My client's short-term gains on shares are partly from on-market STT-paid sales and partly from an off-market transfer. Does the concessional rate cover both, and what is the rate now?
Section 111A covers only a short-term capital asset that is an equity share, a unit of an equity oriented fund or a unit of a business trust where the sale transaction is chargeable to securities transaction tax. Where STT is not chargeable — an off-market sale, unlisted shares, a transfer outside the exchange — section 111A simply does not apply and the short-term gain goes into total income at the assessee's ordinary rate. The concessional rate itself is fifteen per cent for a transfer before 23 July 2024 and twenty per cent for a transfer on or after that date.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2024-07-23, reported as Section 111A of the Income-tax Act, 1961, as amended up to 2026. It bears on section 111A, section 112A, section 115AD, section 43(5), section 2(42A) of the Income Tax Act 1961, in Capital Gains and How Tax Law Is Read matters.
The rate change lands in the middle of FY 2024-25, so one client can have both figures in one return; and the far commoner error is to assume every gain on shares gets the concessional rate. Two further points decide real assessments. First, the proviso lets a RESIDENT individual or Hindu undivided family absorb the unexhausted basic exemption limit against these gains — a non-resident cannot. Second, sub-section (2) bars Chapter VI-A deductions against this slice: the Chapter VI-A deduction is allowed from gross total income AS REDUCED BY these gains, so an 80C claim cannot be used to wipe out a section 111A gain.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
Read aloud by your device. Press again to stop.
Section 111A was inserted by the Finance (No. 2) Act 2004 alongside the securities transaction tax regime in Chapter VII of that Act. It charges short-term capital gains on an equity share, a unit of an equity oriented fund or a unit of a business trust at a concessional rate, provided the sale transaction is entered into on or after the date Chapter VII came into force and is chargeable to securities transaction tax under that Chapter. The Finance (No. 2) Act 2024 raised the rate for transfers on or after 23 July 2024.
Where the two conditions in clauses (a) and (b) of sub-section (1) are met, income-tax on the short-term capital gains is calculated at fifteen per cent for a transfer which takes place before 23 July 2024 and at twenty per cent for a transfer which takes place on or after 23 July 2024, and the rest of the total income is taxed as if it were the whole of the total income. A resident individual or HUF may reduce those gains by the amount by which the balance of total income falls short of the maximum amount not chargeable to tax. Chapter VI-A deductions are allowed only from gross total income as reduced by these gains.
The charge is structured as an aggregate: income-tax on the short-term capital gains at the specified rate, plus income-tax on the balance of total income as if that balance were the total income. The rate is now written into clause (i) itself as two sub-clauses divided by the date of transfer, which is why the section can produce two rates inside one previous year. The definitions in the Explanation borrow 'equity oriented fund' from clause (a) of the Explanation to section 112A, 'International Financial Services Centre' from section 2(q) of the Special Economic Zones Act 2005, and 'recognised stock exchange' from clause (ii) of Explanation 1 to section 43(5).
(a) at the rate of fifteen per cent for any transfer which takes place before the 23rd day of July, 2024; and (b) at the rate of twenty per cent for any transfer which takes place on or after the 23rd day of July, 2024;
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppSection 111A covers only a short-term capital asset that is an equity share, a unit of an equity oriented fund or a unit of a business trust where the sale transaction is chargeable to securities transaction tax. Where STT is not chargeable — an off-market sale, unlisted shares, a transfer outside the exchange — section 111A simply does not apply and the short-term gain goes into total income at the assessee's ordinary rate. The concessional rate itself is fifteen per cent for a transfer before 23 July 2024 and twenty per cent for a transfer on or after that date. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 111A, section 112A, section 115AD, section 43(5), section 2(42A) of the Income Tax Act 1961. It is reported as Section 111A of the Income-tax Act, 1961, as amended up to 2026. The rate change lands in the middle of FY 2024-25, so one client can have both figures in one return; and the far commoner error is to assume every gain on shares gets the concessional rate. Two further points decide real assessments. First, the proviso lets a RESIDENT individual or Hindu undivided family absorb the unexhausted basic exemption limit against these gains — a non-resident cannot. Second, sub-section (2) bars Chapter VI-A deductions against this slice: the Chapter VI-A deduction is allowed from gross total income AS REDUCED BY these gains, so an 80C claim cannot be used to wipe out a section 111A gain. If it applies to you, the first step is this: Segregate the year's short-term share gains into STT-paid and non-STT transactions before you compute anything; only the first stream goes into section 111A.
