Tax on Stock Trading India — Intraday, F&O & Delivery Capital Gains (FY 2025-26)

Updated: 3 June 2026 | Section 43(5), 111A, 112A — Income-tax Act, 2025 | AY 2026-27

Tax on stock trading in India depends on the type of trading: Delivery-based equity — LTCG 12.5% (gains >₹1.25L), STCG 20%. Intraday trading — speculative business income taxed at slab rate, losses set off only against speculative gains. F&O trading — non-speculative business income taxed at slab rate, losses can set off against salary. ITR-3 is mandatory for F&O and intraday traders.

ITR-3

Mandatory for F&O traders and intraday traders — not ITR-1 or ITR-2
ITR-2 is only for delivery-based investors (capital gains). Any F&O or intraday trading requires ITR-3 with P&L and balance sheet.

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Tax audit mandatory if F&O turnover exceeds ₹10 crore (digital) or ₹1 crore (otherwise). F&O turnover for tax audit = absolute sum of all profits + absolute sum of all losses (not contract value). Audit under Section 44AB requires a Chartered Accountant's report (Form 3CB/3CD).

Trading Type → Tax Head → Rate → Losses → ITR Form

Trading Type	Tax Head	Tax Rate	Loss Set-Off	Loss Carry Fwd	ITR Form
Delivery — LTCG Shares held >12 months	Capital Gains (Long-term) — Sec 112A	12.5% (gains >₹1.25L exempt)	Only vs LTCG	8 years (vs LTCG)	ITR-2
Delivery — STCG Shares held ≤12 months, STT paid	Capital Gains (Short-term) — Sec 111A	20%	vs STCG & LTCG	8 years	ITR-2
Intraday Trading Buy + sell same day, no delivery	Speculative Business Income — Sec 43(5)	Slab rate	Only vs speculative income	4 years (vs speculative only)	ITR-3
F&O Trading Futures & Options	Non-speculative Business Income — Sec 43(5) proviso	Slab rate	All income heads incl. salary	8 years (vs business income)	ITR-3

STT (Securities Transaction Tax) Rates for Reference

Transaction Type	STT Rate	Charged On
Delivery-based equity purchase	0.1%	Both buyer and seller
Delivery-based equity sale	0.1%	Both buyer and seller
Intraday equity (buy side)	Nil	—
Intraday equity (sell side)	0.025%	Seller
Futures — sale of futures	0.0125%	Seller
Options — sale of options	0.125%	Seller (on premium)
Options exercise	0.125%	Buyer (on settlement price)

F&O Turnover Calculation for Tax Audit (3-Trade Example)

F&O turnover for the purpose of tax audit under Section 44AB is calculated as the sum of absolute values of all profits and losses — not the total contract/notional value traded.

Trade #	Instrument	Result	Abs. Value Counted
Trade 1	Nifty Futures (March)	Profit: +₹32,000	₹32,000
Trade 2	Bank Nifty Options (Put)	Loss: −₹18,500	₹18,500
Trade 3	Reliance Futures	Profit: +₹9,200	₹9,200
F&O Turnover (Tax Audit basis)		Net P&L: +₹22,700	₹59,700

The turnover figure of ₹59,700 is used to determine if a tax audit is required. The notional/contract value of the trades is irrelevant for this purpose. Premium received on options sold is also added to turnover in some interpretations — consult a CA for complex options portfolios.

Advance Tax for Stock Traders

Traders with estimated tax liability above ₹10,000 in a financial year must pay advance tax in four installments. Capital gains arising after 15 March can be paid in the last installment (by 31 March) without interest penalty. F&O and intraday traders must estimate their business income and pay advance tax by 15 June, 15 September, 15 December, and 15 March.

Frequently Asked Questions

Is F&O trading income treated as business income in India?

Yes. Futures and Options (F&O) trading is treated as non-speculative business income under the Income-tax Act, 2025 (Section 43(5) proviso). This means F&O profits are taxed at your applicable income tax slab rate — not at any special rate. The advantage is that F&O losses can be set off against other business income, rental income, and even salary income. F&O losses can also be carried forward for 8 years. However, if your F&O turnover exceeds ₹10 crore (for digital/online transactions) or ₹1 crore (others), a tax audit under Section 44AB is mandatory.

How is intraday trading taxed in India?

Intraday equity trading (buy and sell shares on the same day without delivery) is classified as speculative business income under Section 43(5) of the Income-tax Act, 2025. Intraday profits are taxed at your income tax slab rate. The key restriction is that intraday losses can only be set off against other speculative income — not against salary, capital gains, rental income, or non-speculative business income. Intraday losses can be carried forward for 4 years (only against speculative income). You must file ITR-3 and maintain proper books of accounts if your intraday trading turnover exceeds prescribed limits.

What ITR form should a stock trader file?

F&O traders and intraday traders must file ITR-3, which is for individuals and HUFs with business or professional income. ITR-3 allows you to report business income (non-speculative for F&O, speculative for intraday), claim trading expenses, and carry forward losses. Investors who only do delivery-based equity trades (capital gains) can use ITR-2. ITR-1 (Sahaj) cannot be used if you have any business income or F&O transactions. If you have both trading business income and salary, ITR-3 is mandatory.

Can F&O losses be set off against salary income?

Yes. F&O (Futures and Options) losses, being non-speculative business losses, can be set off against any other income head in the same financial year, including salary income, rental income, and other business income. This is a significant advantage over intraday (speculative) losses which can only offset speculative gains. For example, if you have salary of ₹15 lakh and F&O loss of ₹4 lakh, your net taxable income is reduced to ₹11 lakh. Unadjusted F&O losses can be carried forward for 8 years and set off against future business income (but not salary in future years — only in the current year is salary set-off allowed).

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