How to compute STCG on PPFAS equity schemes

From WebNotes, a public knowledge base. Last updated 17 May 2026. Reading time ~6 min. Level: Intermediate.

Key facts

Applicable section	Section 111A of the Income Tax Act, 1961, for equity-oriented MFs held 12 months or less
Tax rate (current)	20 per cent, effective 23 July 2024 (post Finance Act 2024); was 15 per cent before
Holding period boundary	12 months from allotment date; FIFO unit allocation per the Income Tax framework
PPFAS equity-oriented schemes	PPFCF, ELSS Tax Saver, Arbitrage, DAAF, Large Cap (each maintains 65%+ equity exposure under SEBI category definitions)

This guide covers computing Section 111A short-term capital gains on PPFAS Mutual Fund equity-oriented scheme redemptions. Section 111A applies to redemptions where the holding period is 12 months or less from the allotment date. The Finance Act 2024 increased the rate from 15 per cent to 20 per cent for transactions on or after 23 July 2024. Pre-23-July-2024 transactions in FY 2024-25 used the 15 per cent rate.

Prerequisites

An understanding of Section 111A: short-term capital gains on listed equity and equity-oriented mutual fund schemes held 12 months or less.
The PPFAS Capital Gains Statement for the relevant FY (computes STCG automatically); see how to download a PPFAS capital-gains statement for ITR.
For manual computation: the PPFAS account statement showing all acquisitions and the redemption event.
Awareness that grandfathering does not apply to STCG; grandfathering is a Section 112A-only provision for pre-31-Jan-2018 acquisitions held over 12 months.
For FY 2024-25 redemptions: separate computation for pre-and-post-23-July-2024 cut-off, due to the rate change.
Awareness that the 20 per cent rate applies as a flat tax; STCG cannot be aggregated with regular slab-rate income for tax-bracket purposes.
For the Liquid Fund and Conservative Hybrid (less than 35 per cent equity exposure schemes) post 1 April 2023: the post-Finance-Act-2023 slab-rate framework applies, not Section 111A. See how to compute slab-rate tax on PPFAS Liquid Fund.

Step-by-step procedure

Step 1: Identify the redemption event

From the PPFAS account statement or the SelfInvest dashboard:

Redemption date.
Total units redeemed.
Redemption NAV.
Total gross sale value (units multiplied by NAV).
Exit load (computed FIFO on the source units).
Net sale value = gross sale value minus exit load.

Step 2: Identify the source FIFO lots

Trace the redeemed units back to their purchase lots in chronological order. Each lot has acquisition date, acquisition NAV, units, and actual cost.

Step 3: Apply the 12-month holding-period test

For each lot, compute the holding period from acquisition date to redemption date:

Holding period over 12 months: Lot is LTCG-eligible (Section 112A). Use how to compute LTCG on PPFCF with grandfathering for the LTCG computation.
Holding period 12 months or less: Lot is STCG-eligible (Section 111A). Continue with this guide.

The 12-month boundary is calculated from the allotment date. For example: a 10 March 2025 allotment redeemed on 5 March 2026 is at 11 months and 25 days, below 12 months, so STCG. The same allotment redeemed on 15 March 2026 is at 12 months and 5 days, over 12 months, so LTCG. The few-day difference can materially affect tax.

Step 4: Compute the cost basis per STCG lot

For each STCG lot:

Cost basis = acquisition NAV multiplied by units in the lot.
Grandfathering does not apply (it is a Section 112A provision for pre-31-Jan-2018 acquisitions held over 12 months).
Indexation does not apply (it is a debt-MF concept that was removed in 2023 and never applied to equity STCG).

Step 5: Compute the gain per STCG lot

For each lot:

Sale value = net redemption value attributable to the lot’s units.
Gain = sale value - cost basis.

For a redemption that spans multiple lots, allocate the net sale value proportionally based on units in each lot.

Step 6: Aggregate STCG across lots

Sum STCG across all STCG-eligible FIFO lots in the redemption. The aggregate is the total STCG for the redemption event.

Step 7: Apply the Section 111A rate

Apply the rate:

20 per cent for transactions on or after 23 July 2024.
15 per cent for transactions before 23 July 2024 (relevant for FY 2024-25 only).

Note: Section 111A STCG cannot be set off against regular slab-rate income; it is taxed at a flat rate. Health and Education Cess (4 per cent) and applicable surcharge are levied on top of the base rate.

Step 8: Report in ITR Schedule CG

In ITR-2 or ITR-3 (whichever applies):

Navigate to Schedule CG then the Short-Term Capital Gains subsection.
Enter the aggregate STCG under Section 111A (equity STCG with STT).
For FY 2024-25 specifically, ITR provides two rows: pre-23-July-2024 (15 per cent rate) and post-23-July-2024 (20 per cent rate). For FY 2025-26 onwards, a single 20 per cent row.

The Income Tax department’s pre-filled ITR may auto-populate from the AIS; cross-verify against the PPFAS-issued statement.

