Suppose you bought listed shares or equity mutual fund units for a total of Rs 5,00,000 and sold them, after holding for more than 12 months, for Rs 8,00,000. The long-term capital gain is the sale value minus the purchase value, which is Rs 3,00,000. Under Section 112A the first Rs 1,25,000 of equity LTCG in a financial year is exempt, so the taxable gain is Rs 3,00,000 minus Rs 1,25,000, which is Rs 1,75,000. The tax is 12.5 percent of that, which is about Rs 21,875. Spread over the whole Rs 3,00,000 gain, that is an effective rate of about 7.3 percent, well below the headline 12.5 percent, because the exemption shields the first slice. No indexation is allowed on equity, so the purchase value is taken at its actual cost without inflation adjustment.
Step
Value
Purchase value
Rs 5,00,000
Sale value
Rs 8,00,000
Total gain
Rs 3,00,000
Less Section 112A exemption
minus Rs 1,25,000
Taxable gain
Rs 1,75,000
LTCG tax at 12.5 percent
Rs 21,875
How it is calculated
The calculator takes the gain as sale value minus purchase value, then subtracts the Rs 1,25,000 annual exemption that Section 112A grants on long-term gains from listed shares and equity mutual funds. It multiplies whatever remains by the 12.5 percent rate that applies to such gains realised on or after 23 July 2024. The exemption is per financial year across all your equity LTCG, not per transaction, so if you have already used part of it elsewhere the taxable amount here would be higher. The rate applies only to gains on units held for more than 12 months; shorter holdings are short-term and taxed at 20 percent. Indexation is not available for equity, and surcharge on these gains is capped at 15 percent for high earners. The 4 percent cess on the tax is not included in this simplified figure.
Frequently asked questions
When is equity gain long-term?
Listed shares and equity mutual funds held for more than 12 months qualify as long-term. Gains are taxed at 12.5% (post 23 July 2024) on the amount above the Rs 1.25 lakh annual exemption. No indexation is allowed.
What is the Rs 1.25 lakh exemption under Section 112A?
Section 112A of the Income Tax Act grants an annual exemption of Rs 1,25,000 on long-term capital gains from listed equity shares and equity-oriented mutual funds. The exemption applies per financial year across all such gains combined, not per transaction. Any gains above this threshold are taxed at 12.5%.
Does the 12.5% rate apply to all equity sales?
The 12.5% rate under Section 112A applies only to gains from listed equity shares and equity-oriented funds held for more than 12 months and sold on or after 23 July 2024. Gains on unlisted shares use a different rate, and short-term gains (holding period of 12 months or less) are taxed at 20% under Section 111A.
Is cess included in the 12.5% rate shown here?
No. The 12.5% shown is the base rate under Section 112A before the 4% Health and Education Cess. To find the total outgo, multiply the tax by 1.04. For high-income taxpayers the surcharge on equity LTCG is capped at 15%, which prevents the effective rate from rising above the base rate as steeply as it would for other income types.