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Guide · Income Tax

Tax on Stock Trading in India
Intraday, F&O & Delivery

How delivery, intraday and F&O trades are taxed — capital gains at 20% / 12.5% on delivery, slab-rate business income for intraday (speculative) and F&O (non-speculative), plus the ITR-3, turnover and tax-audit rules for FY 2025-26.

TaxClue Editorial Desk Updated 18 August 2026 6 min read 16 FAQs answered
Updated for AY 2026-27 CA reviewed Post Budget 2024 rates
Quick Answer

How your stock trading is taxed depends on the type of trade. Delivery equity is capital gains — STCG 20% (held ≤12 months, u/s 111A) and LTCG 12.5% on gains above a ₹1.25 lakh yearly exemption (held >12 months, u/s 112A), both without indexation. Intraday is speculative business income and F&O is non-speculative business income — both taxed at your slab rate. F&O and intraday traders file ITR-3. These rates (effective 23 July 2024) continue for FY 2025-26.

Delivery STCG 20%
Delivery LTCG 12.5%
Intraday / F&O Slab
Trader form ITR-3
The full picture

Trading Type → Tax Head → Rate → Losses → ITR

Every common way to trade Indian stocks, with the tax head it falls under, the applicable rate, how losses can be used and which return form to file.

Trading typeTax headRateLoss set-offCarry fwdITR
Delivery — LTCG (held >12m)Capital gains, long-term u/s 112A12.5% (>₹1.25L exempt)Only vs LTCG8 yrs (vs LTCG)ITR-2
Delivery — STCG (held ≤12m, STT)Capital gains, short-term u/s 111A20%vs STCG & LTCG8 yrsITR-2
Intraday equity (same-day, no delivery)Speculative business income, s.43(5)Slab rateOnly vs speculative income4 yrs (speculative only)ITR-3
F&O (futures & options)Non-speculative business incomeSlab rateAny head incl. salary8 yrs (business)ITR-3

STCG 20% / LTCG 12.5% apply to transfers on/after 23 Jul 2024; no indexation on listed equity. Verified on incometax.gov.in for FY 2025-26 (AY 2026-27).

The 23 July 2024 change raised equity STCG to 20% and LTCG to 12.5%

Budget 2024 raised short-term equity gains (u/s 111A) from 15% to 20% and long-term equity gains (u/s 112A) from 10% to 12.5%, while lifting the LTCG exemption from ₹1 lakh to ₹1.25 lakh a year. Indexation on listed equity was withdrawn. These rates apply to sales on or after 23 July 2024 and are unchanged for FY 2025-26.

Worked example

Delivery Capital Gains — How the Tax Works

Suppose in FY 2025-26 you book a short-term gain of ₹1,50,000 (shares held ≤12 months) and a long-term gain of ₹3,25,000 (held >12 months). Short-term is taxed flat at 20%; long-term gets the ₹1.25 lakh exemption first, then 12.5%.

STCG u/s 111A

Short-term gain₹1,50,000
ExemptionNone
Tax @ 20%₹30,000
Tax payable (+cess)≈ ₹31,200

LTCG u/s 112A

Long-term gain₹3,25,000
Less: yearly exemption₹1,25,000
Taxable LTCG₹2,00,000
Tax @ 12.5%₹25,000
Tax payable (+cess)≈ ₹26,000

Add 4% health & education cess (plus surcharge if applicable). Intraday and F&O profits are added to your total income and taxed at slab, so they are not shown here. Estimate the full liability with the income-tax calculator.

The ₹1.25 lakh exemption applies only to LTCG — not STCG or trading income

The ₹1.25 lakh yearly exemption is available only against long-term equity gains under 112A. Short-term gains under 111A are taxed at 20% from the first rupee, and intraday/F&O business income has no such exemption at all. The Section 87A rebate also cannot be set against these special-rate capital gains.

Business income

Intraday vs F&O — Speculative or Not?

Both intraday and F&O are taxed as business income at slab rates, but the law treats them differently. Intraday equity (no delivery) is speculative under Section 43(5); F&O is specifically excluded from speculation and treated as non-speculative. The difference matters most for how losses can be used.

Slab

Intraday (speculative)

  • Same-day buy & sell of equity, no delivery taken
  • Speculative business income under s.43(5)
  • Losses set off only against speculative gains
  • Loss carry-forward 4 years (speculative only)
  • Reported in ITR-3 as a separate speculative business
vs
Slab

F&O (non-speculative)

  • Futures & options on stocks, indices, commodities
  • Non-speculative business income
  • Losses set off against any head incl. salary (same year)
  • Loss carry-forward 8 years (vs business income)
  • Reported in ITR-3 as a normal business
F&O losses can offset salary — intraday losses cannot

F&O being non-speculative, a current-year F&O loss can be set off against salary, rent and other business income — a genuine tax saving. Intraday (speculative) losses are ring-fenced: they offset only speculative profits and expire after 4 years if unused. Keep the two segments separate in your books.