Section 111A was inserted by the Finance (No. 2) Act 2004 alongside the securities transaction tax regime in Chapter VII of that Act. It charges short-term capital gains on an equity share, a unit of an equity oriented fund or a unit of a business trust at a concessional rate, provided the sale transaction is entered into on or after the date Chapter VII came into force and is chargeable to securities transaction tax under that Chapter. The Finance (No. 2) Act 2024 raised the rate for transfers on or after 23 July 2024. The matter was decided on 2024-07-23 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Where the two conditions in clauses (a) and (b) of sub-section (1) are met, income-tax on the short-term capital gains is calculated at fifteen per cent for a transfer which takes place before 23 July 2024 and at twenty per cent for a transfer which takes place on or after 23 July 2024, and the rest of the total income is taxed as if it were the whole of the total income. A resident individual or HUF may reduce those gains by the amount by which the balance of total income falls short of the maximum amount not chargeable to tax. Chapter VI-A deductions are allowed only from gross total income as reduced by these gains.
The charge is structured as an aggregate: income-tax on the short-term capital gains at the specified rate, plus income-tax on the balance of total income as if that balance were the total income. The rate is now written into clause (i) itself as two sub-clauses divided by the date of transfer, which is why the section can produce two rates inside one previous year. The definitions in the Explanation borrow 'equity oriented fund' from clause (a) of the Explanation to section 112A, 'International Financial Services Centre' from section 2(q) of the Special Economic Zones Act 2005, and 'recognised stock exchange' from clause (ii) of Explanation 1 to section 43(5). In the words reproduced by the source cited on this page: "(a) at the rate of fifteen per cent for any transfer which takes place before the 23rd day of July, 2024; and (b) at the rate of twenty per cent for any transfer which takes place on or after the 23rd day of July, 2024;"
It was decided by the CBDT Circulars & Instructions on 2024-07-23 and is reported as Section 111A of the Income-tax Act, 1961, as amended up to 2026. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 111A, section 112A, section 115AD, section 43(5), section 2(42A), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Where the two conditions in clauses (a) and (b) of sub-section (1) are met, income-tax on the short-term capital gains is calculated at fifteen per cent for a transfer which takes place before 23 July 2024 and at twenty per cent for a transfer which takes place on or after 23 July 2024, and the rest of the total income is taxed as if it were the whole of the total income. A resident individual or HUF may reduce those gains by the amount by which the balance of total income falls short of the maximum amount not chargeable to tax. Chapter VI-A deductions are allowed only from gross total income as reduced by these gains. It arises in Capital Gains and How Tax Law Is Read matters, on section 111A, section 112A, section 115AD, section 43(5), section 2(42A) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For FY 2024-25, split the STT-paid stream again by transfer date and apply fifteen per cent before 23 July 2024 and twenty per cent on or after. For a resident individual or HUF whose other income is below the basic exemption limit, claim the proviso and reduce the section 111A gains by the shortfall before applying the rate. Do not set Chapter VI-A deductions against section 111A income; compute them on gross total income reduced by those gains, and check the return utility has done the same. Where the transfer is on a recognised stock exchange in an International Financial Services Centre with consideration in foreign currency, check the second proviso — the STT-chargeability condition in clause (b) is switched off for such a transaction.
