Section 111A of the Income Tax Act – STCG Tax, Applicability and Calculation

In summary

Section 111A of the Income Tax Act, 1961 applies to specified short-term capital gains (STCG) arising from transfers of equity shares, units of equity-oriented funds, and units of business trusts when the prescribed conditions are met. For transfers on or after 23 July 2024, the applicable rate is 20%.

• The provision mainly covers specified listed equity shares, equity-oriented funds, and business trusts.
• The applicable holding period for these securities is generally 12 months or less.
• Securities Transaction Tax (STT) requirements apply, subject to specified exceptions.
• Resident individuals and HUFs can have a basic exemption adjustment in eligible circumstances.
• Deductions under Sections 80C to 80U are not available against Section 111A gains.
• Short-term capital losses can be relevant when calculating the overall capital-gain tax liability.

The tax treatment depends on the asset, transaction, holding period, taxpayer status, and conditions prescribed under the law.

Section 111A deals with STCG arising from the transfer of specified short-term capital assets. It covers an equity share in a company, a unit of an equity-oriented fund, or a unit of a business trust when the conditions specified under the section are satisfied.

For transfers made on or after 23 July 2024, STCG covered by Section 111A is taxed at 20%, before applicable surcharge and cess. Transfers before that date were subject to the earlier 15% rate.

The provision therefore needs to be distinguished from ordinary STCG, where gains may instead be taxed at the applicable normal rates.

Section 111A generally applies when the STCG arises from:

• Equity shares: Specified equity shares transferred under the prescribed conditions.
• Equity-oriented funds: Units of equity-oriented mutual funds meeting the relevant conditions.
• Business trusts: Units of business trusts, such as eligible REITs or InvITs, covered by the provision.

For specified listed securities, the Income Tax Department states that the concessional Section 111A rate applies where STT is paid at the time of transfer.

Transactions undertaken on a recognised stock exchange located in an International Financial Services Centre can have a specific exception where the consideration is paid or payable in foreign currency.

The tax treatment depends on whether the transaction satisfies the statutory requirements.

For eligible securities, the key considerations are:

• Asset type: The asset must fall within the categories covered by Section 111A.
• Short-term classification: The asset must qualify as a short-term capital asset under the applicable holding-period rules.
• STT: The relevant transaction must be chargeable to STT, subject to the specified IFSC exception.
• Transfer date: The applicable tax rate depends on when the transfer takes place.

For listed securities and equity-oriented fund units, the short-term holding period is generally 12 months or less.

The taxable STCG is generally determined after considering the cost of acquisition and eligible expenses directly connected with the transfer.

For example, suppose Rohan purchases listed shares for Rs. 3,00,000 and later sells them for Rs. 4,00,000. Assume eligible transfer-related expenses of Rs. 5,000.

STCG = Rs. 4,00,000 − Rs. 3,00,000 − Rs. 5,000 = Rs. 95,000

If the entire gain is covered by Section 111A and the transfer occurred on or after 23 July 2024:

Tax before surcharge and cess = Rs. 95,000 × 20% = Rs. 19,000

The actual tax liability can differ depending on the taxpayer's circumstances and applicable surcharge and cess.

A resident individual or resident HUF may be able to use an unutilised portion of the basic exemption limit against eligible Section 111A STCG, subject to the conditions in the provision. The Income Tax Department specifically provides this adjustment where total income excluding the relevant STCG is below the maximum amount not chargeable to tax.

For example, if eligible income other than STCG is Rs. 1,50,000 and the applicable basic exemption limit is Rs. 2,50,000, the Rs. 1,00,000 shortfall can, subject to the statutory conditions, reduce the portion of eligible STCG taxed at the special rate.

The treatment for non-residents is different. A non-resident cannot use the basic exemption limit against Section 111A STCG in the same manner as an eligible resident individual or HUF.

Deductions under Sections 80C to 80U are not available against STCG covered by Section 111A. This means that an eligible investment made under Section 80C, for example, cannot simply be deducted from Section 111A gains to reduce the special-rate income.

This distinction matters when comparing tax-saving investments with investments that generate taxable capital gains.

A short-term capital loss (STCL) can generally be set off against eligible capital gains according to the applicable capital-loss rules. Unabsorbed STCL can generally be carried forward for up to eight assessment years, subject to the applicable conditions and timely filing requirements.

This can be important when an investor has both profitable and loss-making transactions during the same financial year. The loss does not simply disappear because one gain is taxed under Section 111A; its treatment must be considered within the broader capital-gains computation.

The key difference is the nature of the capital gain.

Last updated: October 2026

The holding period and asset-specific conditions should be checked before deciding which provision applies.

Investors can also review mutual fund schemes available through the Bajaj Broking website. The platform offers 4,000+ mutual fund schemes, subject to the availability and applicable product terms.

Calculators can help illustrate potential investment values and returns, although they do not determine your final Income Tax liability.

The mutual fund calculator can help estimate potential mutual fund outcomes. For one-time investments, the lumpsum calculator can be used, while the SIP investment calculator can illustrate potential outcomes from regular contributions.

If contributions increase periodically, the step-up SIP calculator can provide an estimate based on the assumptions entered. All these calculators are available on the Bajaj Finance website.

These tools are illustrative. Actual market returns, transaction costs, tax treatment, and the final tax payable can differ.

Accurate records make capital-gains computation and return filing easier.

• Purchase records: Keep contract notes, statements, and acquisition details.
• Sale records: Retain transaction dates, sale consideration, and contract notes.
• Cost records: Maintain evidence of acquisition cost and eligible transfer expenses.
• STT records: Keep transaction statements showing applicable STT.
• Loss records: Track realised capital losses separately for potential set-off or carry-forward.
• Tax records: Reconcile capital gains with the relevant tax statements before filing.

The Income Tax Department also provides specific reporting fields for STCG covered under Section 111A in applicable return forms.

Section 111A provides a special tax framework for specified STCG from eligible equity shares, equity-oriented funds, and business trust units. For transfers on or after 23 July 2024, the applicable rate is 20%, subject to the statutory conditions and other applicable tax provisions.

For accurate tax computation, investors should distinguish Section 111A gains from other STCG, consider eligible costs and losses, understand the rules for basic exemption adjustments, and maintain complete transaction records.

Last reviewed: October 2026

Mutual funds are subject to market risk. Please read the scheme-related documents carefully before investing.