For Long-Term Capital Gains on the sale of listed equity shares to qualify for the concessional taxation regime under Section 198 of the Income-tax Act, 2025 (the erstwhile Section 112A of the Income-tax Act, 1961), what condition regarding Securities Transaction Tax (STT) must generally be satisfied?

[ A ]STT must have been paid at the time of transfer/sale, and — subject to certain notified exceptions such as IPO allotments — at the time of acquisition as well[ CORRECT ]

[ B ]STT must be paid only at the time of sale; payment at acquisition is never relevant

[ C ]STT payment status has no bearing on Section 198 eligibility

[ D ]STT must be formally waived in writing by the stockbroker before the transaction

Takeaway

Option A is correct: STT must have been paid at the time of transfer, and generally at the time of acquisition too, subject to notified exceptions.

Derivation

Section 198's concessional LTCG treatment (the provision was Section 112A under the erstwhile Income-tax Act, 1961) is conditional on STT having been paid on the transaction — both at the time of transfer of the equity share/unit, and (per Notification No. 60/2018) at the time of its acquisition, unless the acquisition falls under a notified exception such as an IPO allotment, bonus or rights issue, or acquisition by a non-resident under specific regulatory routes. This STT-paid condition is what distinguishes Section 198's concessional treatment from ordinary capital gains taxation on unlisted or off-market equity transfers.

Why the others fail

B — STT must be paid only at the time of sale; payment at acquisition is never relevant

Section 198 generally requires STT to have been paid at acquisition too, not only at sale, subject to specific notified exceptions.

C — STT payment status has no bearing on Section 198 eligibility

STT payment is a central eligibility condition for Section 198 — its absence (outside notified exceptions) disqualifies the gain from the concessional rate entirely.

D — STT must be formally waived in writing by the stockbroker before the transaction

STT is a statutory levy collected automatically on qualifying transactions — it cannot be 'waived' by a broker, and no such waiver process exists.