Trading intraday and F&O together? Get your speculative and non-speculative income segregated correctly.

Talk to a CA →
Compliance

Turnover, Tax Audit & STT for Traders

For F&O and intraday, turnover for tax-audit purposes is the sum of absolute profits and losses on each trade — not the contract/notional value. A tax audit under Section 44AB applies if turnover exceeds ₹1 crore (raised to ₹10 crore where cash receipts and payments are each within 5% of the total — true for most online traders).

TradeResultAbsolute value counted
Nifty FuturesProfit +₹32,000₹32,000
Bank Nifty Options (Put)Loss −₹18,500₹18,500
Reliance FuturesProfit +₹9,200₹9,200
Turnover (audit basis)Net P&L +₹22,700₹59,700

Turnover ₹59,700 (not the notional value) decides audit applicability. Some views add premium on options sold — a CA should confirm for complex portfolios.

STT (Securities Transaction Tax) for reference

TransactionSTT rateCharged on
Delivery equity — buy & sell0.1% each sideBuyer and seller
Intraday equity — sell side0.025%Seller
Futures — sale0.02%Seller
Options — sale of option0.1% on premiumSeller
Options — exercise0.125% on settlementBuyer

STT rates on F&O were revised upward from 1 Oct 2024; confirm current rates for your segment before filing.

If you make a loss

Loss Set-off, Carry Forward & Advance Tax

  • Delivery capital losses: short-term loss offsets STCG or LTCG; long-term loss offsets only LTCG — both carry forward 8 years.
  • F&O (non-speculative) loss: set off against any head except salary is not restricted — allowed against salary too in the same year; carry forward 8 years vs business income.
  • Intraday (speculative) loss: set off only against speculative income; carry forward 4 years.
  • To carry any loss forward you must file your ITR by the due date.
  • Advance tax: if total tax exceeds ₹10,000, pay in four instalments (15 Jun/Sep/Dec/Mar); capital gains arising after 15 March can go in the final instalment.

You likely need ITR-3 + audit help if

  • You trade F&O or intraday in any volume
  • Your turnover is near the ₹1 crore / ₹10 crore line
  • You have trading losses to carry forward
  • You mix salary, capital gains and trading income

ITR-2 may be enough if

  • You only take delivery of shares (capital gains)
  • You have no intraday or F&O trades
  • You are not claiming trading expenses
  • You have no business income to report

Traded this year? Get F&O turnover, audit and ITR-3 handled by a CA.

File Trader ITR with a CA →
Government sourcesSTCG s.111A & LTCG s.112A rates: incometax.gov.in · Equity rates eff. 23 Jul 2024 (Finance (No.2) Act 2024): STCG 20%, LTCG 12.5% above ₹1.25L, no indexation · Speculative vs non-speculative: Section 43(5), Income-tax Act · Tax audit thresholds: Section 44AB (₹1 cr / ₹10 cr where cash ≤5%)
People also ask

