Tax in the Indian Stock Market: The Complete Guide for Investors & Traders
Shares, F&O, intraday, mutual funds, STT, loss set-off, ITR forms and deadlines, in plain English, with links to the official sources.
1. First: are you an investor or a trader?
Your income head decides everything: rate, forms, deductions, audit.
| Activity | Income head | Taxed at |
|---|---|---|
| Delivery-based buy and hold (equity shares, equity MFs) | Capital gains | Special flat rates (below) |
| Intraday equity (no delivery) | Speculative business income | Your slab rate |
| Futures & Options (equity, index, commodity, currency) | Non-speculative business income | Your slab rate |
Delivery trades can also be treated as business income if you trade very frequently, but you must stay consistent year to year. Ask a CA if you are in the grey zone.
2. Capital gains on listed shares & equity mutual funds
| Holding period | Type | Rate (plus 4% cess) |
|---|---|---|
| Up to 12 months | STCG (Sec 111A) | 20% |
| More than 12 months | LTCG (Sec 112A) | 12.5% on gains above ₹1.25 lakh per year |
- Cost basis: shares bought before 31 Jan 2018 use grandfathered cost (higher of actual cost or lower of fair value on 31 Jan 2018 and sale price).
- Rebate trap: the Sec 87A rebate (income up to ₹12 lakh under the new regime) does not apply to these special-rate gains.
- Surcharge on these gains is capped at 15%.
- No indexation. STT paid is not deductible against capital gains.
3. Intraday equity trading
Buying and selling the same stock on the same day without taking delivery is speculative business income, taxed at slab rates. Report in ITR-3. You can deduct genuine expenses (brokerage, internet, software, advisory fees, STT). Losses are speculative and carry forward only 4 years, against speculative income only.
4. Futures & Options (F&O)
F&O profit or loss is non-speculative business income, taxed at your slab rate. It is not capital gains, so the 20% / 12.5% rates do not apply.
Turnover (needed for the audit test)
- Futures & options: sum of the absolute profit and loss of every closed trade (ICAI guidance), not the contract value.
- Expiry without exercise: include the premium lost as part of the turnover.
Slab rates, new regime (default), FY 2026-27
| Income | Rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4-8 lakh | 5% |
| ₹8-12 lakh | 10% |
| ₹12-16 lakh | 15% |
| ₹16-20 lakh | 20% |
| ₹20-24 lakh | 25% |
| Above ₹24 lakh | 30% |
Business income can opt out of the new regime only once in a lifetime (Form 10-IEA); switching rules are strict, so decide carefully. The old regime has different slabs and deductions.
5. STT and other trading costs
Securities Transaction Tax is charged per transaction regardless of profit or loss. Revised F&O rates apply from 1 April 2026.
| Transaction | STT | Charged on |
|---|---|---|
| Equity delivery | 0.1% | Buyer and seller |
| Equity intraday | 0.025% | Seller |
| Equity futures | 0.05% (was 0.02%) | Seller, on contract value |
| Equity options (sell) | 0.15% (was 0.1%) | Seller, on premium |
| Option exercised | 0.15% (was 0.125%) | Buyer, on intrinsic value |
Other costs you can deduct as business expenses (traders): brokerage, exchange charges, SEBI fee, stamp duty, GST on brokerage, DP charges, platform fees. For investors, brokerage on purchase is added to cost and on sale reduces proceeds.
6. Losses & set-off
| Loss type | Set off against | Carry forward |
|---|---|---|
| Short-term capital loss | STCG and LTCG | 8 years |
| Long-term capital loss | LTCG only | 8 years |
| F&O (non-speculative) loss | Any income except salary | 8 years, against business income |
| Intraday (speculative) loss | Speculative gains only | 4 years |
7. Dividends, buybacks, mutual funds, foreign shares, crypto
- Dividends: taxed at your slab rate. TDS of 10% applies if dividends from one company exceed ₹10,000 in a year. Check Form 26AS / AIS.
- Buybacks (from 1 Apr 2026): proceeds are now taxed as capital gains for shareholders, not as dividend.
- Equity mutual funds: same 20% / 12.5% rules as shares. Debt funds bought after April 2023 are taxed at slab rate.
- Foreign shares: gains held over 24 months are LTCG at 12.5%; otherwise slab rate. Disclose them in Schedule FA and keep Form 67 for foreign tax credit.
- Crypto / VDAs: flat 30% on gains, 1% TDS, no set-off of losses, no expense deduction except cost.
8. ITR forms, audit & advance tax
| Your case | Form |
|---|---|
| Only capital gains (plus salary etc.) | ITR-2 |
| Any F&O or intraday income (business) | ITR-3 |
- Tax audit (Sec 44AB): generally needed if business turnover exceeds ₹10 crore (when cash receipts/payments are within 5%), or if you declare profit below the presumptive level and your income exceeds the basic exemption limit. F&O traders with losses should check this every year.
- Advance tax: if tax payable exceeds ₹10,000, pay in instalments (15 Jun, 15 Sep, 15 Dec, 15 Mar). Capital gains can be paid in the quarter they arise.
- Due dates: traditionally 31 July (no audit) and 31 October (audit). The new Act staggers some timelines, so confirm the current date on the portal.
- Reconcile first: match your broker’s P&L and tax statement with AIS / Form 26AS before filing.
9. Official & learning links
Government & regulators
Learn more
10. FAQ
Do I pay tax if my total income is below ₹12 lakh?
Slab income may be rebated to zero, but STCG (111A) and LTCG (112A) are taxed separately and the rebate does not cover them.
Is STT deductible?
Only for business income (F&O, intraday). Not for capital gains.
Do I need to file if I only had losses?
Yes, if you want to carry them forward. File on time.
Is a ₹1.25 lakh LTCG exemption per stock?
No, it is per person per financial year across all listed equity and equity MF LTCG.
Can I net F&O profit against delivery gains?
They are taxed under different heads, but an F&O (non-speculative) loss can be set off against capital gains in the same year. Capital losses cannot be set off against business income.