Making stock market profits but shocked by your income tax bill? Learn how intraday, F&O, STCG, and LTCG are taxed in India. Avoid costly mistakes with this clear guide.
📉 Why You’re Paying High Tax Despite “Moderate” Market Profits
You made ₹7 lakhs in total profits from the stock market—yet got a tax bill of ₹74,000+? You’re not alone. Many Indian investors fall into this trap because they treat all market income as one type.
🔍 Key Insight: “Your tax is not based on how much you earned—it’s based on how you earned it.”
🧾 Different Types of Market Income & Their Tax Treatments
1️⃣ Intraday Trading Income = Speculative Business
Tax Rate: Normal slab rate
Loss Set-Off: Only against speculative gains
Carry Forward: Up to 4 years
Example: ₹1.5 lakh intraday loss can’t be adjusted against salary or STCG, but can offset intraday profits next year.
2️⃣ Futures & Options (F&O) = Non-Speculative Business
Tax Rate: Slab rate
Loss Set-Off: Against business income
Carry Forward: 8 years
Example: ₹2.5 lakh F&O profit can absorb losses from other business heads—more flexible than intraday.
3️⃣ Short-Term Capital Gains (STCG)
Holding Period: Stocks held < 12 months
Tax Rate: Flat 15% under Section 111A
Loss Set-Off: Against STCG/LTCG
Carry Forward: 8 years
Example: ₹3.5 lakh STCG = ₹52,500 tax regardless of your total income.
4️⃣ Long-Term Capital Gains (LTCG)
Holding Period: > 12 months
Tax-Free Limit: First ₹1 lakh
Tax Rate: 10% beyond ₹1 lakh under Section 112A
No Rebate/Indexation
Example: ₹4 lakh LTCG → ₹1 lakh exempt → ₹30,000 tax
💣 Real-World Example: Why ₹7 Lakh “Net Profit” Still Means ₹74,375 in Tax
Breakdown:
₹3 lakh Intraday Loss
₹2.5 lakh F&O Profit
₹3.5 lakh STCG
₹4 lakh LTCG
You might think ₹7L total → low tax.
But:
Type Tax Impact
Intraday loss : Not adjustable
F&O profit Slab rate
STCG Flat 15%
LTCG 10% on excess over ₹1 lakh
📌 Final Tax Payable: ₹74,375
❌ Common Investor Mistakes
1. Treating all stock market income as one
2. Ignoring classification rules
3. Filing ITR without understanding loss set-off
4. Not tracking intraday/F&O separately
✅ How to Avoid Tax Shocks on Stock Market Income
Keep detailed records for:
Intraday
F&O
STCG
LTCG
Consult a Chartered Accountant if:
You actively trade
You book capital gains
You want to optimize carry-forward benefits
Avoid DIY ITR filing if you’re unsure
📌 Pro Tip: A small misclassification = large tax penalty.
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🧠 FAQs – Tax on Stock Market Income in India
Q1. Is intraday income taxed like salary or capital gains?
No. It’s treated as speculative business income and taxed at slab rate.
Q2. Can F&O losses be set off against other income?
Yes, but only against business income, not salary or capital gains.
Q3. What is the tax-free limit on long-term capital gains?
₹1 lakh per financial year under Section 112A.
Q4. Can I claim Section 87A rebate on capital gains?
No. Section 87A rebate does not apply to LTCG under Section 112A.
Q5. How long can I carry forward losses?
Intraday: 4 years
F&O: 8 years
STCG/LTCG: 8 years