Frequently Asked Questions

Delivery / Capital Gains
How is tax on stock trading calculated in India?
It depends on the type of trade. Delivery-based equity is capital gains: short-term (held up to 12 months) is taxed at 20% under Section 111A, and long-term (over 12 months) at 12.5% under Section 112A on gains above a ₹1.25 lakh yearly exemption, both without indexation. Intraday equity is speculative business income and F&O is non-speculative business income — both taxed at your slab rate. These rates apply to transfers on or after 23 July 2024 and continue for FY 2025-26.
What is the STCG tax rate on shares for FY 2025-26?
20% under Section 111A on STT-paid listed equity shares and equity mutual funds held for 12 months or less. The rate was raised from 15% to 20% by Budget 2024 with effect from 23 July 2024 and is unchanged for FY 2025-26 (AY 2026-27). There is no exemption threshold for STCG — it is taxed from the first rupee, plus 4% cess.
What is the LTCG tax rate on shares for FY 2025-26?
12.5% under Section 112A on long-term gains (holding over 12 months) above a ₹1.25 lakh yearly exemption, without indexation. The rate rose from 10% and the exemption from ₹1 lakh, effective 23 July 2024. So if your long-term equity gain is ₹3.25 lakh, tax is 12.5% on ₹2 lakh = ₹25,000 plus cess.
Is indexation available on shares and equity mutual funds?
No. Listed equity shares and equity-oriented mutual funds have never had indexation under Sections 111A/112A, and indexation on most other assets was withdrawn from 23 July 2024. LTCG is computed on the plain gain (sale price minus cost), subject to grandfathering of gains up to 31 January 2018 for holdings bought before that date.
Intraday
How is intraday trading taxed in India?
Intraday equity trading (buying and selling shares the same day without taking delivery) is speculative business income under Section 43(5). Profits are added to your total income and taxed at your slab rate. Intraday losses can be set off only against other speculative income — not salary, capital gains or F&O — and can be carried forward for 4 years. You file ITR-3 and report it as a separate speculative business.
Can intraday losses be set off against salary?
No. Intraday trading is speculative business income, and speculative losses can be set off only against speculative gains. They cannot reduce salary, capital gains, rental income or F&O income. Unabsorbed speculative losses carry forward for 4 assessment years and can only offset future speculative profits, provided you file your ITR on time.
F&O
Is F&O trading income treated as business income?
Yes. Futures and Options trading is non-speculative business income under the proviso to Section 43(5). F&O profits are taxed at your slab rate — not at any special capital-gains rate. The advantage is that F&O losses can be set off against any other income head, including salary, in the same year, and carried forward for 8 years against future business income. F&O traders file ITR-3.
Can F&O losses be set off against salary income?
Yes. F&O losses are non-speculative business losses and can be set off against any income head in the same financial year — including salary, rent and other business income. For example, ₹15 lakh salary with a ₹4 lakh F&O loss reduces taxable income to ₹11 lakh. Any unabsorbed loss carries forward 8 years, but in future years it can offset only business income, not salary.
How is F&O turnover calculated for tax audit?
F&O turnover for Section 44AB is the sum of the absolute values of all profits and losses on each trade — not the contract or notional value. For example, a ₹32,000 profit, an ₹18,500 loss and a ₹9,200 profit give a turnover of ₹59,700 even though the net P&L is only ₹22,700. This turnover figure decides whether a tax audit applies.
When is a tax audit mandatory for a stock trader?
A tax audit under Section 44AB is required if trading turnover exceeds ₹1 crore, raised to ₹10 crore where cash receipts and cash payments are each within 5% of the total — which covers most online traders. Audit may also be triggered if you opted out of presumptive taxation or declare profits below the presumptive rate. The audit report (Form 3CB/3CD) needs a Chartered Accountant.
ITR & Filing
What ITR form should a stock trader file?
F&O and intraday traders must file ITR-3, which covers business and professional income and lets you claim trading expenses and carry forward losses. Investors who only take delivery (capital gains) can use ITR-2. ITR-1 cannot be used with any business income or F&O. If you have both trading business income and salary, ITR-3 is mandatory.
Can I claim trading expenses like brokerage and internet?
Yes, if your trading is treated as business income (intraday or F&O). You can deduct brokerage, STT is not deductible as an expense but transaction charges, exchange fees, internet, depreciation on a trading computer, advisory fees and interest on borrowed capital are allowable against business income. Capital-gains (delivery) traders can only reduce brokerage and transaction costs from the sale value.
Do I have to pay advance tax as a trader?
Yes, if your total tax liability for the year exceeds ₹10,000. Advance tax is payable in four instalments — by 15 June, 15 September, 15 December and 15 March. Capital gains that arise after 15 March can be paid in the final instalment without interest. F&O and intraday traders should estimate business income each quarter to avoid Section 234B/234C interest.
Is TDS deducted on my stock trading profits?
No TDS is deducted on capital gains or trading profits of resident investors selling listed shares — you pay the tax yourself as advance tax or at filing. Your broker deducts STT and charges on transactions, but that is not income tax. Non-residents may face TDS under Section 195. Always reconcile your broker P&L and AIS before filing.
General
Are STCG and LTCG rates the same under old and new tax regime?
Yes. Capital-gains rates on equity — STCG 20% under 111A and LTCG 12.5% under 112A — are special rates independent of your slab, so they are the same under both the old and new regime. The regime choice only affects how your slab income (salary, intraday, F&O business income) is taxed. See our income-tax slabs guide for the slab-rate comparison.
How are dividends from shares taxed?
Dividends are taxable in the investor's hands at slab rates under "Income from Other Sources" and are not capital gains. The company deducts 10% TDS if your dividend from that company exceeds ₹5,000 in the year (raised to ₹10,000 from FY 2025-26). You can claim this TDS against your final tax liability when you file your ITR.
If you would rather not do it yourself

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