Income Tax Law / Capital Gains / Section 112

Section 112 of the Income-tax Act: Tax on Long-Term Capital Gains

Section 112 prescribes the special method for calculating income-tax on specified long-term capital gains. Major changes effective for transfers on or after 23 July 2024 replaced the general 20% indexed regime with a 12.5% rate without indexation, subject to important protections and exceptions.

Legal update (October 2026): The Income-tax Act, 2025 applies from 1 April 2026. Section 112 of the 1961 Act remains relevant to earlier assessment years and transitional matters. For the applicable tax year, read the corresponding capital-gains provisions of the 2025 Act and amendments together with the transition and savings rules. This page retains the historical text separately to avoid presenting outdated rates as current law.

Meaning and scope of Section 112

Long-term capital gain (LTCG) is a gain from transferring a capital asset held beyond the statutory holding period. The period and the applicable rate depend on the asset, the transfer date and any special provisions. Section 112 governs long-term gains that are not governed by a more specific charging or rate provision, such as Section 112A for qualifying listed equity-related assets.

The tax is calculated separately on eligible LTCG and on the balance of taxable income. The resulting amounts are added, with surcharge and health and education cess applied where relevant.

Long-term capital gains tax rates: before and after 23 July 2024

Situation	Broad tax treatment
Qualifying Section 112 transfers before 23 July 2024	Often 20% with indexation, subject to asset-specific 10% alternatives and other rules applicable at the time.
Qualifying Section 112 transfers on or after 23 July 2024	Generally 12.5% without indexation, subject to exceptions, grandfathering and transitional provisions.
Resident individual or HUF: land or building acquired before 23 July 2024	Special protection generally prevents the new 12.5% computation from exceeding tax under the old 20% indexed computation, where statutory conditions are met.
Qualifying listed equity shares, equity-oriented mutual fund units and business trust units	Check Section 112A instead of applying Section 112 automatically.

These are headline rates, not a substitute for asset-specific eligibility, exemptions, surcharge, cess and applicable tax-year legislation.

How the tax is calculated

Identify the capital asset, acquisition and transfer dates, and whether the gain is long-term under the relevant rules.
Calculate the gain under the capital-gains computation provisions, including permitted cost, transfer expenses and any applicable exemption.
Identify whether Section 112, Section 112A or another special provision applies.
Apply the correct rate and any transitional protection, including the property comparison where eligible.
Compute tax on the remaining taxable income separately and add applicable surcharge and cess.

Illustration: post-July 2024 LTCG

If a covered long-term capital gain is Rs. 8,00,000 and no exemption or special relief applies, the basic tax at 12.5% is Rs. 1,00,000, before applicable surcharge and cess. The final liability depends on the taxpayer's other income and the relevant statutory provisions.

Land and building: grandfathering protection

For resident individuals and Hindu undivided families, the Finance (No. 2) Act, 2024 introduced a transitional safeguard for land or buildings acquired before 23 July 2024. In eligible cases, compare the tax at 12.5% without indexation against the tax under the pre-amendment 20% indexed method. The excess under the new computation is ignored. This safeguard is not a blanket restoration of indexation for every asset or taxpayer.

Basic exemption limit for resident individuals and HUFs

Where the taxable income other than covered long-term capital gains is below the applicable basic exemption limit, an eligible resident individual or HUF may use the shortfall against such gains, as the statutory provision permits. The relevant threshold depends on the applicable tax regime and year. Non-residents and companies do not automatically receive the same adjustment.

Chapter VI-A deductions and rebates

Section 112 requires Chapter VI-A deductions to be considered against gross total income after excluding the covered long-term capital gains. Historic subsection (3) refers to rebate under Section 88; this is a legacy provision and should not be read as a current rebate entitlement. The availability of any rebate, including under Section 87A, must be checked against the law and tax year concerned; special-rate capital gains are subject to restrictions.

Other provisions to check

Section 48: method of computing capital gains and applicable cost rules.
Sections 54, 54EC and 54F: possible reinvestment exemptions, subject to their separate conditions.
Section 112A: eligible listed equity shares, equity-oriented fund units and business trust units.
Sections 50AA and other deeming provisions: certain assets may be treated differently regardless of holding period.
Tax treaties: may affect non-resident taxation, subject to domestic law and treaty eligibility.

Historical Section 112 text and amendment notes from the original page

The following archived extract is retained from the original webpage for legal research and historical context. It includes rates and notes from earlier amendments and must not be used as the current consolidated statutory text.

