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How to compute LTCG on equity mutual funds (Section 112A)

Mon, 18 May 2026 00:00:00 +0000

Computing long-term capital gains (LTCG) on equity-oriented mutual funds under Section 112A of the Income Tax Act is a year-end exercise that every Indian equity mutual fund investor performs at tax-filing time. The framework is governed by Section 112A of the Income Tax Act, the grandfathering rule for pre-31-January-2018 acquisitions, and the post-July-2024 rate and exemption updates introduced by the Finance (No. 2) Act 2024.

The computation runs through the six steps in the Procedure infobox above, from confirming equity-oriented qualification to applying the Rs 1.25 lakh annual exemption and the 12.5 per cent rate; each step is expanded under the “Step-by-step computation” sections below. This article walks through each step with worked examples, the integration with broker and RTA-provided tax statements, the reporting framework in ITR Schedule 112A, and the practical considerations for tax planning. The framework reference is at Section 112A of the Income Tax Act and the broader capital gains tax on equity in India .

Large and Mid Cap mutual fund in India

Mon, 18 May 2026 00:00:00 +0000

A large and mid cap mutual fund is a SEBI-categorised equity scheme that invests minimum 35 per cent in large-cap stocks (top 100 by market capitalisation) and minimum 35 per cent in mid-cap stocks (101st to 250th by market capitalisation), with the remaining 30 per cent available for additional allocation across these or other equity exposures. The category was defined under the SEBI October 2017 categorisation framework as one of the 11 equity scheme sub-categories.

Securities Transaction Tax (STT) on equity mutual funds

Mon, 18 May 2026 00:00:00 +0000

Securities Transaction Tax (STT) is a tax on equity transactions that applies to equity-oriented mutual fund redemptions and equity ETF transactions. STT was introduced in 2004 with the abolition of long-term capital gains tax (which was subsequently reintroduced in 2018 under Section 112A ).

For Indian mutual fund investors, STT:

Applies to equity-oriented mutual fund redemptions.
Required for Section 112A LTCG eligibility.
Modest absolute amount.

STT rates

Equity-oriented mutual fund redemption

STT: 0.001% on the sale value at redemption.
Paid by: Investor (deducted from redemption proceeds).
Collected by: AMC and remitted to government.

Equity ETF transactions

STT on equity ETF buy: 0.10% (on delivery-based buy).
STT on equity ETF sell: 0.025% (on delivery-based sell).

These rates are higher than mutual fund redemption STT because ETFs are exchange-traded.

Flexi Cap mutual fund in India

Sat, 16 May 2026 00:00:00 +0000

A Flexi Cap mutual fund in India is an open-ended actively managed equity scheme that invests a minimum of 65 per cent of total assets in equity and equity-related instruments across the full market-capitalisation spectrum, with no mandatory minimum allocation to any individual market-cap segment (large-cap, mid-cap, or small-cap). The category was introduced by SEBI through Circular SEBI/HO/IMD/DF3/CIR/P/2020/228 dated 6 November 2020, as a direct response to industry concerns following the September 2020 multi-cap reclassification that had mandated a 25-25-25 large-mid-small allocation for the Multi Cap Fund category. The Flexi Cap category was created to preserve the structural flexibility that the pre-September-2020 Multi Cap framework had provided, allowing AMCs to maintain genuinely market-cap-flexible equity funds without the new Multi Cap allocation constraints.

Section 111A of the Income Tax Act

Sat, 16 May 2026 00:00:00 +0000

Section 111A of the Income Tax Act, 1961, is the operative tax provision that governs short-term capital gains (STCG) arising from transfers of listed equity shares, units of equity-oriented mutual funds , and units of business trusts (REITs and InvITs), subject to the condition that Securities Transaction Tax (STT) has been paid on both acquisition (with prescribed exceptions) and sale. The section was inserted by the Finance Act, 2004 alongside Section 10(38) (the now-repealed LTCG exemption), and operates as the structural counterpart to Section 112A for short-term holdings. As of the post-23 July 2024 regime introduced by the Finance (No. 2) Act, 2024, STCG under Section 111A is taxed at 20 per cent, with no exemption threshold and no indexation, applicable to gains on listed equity and equity-oriented MF held for up to 12 months.

Section 112A of the Income Tax Act

Sat, 16 May 2026 00:00:00 +0000

Section 112A of the Income Tax Act, 1961, is the operative tax provision that governs long-term capital gains (LTCG) on transfers of listed equity shares, units of equity-oriented mutual funds , and units of business trusts (REITs and InvITs), subject to the condition that Securities Transaction Tax (STT) has been paid on both acquisition and sale (with prescribed exceptions). The section was inserted by the Finance Act, 2018, effective from 1 April 2018, replacing the long-standing Section 10(38) exemption that had operated since the introduction of STT in 2004. As of the post-23 July 2024 regime introduced by the Finance (No. 2) Act, 2024, LTCG under Section 112A is taxed at 12.5 per cent on gains above an annual exemption threshold of Rs 1.25 lakh, with no indexation benefit. The section operates alongside Section 111A (short-term capital gains on the same asset class at 20 per cent) and the broader capital gains tax in India framework.

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