Module 7: Markets and taxation

Tax changes the real result of every trade and investment. This module explains the categories the law uses and how each kind of market income is treated. Rates and limits change in Union Budgets, so always check the rules for the year you are filing.

01Income heads that matter

Market income usually falls under capital gains or business income. Which head applies decides the rate, the set-offs allowed and the return form you file.

02Short-term and long-term capital gains

For listed shares and equity funds, gains on holdings kept beyond twelve months are long-term and taxed differently from short-term gains. The exact rates and exemption limits are set in the budget and have changed in recent years.

03Intraday trading

Buying and selling the same shares on the same day is treated as speculative business income, taxed at your slab rate.

04Futures and options

F&O trading is generally treated as non-speculative business income. Profit is added to your income; losses can be set off and carried forward under the rules for business losses.

05Turnover and tax audit

F&O traders compute turnover in a specific way. Above certain thresholds, or when declaring low profit, a tax audit may be required.

06Charges on every trade

STT, exchange transaction charges, SEBI fees, stamp duty, GST on brokerage and brokerage itself are paid on every trade. For frequent traders they add up to a real share of the result.

07Records to keep

Contract notes, the broker's tax P&L, the capital gains statement and bank statements. Keeping them through the year saves trouble at filing time.

08Where this leads

A1Stock gives no tax advice; speak to a chartered accountant for your own case. The journal on A1Stock counts charges on every paper trade, so results are shown after costs.