How Stock Market Profits Are Taxed in India

Short answer: Profits from listed shares are taxed as capital gains, with separate rates for short-term and long-term holdings, while frequent trading income can be treated as business income.

Short-Term vs Long-Term Capital Gains

For listed equity shares and equity mutual funds, gains on holdings of up to one year are short-term capital gains (STCG), and gains on holdings of more than one year are long-term capital gains (LTCG). The holding period is the key dividing line, so track your purchase dates carefully.

The Applicable Rates

STCG on equity (where STT is paid) and LTCG on equity are taxed at concessional rates that the government revises from time to time, with LTCG enjoying an annual exemption threshold before tax applies. Because these rates and thresholds change in Union Budgets, always confirm the current numbers for the relevant financial year rather than relying on old figures.

Intraday and F&O Are Different

Intraday equity trading is treated as speculative business income, and futures and options trading is treated as non-speculative business income. Both are taxed at your normal slab rate, not as capital gains, and may require an audit depending on turnover.

Dividends

Dividends are taxable in your hands at your slab rate, and companies deduct TDS above a threshold. Add dividend income to your return and claim credit for the TDS.

Set-Off and Carry-Forward of Losses

Capital losses can be set off against capital gains under specific rules, and unused losses can usually be carried forward for several years if you file your return on time. This makes timely, accurate filing valuable even in loss years.

Keep Records and Consider a Tax Advisor

Download your broker's capital gains statement and reconcile it with the Annual Information Statement (AIS). For active traders or large portfolios, a qualified chartered accountant can help with audit requirements and accurate slab versus capital-gains classification.

This explainer was written by The Dispatch desk to answer a question readers commonly ask. It is general information, not personalised financial advice.