of India (NRIs). The deductions under Section VI-A are not provided under Section 111A.

Section 111A Exceptions

• Shares listed in the recognised Stock Exchange in the International Financial Service Centre (IFSC), as Securities Transaction Tax (STT) are not charged on the transfer of such securities.
• If the assessee held the securities as stock in trade on business
• Foreign Institutional Investors (FII) are also not included as the securities held by them are indeed Capital Assets, and there is no requirement to prove the same.

Remember the Points

Suppose the total income and STCG (short-term capital gain) after all the related tax deductions would be less than Rs 2.5 lakh. In that case, you must be secured with no tax load and no liability under section 111A, as the deductions up to the basic tax exemption amount would be permitted. 

If the total income, along with the STCG, is more than Rs 2.5 lakhs, you will be imposed a flat rate of 20% on STCG. But if the total income is less than 5 lakhs, a reimbursement of up to Rs 12500 of the tax liability would be available under the old income tax regime.

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Section 112 of the Income Tax Act

Under Section 112 of the Income Tax Act, an assessee is required to pay a tax on the capital gained by him on long-term capital assets defined under Section 2 (29A) of the IT Act, 1961, lower than the following if the capital asset is acquired before 23 rd July 2024.

• At the rate of 20% after indexation or
• 12.50% before indexation

Otherwise, the tax rate will be 12.50% on capital gain without indexation where the asset is acquired after 23 rd July 2024. All the securities, whether listed or not and whether its shares, debentures, or units of a business trust and any other movable and immovable property, are taxable under this section.

The deductions under Section VI-A are not provided under Section 112.

Section 112 Exceptions

• If Section 112A is applicable, then Section 112 does not imply

Section 112A of the Income Tax Act

Under Section 112A, the assessees are liable to pay a tax at the rate of 10% on the capital gained on the long-term capital assets, being an equity share in a company or a unit of an equity-oriented fund or a unit of a business trust which attracts Securities Transaction Tax (STT), if the value of gains amounts to more than INR 1,25,000. All the securities, which attract STT, a unit of equity-oriented fund, or units of a business trust, are applicable under this section.

The deductions under Section VI-A are not provided under Section 112A. Exceptions under Section 10(38) are not available if the provisions under the same are not fulfilled. Provisions 1 and 2 of Section 48 are not applicable.

Section 112A Exceptions

• If Section 112 is applicable, then Section 112A does not imply
• Shares listed in the recognised Stock Exchange in the International Financial Service Centre (IFSC), as Securities Transaction Tax (STT), are not charged on the transfer of such securities (except where the transaction involves foreign exchange).
• If assessees held securities as stock in trade for business
• Foreign Institutional Investors (FII) are also not included as the securities held by them are indeed Capital Assets, and there is no requirement to prove the same.

Acquisition Cost (Capital Gains on or before 31 Jan 2018)

For the calculation of tax on the cost of acquisition, the values taken should be higher than the actual cost of acquisition and lower than the fair market value of the asset and the sales consideration. The tax applies to the gains amounting to above INR 1,25,000 at the rate of 12.50% and no tax below that.

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For example, if the actual cost of acquisition is INR 5,00,000, sales consideration is INR 6,00,000, and the fair market value of the asset is INR 5,50,000, then,

• Step 1- Lower FMV and sales consideration, that is, 5,50,000, is taken
• Step 2- The Value taken is compared with the actual cost of acquisition, and the higher actual or value taken, that is, 5,50,000, is taken for the calculation
• Step 3- Calculation of Taxable Capital Gain: 6,00,000 minus 5,50,000, which is 50,000, so 50,000 will be taxable capital gain
• Step 4- Calculation of Tax Liability: 12.50% of capital gain, that is, 12.50% of 50,000 equals INR 6250

Note: According to Sections 70 to 80, the losses under this section can be carried forward and set off accordingly, and the remaining balance will be taxable.

Adjustment for Rs 1,25,000 Exemption

LTCG beneath section 112A with 12.50% would be calculated on the gains over Rs 1.25 lac. 

CBDT said that in the FAQ section, the amount of Rs 1.25 lac would not be diminished from the total amount of the capital gains, as the same would get deducted automatically through the software of the tax calculator. 

Under section 112A of the Income Tax Act, the advantages and conditions are

The conditions mentioned below should be attained to take advantage of the reduced rate under section 112A of the Income Tax Act. 

• Upon the acquisition and transfer of the firm’s equity stake, the securities transaction tax (STT) was imposed. 
• For the units of the equity-oriented fund or units of a business trust, the STT was furnished at the time of disposal of the asset. 
• Long-term capital assets must be securities.
• These long-term capital gains would not be entitled to the deduction under Chapter VI A. 
• Section 87A reimbursement could not be utilised to offset the tax left on the long-term capital gains under section 112A. 

Income Tax Section 111A Vs 112A

Section 111A under the Income Tax Act	Section 112A under the Income Tax Act
Section 111A is for Short-Term Capital Gains (STCG).	Section 112A is for Long Term Capital Gain (LTCG).
As Per Section 11A STCG is taxed at 20%	As per Section 112A, LTCG is taxed at 12.50%
When the total income post to all the related tax deductions along with STCG (short-term capital gain) would be less than Rs 2.5 lakh or Rs 4 lakh then have no load and liability under section 111A)	Rs 1.25 lakh will be the LTCG exemption limit that is rendered if the gain surpasses Rs 1.25 lakh then only a 12.50% tax rate would be applicable under section 112A of the income tax act.
STCL can be set off against STCG and LTCG but LTCL cannot set off against STCG	For 8 years complying with the assessment year where you made the loss, you could carry forward the long-term capital loss which you could not set off.