Section 111A — STCG Tax on Equity Shares & Mutual Funds at 20%

Updated: 3 June 2026 | Budget 2024 rate (23 Jul 2024) | FY 2025-26

Section 111A imposes a flat 20% tax on short-term capital gains (STCG) from equity shares, equity-oriented mutual funds, and units of REITs/INVITs — when sold via a recognised stock exchange with STT paid, after holding for 12 months or less. The rate was raised from 15% to 20% in Budget 2024, effective 23 July 2024. No Chapter VI-A deductions (80C etc.) are permitted against this income.

20%

STCG rate under Section 111A — effective 23 July 2024 (Budget 2024)
Plus 4% cess = 20.8% effective. Was 15% before 23 Jul 2024. Surcharge applies at 10%/15% for high income.

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Rate change date matters: Transactions before 23 July 2024 are taxed at the old 15% rate. Transactions on or after 23 July 2024 are taxed at 20%. For FY 2024-25 returns (AY 2025-26), you may have both rates in the same year — check your transaction dates carefully.

Applicability — What Section 111A Covers

Asset Type	STT Paid?	Applicable Section	Tax Rate (STCG)
Listed equity shares (NSE/BSE)	Yes (exchange)	Section 111A	20%
Equity-oriented mutual funds (>65% equity)	Yes (AMC redemption)	Section 111A	20%
Equity ETFs (Nifty 50, Sensex, etc.)	Yes (exchange)	Section 111A	20%
Units of REITs / INVITs (on exchange)	Yes	Section 111A	20%
Listed equity shares — off-market transfer	No	Normal provisions	Slab rate
Unlisted equity shares	No	Normal provisions	Slab rate
Intraday equity trading	Yes, but same-day	Speculative business	Slab rate
F&O (Futures & Options)	No equity delivery	Non-speculative business	Slab rate
Debt mutual funds	N/A	Normal provisions	Slab rate

Section 111A vs Section 112A — Side-by-Side

Feature	Section 111A (STCG)	Section 112A (LTCG)
Holding period	≤ 12 months	> 12 months
Applicable assets	Listed equity, equity MF, REITs/INVITs	Same
STT requirement	Yes (on sale)	Yes (on sale; also on acquisition for shares acquired after Oct 2004)
Tax rate (post Budget 2024)	20%	12.5%
Annual exemption	None	₹1,25,000/year
Chapter VI-A deductions (80C etc.)	Not allowed	Not allowed
Indexation benefit	Not applicable	Not applicable
Loss set-off	STCG/LTCG only	LTCG only
Loss carry forward	8 years	8 years

Surcharge on Section 111A Gains

Surcharge is capped at 15% for income chargeable under Section 111A (as well as 112A). This is different from ordinary income where surcharge can go up to 37%. The effective rates including surcharge and cess for STCG under 111A are:

Total Income Range	Surcharge Rate	Effective STCG Tax (111A)
Up to ₹50 lakh	Nil	20.80%
₹50 lakh – ₹1 crore	10%	22.88%
₹1 crore – ₹2 crore	15% (capped)	23.92%
Above ₹2 crore	15% (capped at 15%)	23.92%

For ordinary income (not 111A/112A), surcharge goes up to 25%–37% above ₹2 crore. Surcharge on 111A/112A is capped at 15%, giving equity investors a meaningful advantage at high incomes.

Loss Set-Off Rules under Section 111A

If you incur a short-term capital loss under Section 111A (e.g., sold equity shares at a loss within 12 months), the set-off priority is:

Loss Type	Can Set Off Against	Carry Forward
STCG loss (111A)	STCG (any type) + LTCG (any type)	8 years
LTCG loss (112A)	LTCG only (cannot set off against STCG)	8 years
STCG loss (111A)	NOT against salary/business/house property	—

Frequently Asked Questions

What is the STCG tax rate on shares in India under Section 111A?

Under Section 111A of the Income Tax Act, short-term capital gains (STCG) on equity shares, equity-oriented mutual funds, and units of business trusts (REITs/INVITs) are taxed at 20% — provided the transaction is on a recognised stock exchange and Securities Transaction Tax (STT) has been paid. This rate was increased from 15% to 20% by Budget 2024, effective 23 July 2024. A 4% health and education cess applies, making the effective rate 20.8%. Surcharge at 10% (income ₹50L–1 crore) or 15% (above ₹1 crore) further increases the effective rate. Section 111A applies when shares are held for 12 months or less.

Does Section 111A apply to intraday trading?

No. Section 111A does not apply to intraday trading (buying and selling equity shares on the same day). Intraday equity trading is classified as Speculative Business Income under Section 43(5), not as short-term capital gains. Speculative income is taxed at your normal income slab rate. Section 111A specifically applies to delivery-based transactions in equity shares, equity mutual funds, and units of business trusts where the shares/units are actually held (even briefly — minimum one day) and later sold through a recognised stock exchange with STT paid. F&O (Futures and Options) trading is also treated as non-speculative business income and taxed at slab rates, not under Section 111A.

How to set off STCG loss under Section 111A?

STCG losses under Section 111A (short-term capital losses on equity/equity MF) can be set off as follows: (1) First, against any other short-term capital gains (STCG) in the same year — including gains under 111A and other STCG not covered under 111A; (2) Also against long-term capital gains (LTCG) in the same year — including gains under Section 112A (equity LTCG) and other LTCG. If not fully set off in the same year, the remaining STCG loss can be carried forward for 8 assessment years and set off against STCG or LTCG in future years. Important: STCG losses under 111A cannot be set off against normal income (salary, business income, etc.) — only against capital gains.

Can I claim 80C deduction against Section 111A gains?

No. Deductions under Chapter VI-A (including Section 80C, 80D, 80G, 80TTA, etc.) are not allowed to be deducted from income taxable under Section 111A. The STCG under 111A is taxed at a flat 20% and Chapter VI-A deductions cannot reduce this tax liability. However, there is one exception: if your other income (excluding Section 111A gains) is below the basic exemption limit (₹2.5 lakh for individuals below 60 years in old regime), then the shortfall can be adjusted against 111A gains. For example: if salary income is ₹1.5 lakh and Section 111A STCG is ₹2 lakh, the ₹1 lakh shortfall in basic exemption can be applied to reduce 111A taxable gains to ₹1 lakh.

What is the difference between Section 111A and Section 112A?

Section 111A covers Short-Term Capital Gains (STCG) on equity: applicable when equity shares, equity-oriented mutual funds, or business trust units are held for 12 months or less (via recognized exchange, STT paid). Tax rate: 20% (post Budget 2024). Section 112A covers Long-Term Capital Gains (LTCG) on equity: applicable when the same securities are held for more than 12 months. Tax rate: 12.5% without indexation. The first ₹1.25 lakh of LTCG per year is exempt under 112A. Key difference: LTCG under 112A has an annual exemption (₹1.25L); STCG under 111A has no such exemption — every rupee of STCG is taxed at 20%. Both sections apply to STT-paid transactions on equity.

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