ITR filing: How income from stock market is taxed — explained (2024)

Income tax calculator: An income made on sale and purchase of shares fall under the business income or capital gain head. So, those who made money in recent stock market rally need to know how their income from stock market will be taxed. According to tax and investment experts, income from stock market is calculated on the basis of holding period. If the investor has hold the stock for more than 12 months, then the income will fall under long term capital gain category. However, if the holding period is less than or equal to 12 months, then the stock market income would be called short term capital gain.

Income tax rules for stock market investors

Speaking on how income tax applies on stock market gains, Sujit Bangar, Founder at Taxbuddy.com said, "Income earned from stock market is taxed either as business income or capital gain. If stocks are sold with under line delivery, it’s non speculative. This type of transaction can be taxed as normal business income or capital gain. If you are holding shares in your trading Portfoio, the income or loss on account of sale, purchase of these shares is considered as business income. Even trading in futures and options is considered as non speculative business income."

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Taxbuddy.com expert went on to add that business income are taxed as regular slab rates. Here you can reduce incidental expenses incurred from the business profit to work out taxable profit. He said that income made from stock market is termed as short term gain or long term gain, depending upon the holding period of stocks.

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Short Term Capital Gain (STCG): These are gains from assets held for less than or equal to one year. STCG is typically taxed at 15 per cent on your gains.

Long Term Capital Gain (LTCG): LTCG results from holding assets for more than one year. In the Indian context, LTCG on listed securities is taxed at a flat rate of 10% without the benefit of indexation.

How income from IPO is taxed?

Explaining the income tax rule getting applied on income from an initial public ofering (IPO), SEBI registered tax and investment expert Jitendra Solanki said, "In case of income from IPO, same income tax rule will be applied but the holding period of the stock will not begin with the date of investment but from the date of allotment of shares to the investor."

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On why date of apply can't be considered daet of investment, Solanki said, "When you apply for the IPO, you are not holding the stock and hence, it can't be the date of investment."

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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ITR filing: How income from stock market is taxed — explained (1)

Asit Manohar

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Published: 14 Oct 2023, 09:05 AM IST

ITR filing: How income from stock market is taxed — explained (2024)

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