To avail the concessional rate of 20% under Section 111A, the sale must occur through a recognised stock exchange, and the transaction should be subject to STT. Transactions in an International Financial Service Center (IFSC) are an exception; these are taxed at 20% even if STT is not levied.
This condition ensures that only legitimate transactions performed through recognised platforms benefit from the lower tax rate. Also, it prevents tax evasion and ensures compliance.