Still good law. The text set out here is current and is identical to the words enacted by section 30 of the Finance (No. 2) Act, 2024 as printed in the Gazette. No amendment later than that Act has been searched for, so treat the text as current to the version read and check the section for your own year before a computation is put in. Two features of the section make that check worth making. The rate is not a single figure: fifteen per cent for a transfer before 23 July 2024 and twenty per cent for a transfer on or after that date, so one client can have both figures in a single return for financial year 2024-25. And the concession is conditional: it reaches only a short-term capital asset that is an equity share, a unit of an equity oriented fund or a unit of a business trust, where the sale transaction is chargeable to securities transaction tax. Where securities transaction tax is not chargeable - an off-market sale, unlisted shares, a transfer outside the exchange - the section does not apply at all and the gain goes into total income at the ordinary rate. Two qualifications on the face of the section that are easy to miss. The proviso lets a resident individual or Hindu undivided family reduce these gains by the amount by which the balance of total income falls short of the maximum amount not chargeable to tax; a non-resident cannot. And sub-section (2) allows Chapter VI-A deductions only from gross total income as reduced by these gains, so a deduction under Chapter VI-A cannot be used to wipe out a section 111A gain. For a tax year governed by the Income-tax Act 2025 the successor of section 111A should be identified; that correspondence has not been established here. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
WHAT THIS ENTRY IS. A statutory entry, not a decision. 'decided_on' is the date from which the substituted clause takes effect and is not a decision date. ON THE TEXT AND ITS CORROBORATION. The section is set out here from a current consolidation, and the 23 July 2024 rate split appears in the section itself. It has been independently confirmed against section 30 of the enacted Finance (No. 2) Act, 2024 (Act 15 of 2024) in the Gazette, which substitutes the long line of sub-section (1) in identical terms and replaces the words 'rate of fifteen per cent.' in the first proviso with 'rate as applicable in clause (i)'. The same split is independently stated in the Government's Memorandum to the Finance (No. 2) Bill 2024. A WARNING ABOUT OLDER CONSOLIDATIONS. Many copies of s.111A in circulation predate the Finance (No. 2) Act, 2024 and print a flat fifteen per cent with no date split at all. A computation built on one of them will be wrong for every transfer on or after 23 July 2024. Check that the text in front of you carries the split before using it. ON SUB-SECTION (3). It is shown as omitted. That is an omission and not a gap in the statute book. ON THE SECOND PROVISO, which is easy to overlook and matters to an International Financial Services Centre transaction. Where the transfer is on a recognised stock exchange located in an International Financial Services Centre and the consideration is paid or payable in foreign currency, the condition in clause (b) of sub-section (1) - that the transaction be chargeable to securities transaction tax - is switched off. So such a transfer is inside s.111A even though no securities transaction tax is payable on it. ON THE ORDER OF THE COMPUTATION, which the section fixes and return utilities sometimes do not. First segregate the year's short-term share gains into the securities-transaction-tax stream and the rest; only the first goes into s.111A. For financial year 2024-25, split that stream again by transfer date. Then, for a resident individual or Hindu undivided family, absorb any unexhausted basic exemption against the s.111A gains under the proviso. Only then compute Chapter VI-A deductions, on gross total income reduced by those gains. ON THE NEIGHBOURING SECTIONS. Section 112A does the corresponding work for long-term gains and s.115AD for a Foreign Institutional Investor; s.43(5) and s.2(42A) decide, respectively, whether a transaction is speculative and whether the asset is short-term at all. None of those is stated on this page, and the holding period has to be settled under s.2(42A) before s.111A is reached. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Where the two conditions in clauses (a) and (b) of sub-section (1) are met, income-tax on the short-term capital gains is calculated at fifteen per cent for a transfer which takes place before 23 July 2024 and at twenty per cent for a transfer which takes place on or after 23 July 2024, and the rest of the total income is taxed as if it were the whole of the total income. A resident individual or HUF may reduce those gains by the amount by which the balance of total income falls short of the maximum amount not chargeable to tax. Chapter VI-A deductions are allowed only from gross total income as reduced by these gains.
TaxSphere, “Statutory position — section 111A: short-term gains where STT is paid, and what happens where it is not”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-111a-short-term-gains-where-stt-is-paid-and-where-it-is-not/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
My client sold listed equity shares twice in FY 2024-25 — once in June 2024 and once in September 2024. What rate and what exempt threshold apply to each lot?
Is a listed bond still a long-term asset only after three years, and what about units of a listed business trust? My client transferred both in late 2024.
My foreign portfolio investor client has non-STT short-term gains taxed under section 115AD and STT-paid short-term gains taxed at the section 111A rate, plus an STT-paid short-term loss. The officer re-sequenced the set-off. Can he?
My client bought listed shares in 2012 and sold them last year. How exactly do I work out the cost of acquisition under the grandfathering rule, and does the 31 January 2018 price simply replace the cost?
