How much tax do you pay on stock market profits in India?

What is the actual tax rate on share profits for an Indian investor?

On listed Indian shares, profit from a holding sold within 12 months is taxed at 20.0% plus 4.0% cess on the whole gain. Hold beyond 12 months and it is 12.5% plus 4.0% cess, and only the gain above Rs 1,25,000 a year is taxed. Intraday and F&O profit is taxed at your slab rate instead.

Key Takeaways

• Nothing is taxed until you sell; a gain on the screen is not income.
• Sold within 12 months: 20.0% plus 4.0% cess, on the whole gain.
• Held beyond 12 months: 12.5% plus 4.0% cess, on the gain above Rs 1,25,000 a year.
• That Rs 1,25,000 is one allowance per financial year, not per stock or per broker.
• Intraday is speculative business income and F&O is non-speculative business income; both go at your slab rate.
• Losses only reduce tax if you file your return on time and carry them forward.

What exactly counts as a stock market profit in India?

The tax department does not tax the market. It taxes each sale you make. If a stock in your demat account has doubled and you have not sold it, there is no tax and nothing to declare as income. The profit becomes real, and taxable, on the day the trade is executed. This one fact is worth sitting with, because it means the timing of your sell button is a tax decision, not just a market decision.

Once you do sell, your profit falls into one of a few buckets, and the bucket decides the rate. Delivery-based shares bought and sold on the NSE or BSE, where STT has been paid, are capital gains. Intraday trades, where you square off the same day and never take delivery, are speculative business income. Futures and options are non-speculative business income. Dividends are separate again: they are added to your total income and taxed at your own slab rate, and TDS may already have been cut before the money reached your bank.

Tax on an illustrative Rs 500,000 gain at the statutory rates in force from 23 July 2024

When you sold	Rate applied	Tax (Rs)	You keep (Rs)
Within 12 months	20.0% plus 4.0% cess, on the whole gain	104,000	396,000
Beyond 12 months	12.5% plus 4.0% cess, above Rs 1,25,000	48,750	451,250
Difference	Same Rs 500,000 gain, different date	55,250	55,250

How is a short-term gain on shares taxed now?

If you bought a listed share and sold it within 12 months, the gain is short-term. The rate is 20.0% plus 4.0% cess, on the whole gain. There is no free slice here. The first rupee of profit is taxed at the same rate as the last one, and the rate does not soften because you happen to be in a lower income bracket. It is a flat, separate rate sitting on top of however your salary or business income is taxed.

The 12 months is counted from the date of purchase to the date of sale, and shares are matched on a first-in, first-out basis by your depository. That matters more than people expect. If you bought in tranches, part of your holding may cross the one-year mark weeks before the rest of it does. Selling the whole position on one day can drag older, cheaper shares into the same sale as recently bought ones. Your broker's capital gains statement will show you the split; it is worth reading before you place the order, not after.

How is a long-term gain on listed shares taxed?

Hold the share beyond 12 months and the gain becomes long-term. The rate is 12.5% plus 4.0% cess, on the gain above Rs 1,25,000 a year. That Rs 1,25,000 is an annual allowance, not a per-stock or per-broker one. It covers all your long-term gains from listed equity and equity mutual funds in a financial year put together. Someone who books a small long-term gain each year may legitimately pay nothing at all; someone who books everything in one year uses the allowance once.

Everything in this article is a worked calculation at the statutory rates in force from 23 July 2024, not tax advice, and not a return of any service of ours. Surcharge is not included, and surcharge does apply once total income crosses the higher brackets, so a large gain in a high-income year will cost a little more than the arithmetic here. Two other points: indexation is not available on listed equity, so inflation does not reduce your taxable gain, and very old holdings bought before long-term tax was reintroduced get a one-time step-up in their cost. If you are holding shares that old, have that checked rather than assumed.

What does the tax actually cost on a Rs 5 lakh profit?

Take an illustrative case: a single gain of Rs 500,000, one investor, one financial year, nothing else in the picture. Run it through both buckets at the statutory rates in force from 23 July 2024 and the gap between selling at month eleven and selling at month thirteen comes to Rs 55,250. The table above shows the full split. These are illustrative figures for one clean gain, and your own number will move with your other income and with surcharge.

Rs 55,250 on a Rs 5 lakh profit is roughly an eleventh of the gain, handed over for impatience. That is real money, and it is the strongest argument in the Indian tax code for holding a good business through a boring year. But read the argument carefully. It says patience is rewarded. It does not say hold anything at all for 12 months. If a business has actually broken, paying 20.0% plus 4.0% cess to get out is far cheaper than watching the position halve while you wait for a date on the calendar. Tax is a tiebreaker, never the thesis.

Is intraday and F&O profit taxed differently from delivery?

Yes, and this is where most retail investors get an unpleasant surprise in July. Intraday equity trades are treated as speculative business income. Futures and options are treated as non-speculative business income. Neither is a capital gain, so neither gets the 12.5% long-term rate and neither touches the Rs 1,25,000 allowance. Both are simply added to your total income and taxed at your slab rate, which for a well-paid salaried trader can be higher than the short-term capital gains rate on delivery trades.

There is one consolation: because it is business income, genuine costs of doing that business are deductible. Brokerage, exchange charges, demat charges, data subscriptions, a share of your internet bill. The price for that is paperwork. You file a business return rather than the simpler capital gains one, you may need to maintain books, and if turnover is large enough an audit requirement can kick in. You are also expected to pay advance tax through the year in instalments instead of settling everything at filing time, and interest is charged if you do not.

Can my losses reduce what I owe?