Expand historical statutory extract and amendment notes

112 Income Tax Act - Tax on long-term capital gains Section 112 of Income Tax Act 1961 - Tax on long-term capital gains 1(1) Where the total income of an assessee includes any income, arising from the transfer of a long-term capital asset, which is chargeable under the head "Capital gains", the tax payable by the assessee on the total income shall be the aggregate of,- (a) in the case of an individual or a Hindu undivided family, 2 being a resident,- (i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been his total income; and (ii) the amount of income-tax calculated on such long-term capital gains at the rate of twenty per cent.: Provided that where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate of twenty per cent.; (b) in the case of a 3 domestic company,- (i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and (ii) the amount of income-tax calculated on such long-term capital gains at the rate of 4 twenty per cent.: 5 * * * * * 2 (c) in the case of a non-resident (not being a company) or a foreign company,- (i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and 6 (ii) the amount of income-tax calculated on long-term capital gains except where such gain arises from transfer of capital asset referred to in sub-clause (iii) at the rate of twenty per cent.; and (iii) the amount of income-tax on long-term capital gains arising from the transfer of a capital asset, being 7 unlisted securities or shares of a company not being a company in which the public are substantially interested, calculated at the rate of ten per cent. on the capital gains in respect of such asset as computed without giving effect to the first and second proviso to section 48; 8 (d) in any other case 9 of a resident,- (i) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains, had the total income as so reduced been its total income; and (ii) the amount of income-tax calculated on such long-term capital gains at the rate of 10twenty per cent.; and 11 * * * * * 12 Provided that where the tax payable in respect of any income arising from the transfer of a long-term capital asset, 13 being listed securities (other than a unit) 14 or zero coupon bond, exceeds ten per cent of the amount of capital gains before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee: 15 Provided further that where the tax payable in respect of any income arising from the transfer of a long-term capital asset, being a unit of a Mutual Fund specified under clause (23D) of section 10, during the period beginning on the 1st day of April, 2014 and ending on the 10th day of July, 2014, exceeds ten per cent. of the amount of capital gains, before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee. 16 Explanation.-For the purposes of this sub-section,- 17 (a) the expression "securities" shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (32 of 1956); (aa) "listed securities" means the securities which are listed on any recognised stock exchange in India; (ab) "unlisted securities" means securities other than listed securities. 18 * * * * (2) Where the gross total income of an assessee includes any income arising from the transfer of a long-term capital asset, the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced were the gross total income of the assessee. (3) Where the total income of an assessee includes any income arising from the transfer of a long-term capital asset, the total income shall be reduced by the amount of such income and the rebate under section 88 shall be allowed from the income-tax on the total income as so reduced. --------------- 1. Ins. by Act 18 of 1992, s. 53 (w.e.f. 1-4-1993). Earlier section 112 was omitted by 20 of 1967, s. 33 and the Third Schedule (w.e.f. 1-4-1968). 2. Ins. by 32 of 1994, s. 31 (w.e.f. 1-4-1995). 3. Subs. by s. 31, ibid., for "company" (w.e.f. 1-4-1995). 4. Subs. by Act 33 of 1996, s. 37, for "thirty per cent." (w.e.f. 1-4-1997).Earlier substituted by Act 32 of 1994, s. 31, for "forty per cent." (w.e.f. 1-4-1995). 5. Proviso omitted by Act 22 of 1995, s. 23 (w.e.f. 1-4-1996). Prior to its omission, the proviso, as amended by the 22 of 1995, s. 23 (w.e.f. 1-4-1996). Prior to its omission, the proviso, as amended by the 32 of 1994, s. 31 (1-4-1995). 6. Subs. by Act 23 of 2012, s. 43, for sub-clause (ii) (w.e.f. 1-4-2013). 7. Subs. by 28 of 2016, s. 50, for "unlisted securities" (w.e.f. 1-4-2017). 8. Clause (c) relettered as Clause (d) thereof by Act 32 of 1994, s. 31 (w.e.f. 1-4-1995). 9. Ins. by s. 31, ibid., (w.e.f. 1-4-1995). 10. Subs. by Act 33 of 1996, s. 37, for "thirty per cent." (w.e.f. 1-4-1997). 11. The Explanation omitted by Act 22 of 1995, s. 23 (w.e.f. 1-4-1996). 12. Ins. by Act 27 of 1999, s. 57 (w.e.f. 1-4-2000). 13. Subs. by Act 25 of 2014, s. 35, "being listed securities or unit" (w.e.f. 1-4-2015). 14. Ins. by 18 of 2005, s. 33 (w.e.f. 1-4-2006). 15. Ins. by Act 25 of 2014, s. 35 (w.e.f. 1-4-2015). 16. Subs. by Act 10 of 2000, s. 49, for the Explanation (w.e.f. 1-4-2000). Prior to its Inserted by Act 27 of 1999, s. 57 (w.e.f. 1-4-2000). 17. Subs. by Act 23 of 2012, s. 43, for clause (a) (w.e.f. 1-4-2013). 18. Clause (b) omitted by Act 25 of 2014, s. 35 (w.e.f. 1-4-2015).

Official legislative references

Income Tax Department - official website (legislation, circulars and guidance).
India Code - central legislation (search the Income-tax Act, 1961 and Income-tax Act, 2025).
Income Tax e-Filing Portal (taxpayer services and resources).
e-Gazette of India (Finance Acts and statutory notifications).

For a particular transaction, check the latest consolidated law, relevant Finance Act, notifications and the applicable tax year rather than relying on a historical version of this section.

Frequently asked questions

What is the Section 112 LTCG tax rate after 23 July 2024?

Generally 12.5% without indexation for transfers covered by the amended provision, subject to specific exceptions, transitional protections and applicable surcharge and cess.

Is indexation available for property purchased before 23 July 2024?

For a resident individual or HUF selling land or building acquired before 23 July 2024, transitional protection generally limits tax to the lower of 12.5% without indexation and 20% with indexation, subject to statutory conditions.

Does Section 112 apply to listed equity shares?

Eligible listed equity shares, equity-oriented fund units and business-trust units generally fall under the separate Section 112A regime when its conditions are satisfied.

Can Chapter VI-A deductions reduce Section 112 gains?

The Chapter VI-A deductions are ordinarily computed on gross total income excluding the long-term capital gains covered by Section 112.

Last reviewed: 26 October 2026. General legal information; individual tax outcomes depend on facts and the law for the relevant year.