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Understanding Section 112A: LTCG on Equity

 

Section 112A introduced significant changes to how long-term

capital gains from equity investments are taxed.

 

What is Section 112A?

 

Section 112A deals with taxation of long-term capital gains from:

- Listed equity shares

- Equity-oriented mutual funds

- Units of business trust

 

Tax Rate under Section 112A

 

- 10% on gains exceeding ₹1 lakh

- No indexation benefit available

- Securities Transaction Tax (STT) must be paid

 

Exemption Limit

 

₹1 lakh per financial year is exempt from tax

 

Calculating Tax under Section 112A

 

Example: If you made LTCG of ₹2.5 lakh from equity:

- Exempt amount: ₹1 lakh

- Taxable amount: ₹1.5 lakh

- Tax: ₹1.5 lakh × 10% = ₹15,000

 

Important Points to Remember

 

Always ensure STT has been paid on transactions. Maintain proper

records of purchase and sale. Consider the ₹1 lakh exemption

while planning sales.