Section 10(36): Exemption for Long-Term Capital Gains on Eligible Equity Shares
Section 10(36) of the Income-tax Act, 1961 granted an exemption for certain long-term capital gains on eligible equity shares transferred through a recognised stock exchange during a narrowly defined period in 2003-04. It is a historical provision, not a general exemption for equity share sales today.
Eligible assessee: Any assessee satisfying the statutory conditions.
Nature of income: Long-term capital gain on transfer of eligible equity shares.
Transfer window: After 28 February 2003 and before 1 March 2004.
Trading venue: A recognised stock exchange in India.
Exempt amount: Entire qualifying long-term capital gain under the historical provision.
Meaning and scope of Section 10(36)
Section 10 of the Income-tax Act, 1961 identified income excluded from total income. Clause 10(36) specifically addressed income arising from the transfer of a long-term capital asset, being an eligible equity share in a company, where the transfer took place during the prescribed period and on a recognised stock exchange in India.
This was a transitional exemption associated with the early-2000s equity market regime. It did not exempt short-term capital gains, every listed equity share or transfers made outside the statutory period.
Who was eligible and what income was exempt?
| Eligible assessee | Any assessee who earned qualifying long-term capital gains and met the statutory conditions. |
|---|---|
| Nature of income | Long-term capital gain on transfer of an eligible equity share held as a capital asset. |
| Amount exempt | Entire qualifying long-term capital gain, with no separate rupee ceiling specified in this clause. |
| Transfer period | After 28 February 2003 but before 1 March 2004. |
| Place of transfer | A recognised stock exchange in India. |
Conditions for exemption under Section 10(36)
- Long-term asset: The equity share had to be a long-term capital asset under the holding-period rules applicable to the transaction.
- Eligible equity share: The shares had to fall within one of the categories defined in the provision.
- Specified dates: The transfer had to occur after 28 February 2003 and before 1 March 2004.
- Recognised exchange: The transfer had to take place on a recognised stock exchange in India.
- Supporting evidence: Transaction records, purchase and sale details, evidence of eligible share status and the applicable stock-exchange documentation should support the claim.
Definition of eligible equity shares
For this historical exemption, eligible equity shares broadly covered the following categories:
- BSE-500 shares: Equity shares in a company forming part of the BSE-500 Index of the Stock Exchange, Mumbai, as on 1 March 2003.
- Qualifying public issue shares: Equity shares allotted through a public issue on or after 1 March 2003, where the company was listed on a recognised stock exchange in India before 1 March 2004.
The precise statutory definition and the facts of the particular issue or listing control eligibility. The original page referred to public issues on or after 31 March 2003; the statutory date should be checked against the authoritative enacted text when reviewing an old assessment.
Example: Qualifying historic capital gain
Suppose an investor held shares in a company included in the BSE-500 Index on 1 March 2003. The investor sold those shares through a recognised stock exchange in India in December 2003. If the shares were a long-term capital asset and all statutory requirements were met, the resulting long-term capital gain could qualify for exemption under Section 10(36).
By contrast, a sale of the same shares in October 2026 cannot qualify under Section 10(36), because the statutory transfer window has long expired.
How are equity share capital gains treated now?
For transactions outside the historical period, capital gains must be assessed under the legislation applicable to the relevant tax year. Under the Income-tax Act, 1961, subsequent regimes included Section 10(38) for certain earlier transactions and Section 112A for specified long-term capital gains on listed equity shares and certain units, subject to their respective dates and conditions.
The Income-tax Act, 2025 came into force on 1 April 2026. For tax year 2026-27 onwards, check the corresponding provisions and transitional rules under the new Act. Do not apply an expired Section 10(36) exemption to present-day transactions or assume historical section numbers remain unchanged.
Frequently asked questions
What is the Section 10(36) exemption?
It was an exemption for qualifying long-term capital gains from eligible equity shares transferred on a recognised Indian stock exchange within the statutory period in 2003-04.
Was the entire qualifying gain exempt?
Yes. The historical clause exempted the qualifying income without a separate monetary cap.
Which shares counted as eligible equity shares?
Specified BSE-500 company shares and certain qualifying public-issue shares listed before the statutory deadline, subject to the precise legal definition.
Can this exemption be claimed for shares sold in 2026?
No. The transfer date condition makes Section 10(36) inapplicable to sales in 2026.
Where can current capital gains rules be checked?
Use the Income Tax Department, India Code and the official income-tax e-Filing portal to verify the provisions applicable to the relevant tax year.
Official legal references
- Income Tax Department - statutory resources and capital gains guidance.
- India Code - authoritative legislative texts of the Income-tax Acts.
- Income Tax e-Filing Portal - filing information and updates.
- Securities and Exchange Board of India - securities market regulations and resources.
Related reading: income exempt under Section 10, tax-free income guide, Chapter VI-A deductions and income-tax return filing resources.
This article explains a historical provision for educational purposes. Confirm the enacted text and law applicable to the assessment year in question.