Section 198 - Tax on long-term capital gains in certain cases
The ₹1.25 lakh threshold is an annual aggregate threshold for the qualifying section 198 bucket, not a per-security exemption.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Current law and effective date
Section 198 is controlled against the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The Act and Income-tax Rules, 2026 operate from 1 April 2026; earlier years and saved proceedings require the repeal-and-savings framework rather than automatic migration.
Primary statute: Income Tax Department consolidated Act | Rules: Notified Income-tax Rules, 2026
2-minute decode
The ₹1.25 lakh threshold is an annual aggregate threshold for the qualifying section 198 bucket, not a per-security exemption.
Who should use this section
Taxpayers aggregating qualifying long-term gains on listed equity shares, equity-oriented funds or business-trust units subject to the statutory STT and threshold conditions.
Old-law bridge
section 112A
The old-law bridge is navigational, not automatic precedent transfer. Match the 1961 Act wording, saved proceedings, current 2025 Act text and effective date before importing an older interpretation.
Finance Act 2026 / current-law note
No section-specific Finance Act, 2026 textual substitution is separately flagged for section 198; the consolidated post-Finance-Act-2026 text remains the controlling version and must be used instead of pre-1 April 2026 extracts.
Professional alert
Aggregate qualifying gains across securities. Verify acquisition and transfer STT conditions or notified exception. Do not permit Chapter VIII deductions against the special gain bucket.
Connected Income-tax Rules, 2026 and Forms
| Rule | Current control | Form |
|---|---|---|
| No provision-specific Rule/Form is directly prescribed for this section in the mapping used here. Apply the statute directly and check the current Rules where another provision cross-refers to them. | ||
Worked application
Qualifying section 198 gains are ₹1.80 lakh. Tax applies at 12.5% on ₹55,000, after other statutory adjustments.
Evidence / compliance checklist
- Aggregate qualifying gains across securities (section 198 evidence control 1).
- Verify acquisition and transfer STT conditions or notified exception (section 198 evidence control 2).
- Do not permit Chapter VIII deductions against the special gain bucket (section 198 evidence control 3).
Common mistake
A common section 198 error is to apply the old-law label or headline rate without rebuilding the current statutory conditions. For “Tax on long-term capital gains in certain cases”, the safer control is to test the exact taxpayer/transaction facts, the operative tax year, every linked Rule/Form and the Finance Act 2026 consolidated wording. Aggregate qualifying gains across securities. Verify acquisition and transfer STT conditions or notified exception. Do not permit Chapter VIII deductions against the special gain bucket.
Recommended approach
For section 198, start with the legal trigger in “Tax on long-term capital gains in certain cases”, document the evidence for that trigger, then run the computation or procedural step against the current text. As a cross-check, verify this provision-specific checkpoint: Qualifying section 198 LTCG rate: 12.5%.
Thresholds, periods and timing checkpoints
- Qualifying section 198 LTCG rate: 12.5%.
- Annual aggregate threshold: Rs 1,25,000 for the qualifying gain bucket.
Related provisions and interaction map
Section 198 operates inside Chapter XIII special-rate computation; reconcile its particular tax bucket with the relevant capital-gains, unexplained-income or corporate-regime rules, plus surcharge, cess, return and loss-set-off provisions.
Provision summary - verify verbatim text in the official Act
Text-status note: This guide does not reproduce the complete verbatim provision for section 198. Use the linked official consolidated Act before quoting sub-section language or preparing a filing, opinion or litigation document.
Primary-source trail
Statute: Income-tax Act, 2025 as amended by Finance Act, 2026
Rules: Income-tax Rules, 2026
Law navigation: Income Tax Department 2025 Act / Rules hub
Quoting note: Use the official consolidated Act for verbatim legislative language.
FAQs
Does an old Income-tax Act, 1961 case automatically decide section 198?
No. The old-law bridge helps research, but transferability depends on materially matching language, transition rules and any Finance Act 2026 change.
Which text should be quoted in advice or litigation?
Quote the consolidated official statute for the relevant tax year. If this page presents a provision summary rather than complete statutory text, use the official consolidated Act for verbatim legislative language.