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nism-series-xb-section-112a-ltcg-tax-rate-equity-post-budget-2024[ INVESTMENT ADVISER (LEVEL 2) ]

Under Section 198 of the Income-tax Act, 2025 (the erstwhile Section 112A of the Income-tax Act, 1961) (post-Budget 2024), what is the tax treatment for Long-Term Capital Gains realized on equity shares and equity mutual funds held for > 12 months?

[ A ]Taxed at 10% on gains exceeding ₹1,00,000 (Pre-Budget 2024 rate).
[ B ]100% tax-exempt under Section 10(38).
[ C ]Taxed at 30% marginal slab rate.
[ D ]Taxed at a flat rate of 12.5% on aggregate capital gains EXCEEDING the basic exemption threshold of ₹1,25,000 per financial year (without indexation).[ CORRECT ]
Takeaway

The correct answer is D: post-Budget 2024, LTCG on equity shares/equity mutual funds held over 12 months is taxed at a flat 12.5% (without indexation) on gains exceeding the ₹1,25,000 annual exemption under Section 198 (the erstwhile Section 112A).

Derivation
Section 198 of the Income-tax Act, 2025 (the erstwhile Section 112A of the Income-tax Act, 1961) originally (2018) taxed equity LTCG above ₹1,00,000 at 10%. Budget 2024 revised both parameters: the exemption threshold was raised to ₹1,25,000 per financial year and the tax rate on the excess was increased to 12.5%, still without indexation benefit (equity LTCG has never been indexed under Section 198). Candidates commonly answer with the pre-2024 10%/₹1L figures because those were tested for years before the amendment -- this question specifically checks whether the adviser has updated to the current post-Budget-2024 parameters rather than relying on outdated exam-prep memory.
Why the others fail
A — Taxed at 10% on gains exceeding ₹1,00,000 (Pre-Budget 2024 rate).
This restates the pre-Budget-2024 rate/threshold (10% over ₹1 Lakh); Budget 2024 revised both figures to 12.5% over ₹1.25 Lakh.
B — 100% tax-exempt under Section 10(38).
Section 10(38)'s full exemption was withdrawn in Budget 2018; equity LTCG has been taxable under Section 198 (the erstwhile Section 112A) ever since, not exempt.
C — Taxed at 30% marginal slab rate.
Equity LTCG under Section 198 (the erstwhile Section 112A) is a special concessional rate (12.5%), never taxed at the investor's marginal 30% slab rate.