Confused about Section 112A LTCG exemption in ITR? What residents and NRIs should know

In a first, the income tax department has included LTCG exemption up to ₹1.25 lakh under Section 112A in ITR-1 for AY 2025-26 (FY 2024-25).

In the following Q&As, CA Dr Suresh Surana has explained the applicability of Section 112A exemption while filing ITR for AY 2025-26 for both individuals and NRIs.

Under the Indian Income-tax Act, 1961, non-resident individuals (NRIs) are subject to special provisions for taxation of long-term capital gains (LTCG), particularly when such gains arise from the sale of listed securities or mutual funds.

As per Section 112A, LTCG exceeding ₹1.25 lakh in a financial year from the transfer of listed equity shares or units of listed equity-oriented mutual funds or units of a business trust (where STT is paid) is taxed at 12.5% (plus surcharge and cess).

The initial exemption of ₹1.25 lakh under section 112A is available to both residents and non-residents.

However, unlike residents, NRIs are not permitted to adjust their LTCG against the basic exemption limit. As such, if the only income of the NRI is LTCG taxable under Section 112A, then the basic exemption limit cannot be used to reduce the taxable LTCG in case of NRIs.

In the case of non-resident individuals, the treatment of short-term capital gains (STCG) under Section 111A is similar to that of long-term capital gains under Section 112A, as aforementioned.

While the tax rate of 15% is applicable, the benefit of adjusting such STCG against the basic exemption limit is not available to non-residents.