Section 111A – Short-Term Capital Gains Tax on Equity Shares & Mutual Funds
📊 Section 111A – Short-Term Capital Gains Tax on Equity Shares & Mutual Funds
If you invest in the stock market or equity mutual funds, the Income Tax Act treats your profits differently based on how long you hold your investments.
Profits earned from the sale of listed equity shares or mutual funds held for less than 12 months are taxed as Short-Term Capital Gains (STCG) under Section 111A of the Income Tax Act.
This section is one of the most commonly applicable tax provisions for salaried professionals, retail investors, traders, and even NRIs who earn from the Indian equity market. Here’s everything you need to know.
✅ What Is Section 111A of the Income Tax Act?
Section 111A governs the taxation of short-term capital gains arising from the sale of:
- Listed equity shares on a recognised stock exchange in India
- Equity-oriented mutual funds (including ELSS schemes)
- Units of business trusts
The key condition is that Securities Transaction Tax (STT) must have been paid at the time of sale (and purchase, in the case of shares).
Such STCG is taxed at a flat rate of 15%, irrespective of your income slab.
📋 Assets Covered Under Section 111A
This section applies only when:
|
Asset Type |
Holding Period |
Condition |
Tax Rate |
|
Listed equity shares |
Less than 12 months |
STT paid on both buy & sell |
15% cess |
|
Equity-oriented mutual funds |
Less than 12 months |
STT paid on redemption/sale |
15% cess |
|
Business trust units |
Less than 12 months |
Traded on a recognised exchange |
15% cess |
If you sell these securities after 12 months, the gain is taxed as long-term capital gain under Section 112A.
🧮 Example of STCG Calculation Under Section 111A
Let’s say:
- You bought 100 shares of ABC Ltd @ ₹500 in January 2024
- Sold them in May 2024 @ ₹600
- Profit per share = ₹100
- Total STCG = ₹10,000
Tax payable under Section 111A = ₹10,000 × 15% = ₹1,500
(plus 4% cess on tax)
Total tax = ₹1,560
💡 STCG under Section 111A is not eligible for the slab benefit. Still, if your total income (including STCG) is below ₹2.5 lakh (basic exemption limit), the unutilized portion of that limit can be used to reduce STCG.
🧾 Reporting STCG in ITR
To report STCG in your Income Tax Return:
- Use ITR-2 or ITR-3 (ITR-1 not allowed if you have capital gains)
- Fill Schedule CG (Capital Gains)
- Mention:
- ISIN / Mutual Fund name
- Date of acquisition and sale
- Sale consideration and cost
- STT paid confirmation
For active traders using intraday, F&O, or high-frequency strategies, income may fall under business income instead of capital gains—consult a CA for proper classification.
🧠 People Also Ask
❓ Is STCG under Section 111A included in total income?
Yes, STCG is added to your total income, but taxed separately at 15%. It may impact surcharge, rebate eligibility, or slab-based deductions.
❓ Can I adjust STCG losses under Section 111A?
Yes. STCG loss can be set off only against capital gains (short or long-term) and can be carried forward for 8 years, provided you file your ITR before the due date.
❓ Is the ₹1 lakh exemption available for STCG?
No. The ₹1 lakh LTCG exemption under Section 112A does not apply to STCG. Even ₹1 of STCG under Section 111A is fully taxable.
❓ Are NRIS covered under Section 111A?
Yes. NRIS investing through NRO or NRE Demat accounts in Indian equity markets are also taxed at 15% STCG under Section 111A, provided STT conditions are met.
⚠️ Common Mistakes to Avoid
- Reporting STCG under “Income from Other Sources”
- Claiming indexation benefit (not allowed for STCG)
- Using ITR-1 despite having capital gains
- Not adjusting carry-forward losses properly
- Ignoring the STT requirement (especially for off-market trades)
🎯 Final Thoughts from a CA’s Desk
“Section 111A is one of the few flat-tax provisions in India. It's straightforward—but only if you file it correctly.”
Retail investors often misreport gains, ignore STT conditions, or underutilise basic exemption limits. With increasing transparency via AIS and broker integrations, any mismatch is easily flagged.
Ensure your capital gains are reported in detail, especially if you're a frequent investor or dealing in multiple stocks and funds.
📞 Need Help Filing STCG in ITR or Handling Capital Gains Tax?
At Callmyca, we help:
- Accurately calculate and report Section 111A gains
- File capital gains schedules with ISIN and broker reports
- Optimise tax liability across STCG, LTCG, and exemptions
- Avoid mismatch notices or audit red flags
👉 Click here to book your capital gains tax filing support via Callmyca
