Tax on Long-Term Capital Gain from Sale of Securities Chargeable to STT AY 2026-27

By | May 6, 2026
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Tax on Long-Term Capital Gain from Sale of Securities Chargeable to STT

Introduction
Long-term capital gains (LTCG) from the sale of specified securities are exempt from tax if the aggregate gain during the year does not exceed Rs. 1,25,000. Gains above this threshold are taxable at a concessional rate of 12.5% or 10%.

Key Provisions

  • Eligibility
  • All assessees can claim the benefit of Section 112A for LTCG arising from specified securities.
    • Specified Securities
  • Equity shares.
  • Units of equity-oriented mutual funds.
  • Units of business trusts.
    • Conditions for Concessional Taxation
  • STT must be paid at the time of transfer.
  • For equity shares, STT must also be paid at acquisition (However, there are some exceptions).

Exceptions:

  • Transactions on recognized stock exchanges in IFSCs are exempt from STT requirements if consideration is in foreign currency.
  • CBDT permits exemptions for certain acquisitions, including shares purchased before October 1, 2004, or acquired through court orders, SEBI regulations, FDI guidelines, ESOPs, and specified corporate restructuring.

Cost of Acquisition Rules

  • Shares Acquired on or Before January 31, 2018:
  • Higher of:
  • Actual cost of acquisition.
  • Lower of:
    • Fair market value (FMV) as on January 31, 2018.
    • Full value of consideration at transfer.
      • Shares Acquired on or After February 1, 2018:
    • Actual cost of acquisition.

Taxation Under Section 112A

  • Threshold Exemption:
  • LTCG up to Rs. 1,25,000 is exempt.
    • Tax Rate:
  • LTCG exceeding Rs. 1,25,000 is taxed at 12.5%(10% if specified security transferred before 23rdJuly 2024) plus surcharge and health & education cess.

Restrictions on Benefits

  • Adjustment of Basic Exemption Limit
  • LTCG taxable under Section 112A cannot be adjusted against the basic exemption limit.
  • Exception: Resident individuals and HUFs can adjust LTCG if their total income (excluding LTCG) falls below the exemption limit.
    • No Deductions or Rebates
  • Deductions under Chapter VI-A are not allowed.
  • No rebate under Section 87A is available for LTCG taxed under Section 112A.