What can go wrong

Holding period miscalculation: A lot acquired on 5 February 2025 and redeemed on 5 February 2026 is at exactly 12 months. Income Tax framework generally treats “12 months” as the inclusive boundary, so this is LTCG. Redemption on 4 February 2026 (one day earlier) would be STCG. The few-day window often surprises investors.
Wrong rate applied for FY 2024-25 pre-cut-off transactions: Redemptions before 23 July 2024 in FY 2024-25 use 15 per cent. The PPFAS-issued statement applies the correct rate; manual computation must respect the cut-off date.
STCG and LTCG in the same redemption: A redemption that spans multiple FIFO lots may have some lots in STCG and some in LTCG. The PPFAS statement breaks these out separately; manual computation must do the same.
Exit-load drag confused with STCG cost: Exit load reduces the sale value (net sale value approach) rather than increases cost basis. The Income Tax framework accepts net-sale-value approach.
SIP installment STCG accumulation: A SIP investor who redeems within 12 months of recent installments has STCG on those installments while older installments (over 12 months) are LTCG. Each installment is a separate FIFO lot.
Switch leg STCG implications: A switch from PPFCF to Liquid Fund within 12 months of recent PPFCF acquisitions triggers STCG on those source units. This is often overlooked in switch decisions.
Section 111A versus regular slab STCG: Section 111A’s 20 per cent flat rate applies only to equity-oriented MF and listed-equity STCG with STT. Non-STT STCG and debt-MF STCG (post Finance Act 2023) are taxed at slab rates.
Cess and surcharge on top of 20 per cent: The 20 per cent is the base rate. Health and Education Cess (4 per cent) brings the effective rate to approximately 20.8 per cent. Investors in the higher-surcharge brackets (above Rs 50 lakh income) pay additional surcharge.
Section 111A and the Rs 1.25 lakh exemption: The Rs 1.25 lakh exemption is a Section 112A-only provision. Section 111A STCG has no exemption; the full STCG is taxed at 20 per cent.
Basic exemption limit set-off: For resident individuals whose total income is below the basic exemption limit, the unused basic exemption can be applied against STCG and LTCG. This can reduce STCG tax to zero for low-income investors.

Worked example

An investor holds the following PPFCF FIFO lots:

Lot A: 100 units acquired 1 February 2025 at NAV Rs 65 (cost: Rs 6,500).
Lot B: 100 units acquired 1 August 2025 at NAV Rs 70 (cost: Rs 7,000).

Redemption: 150 units on 1 February 2026 at NAV Rs 80 (sale value: 150 x 80 = Rs 12,000).

Exit load: Lot A has crossed 365 days, so 1 per cent exit load on units redeemed from Lot A. Lot B is within 365 days, so 2 per cent exit load on Lot B units.

FIFO sequence: All 100 units from Lot A + 50 units from Lot B.

Lot A (100 units): Holding 1 Feb 2025 to 1 Feb 2026 = 365 days (just at or over 12 months; treated as LTCG under inclusive boundary interpretation). Sale value 100 x 80 = Rs 8,000, exit load 1% = Rs 80, net Rs 7,920. Cost Rs 6,500. LTCG = 7,920 - 6,500 = Rs 1,420.
50 units from Lot B: Holding 1 Aug 2025 to 1 Feb 2026 = 6 months (clearly STCG). Sale value 50 x 80 = Rs 4,000, exit load 2% = Rs 80, net Rs 3,920. Cost 50 x 70 = Rs 3,500. STCG = 3,920 - 3,500 = Rs 420.

Tax:

LTCG of Rs 1,420 is below the Rs 1.25 lakh exemption; Rs 0 tax.
STCG of Rs 420 taxed at 20 per cent = Rs 84.

Total tax on this redemption: Rs 84.

How to download a PPFAS capital-gains statement for ITR covers the SelfInvest-issued statement
How to compute LTCG on PPFCF with grandfathering covers Section 112A LTCG
How to file STCG in ITR for PPFAS equity-scheme STCG covers the ITR entries
How to redeem PPFAS units via SelfInvest covers the redemption mechanics
The reference article on STCG on equity mutual fund (Section 111A) covers the broader framework

External references

References

Income Tax Act, 1961, Section 111A.
Finance Act, 2024 (STCG rate increased from 15 per cent to 20 per cent, effective 23 July 2024).
CBDT circulars on Section 111A computation.
PPFAS Mutual Fund, Scheme Information Documents for the seven active schemes.
SEBI Master Circular for Mutual Funds, 22 May 2024.
SEBI (Mutual Funds) Regulations, 1996.
AMFI Industry Best Practices on STCG computation.
CAMS Investor Services capital-gains-statement methodology.
PPFAS investor desk FAQ at amc.ppfas.com/faqs/.
Income Tax e-filing portal ITR-2 and ITR-3 Schedule CG framework.

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Last reviewed: 17 May 2026
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