They can, within rules that are stricter than most people assume. A short-term capital loss can be set off against both short-term and long-term capital gains. A long-term capital loss can only be set off against long-term capital gains. An intraday loss, being speculative, can only be set off against speculative gains, not against your salary and not against a delivery profit. Whatever remains unabsorbed can be carried forward into future years, but only on one condition: you filed your income tax return by the due date. Miss the deadline and the carry-forward is simply gone.

India has no wash-sale rule, so selling a losing position before 31 March to book the loss and buying it back later is allowed. Do it with your eyes open. If you genuinely want to own the business, a gap in ownership is market risk you have taken on for a tax benefit, and the stock does not know your intentions. The honest version of tax-loss harvesting is closing positions you had already decided were mistakes, and letting the tax saving be a consolation prize rather than the reason.

Does the tax structure change which stocks are worth holding for a year?

It changes the standard. The code pays you to hold beyond 12 months, so the real question becomes which businesses you can hold that long without flinching. Our own screening as of August 2026 suggests the answer is a short list. Of 1,843 listed Indian companies in our universe, 1,518 have full-year fundamentals available. Only 22.0% of those, 334 companies, clear a basic quality bar of ROE above 15%, ROCE above 15% and debt-to-equity below 1 at the same time. Add a simple valuation check of PE under 40 and 15.9%, or 241 companies, remain. Median PE across the universe is 24.0.

One caveat on that debt screen: banks and NBFCs are unfairly penalised by a flat debt-to-equity rule, because borrowing is their business model, and a good lender will fail that test for the wrong reason. Treat the screen as a way of narrowing 1,518 names to a few hundred worth reading properly, not as a verdict. The point for tax purposes is simpler. If you cannot say, in one plain sentence, why a business will still be earning well twelve months from now, you are unlikely to hold it for twelve months, and you will pay the higher rate by default.

What should I sort out before filing so nothing bites me later?

Pull the capital gains statement from every broker you used during the financial year, not just the main one, and reconcile it against your Annual Information Statement on the income tax portal. The department already sees your trades; mismatches generate notices. Pick the right return form, because using the capital gains form when you traded F&O is one of the commonest retail errors. Keep contract notes and your buy-side records, especially for shares transferred between demat accounts, where cost data often goes missing.

If you have booked a large gain early in the year, check whether advance tax is due rather than waiting for filing season and paying interest on top. And keep a one-line log of each purchase date as you go. The single cheapest tax lever available to an Indian equity investor is knowing, before you click sell, whether the holding has crossed 12 months. That takes thirty seconds and, on the illustrative gain above, was worth Rs 55,250.

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Conclusion

The method is small enough to memorise: work out which bucket the profit falls in, count the months from the purchase date, and only then decide whether the sale is worth the rate. Delivery gains beyond 12 months are the cheapest money in the Indian market, and intraday and F&O are the most expensive, because they are taxed like a business. None of that tells you what to own, which is the harder half of the job. Our own stock-specific work sits behind KYC in the app, where the regulator expects it to be.

BossInvestor is a SEBI Registered Research Analyst (INH000024143). This article is for educational and informational purposes only. It explains a method and is not investment advice, nor a recommendation to buy, sell or hold any security. Market-wide figures are computed from our universe as of August 2026; past metrics do not guarantee future results. Always do your own research or consult a registered adviser before investing.

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Frequently Asked Questions

Do I pay tax if I have a profit but have not sold the share?

No. Indian capital gains tax applies only when you sell. An unrealised profit showing in your demat account is not income and is not declared as such, however large it looks. This is why the timing of a sale is partly a tax decision. It also means you can hold a gain across financial years and choose the year you book it in, which is useful when you want to use the Rs 1,25,000 long-term allowance in more than one year.

Is the Rs 1,25,000 long-term exemption per stock or per year?

Per financial year, per person. It covers all your long-term gains from listed shares and equity mutual funds added together, across every broker you use. Only the gain above Rs 1,25,000 is taxed, at 12.5% plus 4.0% cess. So if your long-term gains for the year come to less than that, the tax is nil, but the gains still need to be reported in your return. Booking gains in steps across years can legitimately use this allowance more than once.

What happens if I sell one month before the 12-month mark?

The entire gain is treated as short-term and taxed at 20.0% plus 4.0% cess, with no Rs 1,25,000 allowance applied. There is no partial credit for holding eleven months. On an illustrative Rs 500,000 gain at the statutory rates in force from 23 July 2024, that timing difference works out to Rs 55,250. Check the purchase date before placing the order, and remember that shares are matched first-in, first-out, so tranches bought at different times may not all have crossed the mark.

Are F&O profits taxed at 20% like short-term equity gains?

No. Futures and options profits are non-speculative business income, not capital gains. They are added to your total income and taxed at your own slab rate, which may be higher or lower than 20%. Intraday equity is treated similarly, as speculative business income. Neither gets the 12.5% long-term rate and neither touches the Rs 1,25,000 allowance. The trade-off is that genuine trading expenses are deductible, but you file a business return and may face advance tax and audit requirements.

Does STT mean my gains are already taxed?

No. Securities Transaction Tax is charged on the transaction itself and is collected by your broker at the time of the trade, whether you made money or lost it. It is entirely separate from income tax on the gain, and paying it does not reduce your capital gains liability. What STT payment does do is qualify listed equity trades for the concessional capital gains rates described here, rather than the rates applying to unlisted or off-market transfers.

Can I set off a trading loss against my salary income?

No. Speculative losses from intraday trading can only be set off against speculative gains. Capital losses can only be set off against capital gains, with short-term losses usable against both short-term and long-term gains, and long-term losses only against long-term gains. Salary is out of reach in all these cases. Unabsorbed losses carry forward to future years, but only if you filed your income tax return by the due date. File late and you lose the carry-forward permanently.