Equity Taxation on WebNotes

Grandfathering rule for LTCG

Mon, 11 May 2026 00:00:00 +0000

The grandfathering rule for long-term capital gains (LTCG) is a transitional provision in Section 112A of the Income Tax Act 1961 that protects equity investors from being taxed on gains that accrued before 1 February 2018. Under the rule, the cost of acquisition for computing LTCG on listed equity shares and equity-oriented mutual funds acquired before 31 January 2018 is deemed to be the higher of the actual purchase price and the fair market value (FMV) of the asset as on 31 January 2018. This has the effect of “grandfathering” all pre-February 2018 appreciation out of the taxable base.

Securities Transaction Tax (STT)

Mon, 11 May 2026 00:00:00 +0000

Securities Transaction Tax (STT) is a tax levied in India on the purchase or sale of securities listed on a recognised stock exchange. It was introduced by Chapter VII of the Finance Act 2004 and came into force on 1 October 2004. STT is collected at source by the stock exchange or recognised intermediary and remitted to the central government on behalf of the transacting party. It is distinct from income tax and is payable irrespective of whether the transaction results in a profit or loss.

Tax treatment of listing-day gains

Mon, 11 May 2026 00:00:00 +0000

Listing-day gains are profits realised by investors who sell shares allotted in an initial public offering (IPO) on the very first day those shares are admitted to trading on a recognised stock exchange. The tax treatment of such gains is governed by Section 111A of the Income Tax Act 1961, which taxes short-term capital gains (STCG) on listed equity at a flat 20% (as revised by the Finance Act 2024), provided that Securities Transaction Tax (STT) has been paid on the sale.