Module 7 Markets and Taxation

Chapter 4

Taxation for Investors


4.1 – Quick recap

In continuation of previous chapter: Classifying your market activity

You can consider yourself an investor when –

  • Buying and selling stocks after taking delivery to your DEMAT account

If the frequency of transactions (buy/sells) is high, it is best to consider them as trades and not investments. If considered as trades, any income is non-speculative business income, whereas if these are investments, then it falls under capital gains.

Keeping this in perspective, you may have few questions –

  • What is long term?
  • What is considered high frequency of transactions (buy/sells)?

We discussed this in the previous chapter, but just to refresh your memory – there is no set rule from the IT department to quantify ‘frequency’ or determine ‘long term’.

As long as your intent is right, and you are consistent across financial years in the way you identify long term or high frequency, there is nothing to worry.

Do note, if you are indulging in equity delivery based trades as frequent as a few times every week, it would be best to consider all of them as ‘trades’ and classifying income from them as business income instead of capital gains.

Reiterating again that if investing/trading on the markets is the only source of income, and even if you are trading with moderate frequency, it is best to classify income from all your equity trades as a business income instead of capital gains.

On the other hand, if you are salaried or have some other business as your primary source of business, it becomes easier to show your equity trades as capital gains even if the frequency of trades is slightly higher.

Updated 2nd March 2016

Finally the income tax department has brought in clarity by allowing an individual to decide on his own to either show his stock investments as capital gains or as a business income (trading) irrespective of the period of holding the listed shares and securities. Whatever is the stance once taken, the taxpayer will have to continue with the same in the subsequent years. Check this circular.

So essentially,

  1. Stocks that you hold for more than 1 year can be considered as investments as you would have most likely received some dividends and also held for longish time
  2. Shorter term equity delivery buy/sells can be considered as investments as long as frequency of such buy/sells is low.
  3. If you wish, you can also show your equity delivery trades as a business income, but whatever stance you take, you should continue with it in the future years as well.

The focus of this chapter is on investing; hence we will keep the discussion limited to just points 1 and 2. We will talk about taxation when trading/business income in the next chapter.

4.2 – Long term capital gain (LTCG)

Firstly you need to know that, when you buy & sell (long trades) or sell & buy (short trades) stocks within a single trading day then such transactions are called intraday equity/stock trades. Alternatively if you are buying stocks/equity and wait till it gets delivered to your DEMAT account before selling it, then it is called ‘equity delivery based’ transactions.

Any gain or profit earned through equity delivery based trades or mutual funds can be categorized under capital gains, which can be subdivided into:

  • Long term capital gain (LTCG): equity delivery based investments where the holding period is more than 1 year
  • Short term capital gain (STCG): equity delivery based investments where the holding period is lesser than 1 year

Taxes on long term capital gains for equity and mutual funds are discussed below –

For stocks/equity – 0% or NIL tax

It is NIL only if the transactions (buy/sells) are executed on recognized stock exchanges where STT (Security transaction tax) is paid. As discussed above, LTCG is for holding period more than 1 year.

If the transactions (buy/sells) are executed through off-market transfer where shares are transferred from one person to another via delivery instruction booklet and not via a recognized exchange then LTCG is 20% in case of non-listed stocks, and 10% on listed stocks. (Listed are those which trade on recognized exchanges). Do note that when you carry an off-market transaction Security Transaction Tax (STT) is not paid, but you end up paying higher capital gains tax.

Note that a gift from a relative through DIS slip is not considered as a transaction and hence not capital gain. It is important that gift not be treated as transfer, and relative could be (i) spouse of the individual (ii) brother or sister of the individual (iii) brother or sister of the spouse of the individual(iv) brother or sister of either of the parents of the individual (v) any lineal ascendant or descendant of the individual(vi) any lineal ascendant or descendant of the spouse of the individual (vii) spouse of the person referred to in clauses (ii) to (vi)

For equity mutual funds (MF) – 0% or NIL tax

Similar to equity delivery based trades, any gain in investment in equity oriented mutual funds for more than 1 year is considered as LTCG and exempt from taxes. A mutual fund is considered as equity oriented if at least 65% of the investible funds are deployed into equity or shares of domestic companies.

For non-equity oriented/Debt MF – flat 20% on the gain with indexation benefit

Union budget 2014 brought in a major change to non-equity mutual funds. As opposed to 1 year in equity based funds, you have to stay invested for 3 years in non-equity/debt funds for the investment to be considered as long term capital gain. If you sell the funds within 3 years to realize a gain, then that gain is considered as STCG.

4.3 – Indexation

When calculating capital gains in case of non-equity oriented mutual funds, property, gold, and others where you are taxed on LTCG, you get the indexation benefit to determine your net capital gain.

I guess we would all agree that inflation eats into most of what is earned as profits by investing into capital assets such as the ones mentioned above.

For someone wondering what that inflation is, here is a simple example to help you understand the same –

All else equal, if a box of sweets priced at Rs.100 last year, chances are the same could cost Rs.110 this year. The price differential is attributable to Inflation, which in this example is 10%. Inflation is the % by which purchasing value of your money diminishes.

Assuming the average inflation rate in India of around 6.5%, if you had invested into a debt fund, wouldn’t a big portion of your long term capital gain at the end of 3 years get eaten away by inflation?

For example assume you had invested Rs.100, 000/- into a debt fund, and you got back Rs 130,000/- at the end of 3 years. You have a long term capital gain of Rs.30,000/-. But in the same period assume purchasing value of money is dropped by 18k because of inflation. Should you still pay long term capital gain on the entire 30k? Clearly this does not make sense right?


Indexation is a simple method to determine the true value from sale of an asset after considering the effect of inflation. This can be done with help of Cost inflation index (CII) which can be found on the income tax website.

Let me explain this with an example of a purchase/sale of a debt mutual fund.

Purchase value:  Rs.100,000/-

Year of purchase: 2005

Sale value: Rs 300,000

Year of sale: 2015

Long term capital gain: Rs 200,000/-

Without indexation I would have to pay tax of 20% on the capital gains of Rs 200,000/-, which works out to Rs 40,000/-.

But we can reduce the LTCG by considering indexation.

To calculate indexed purchase value, we need to use the cost inflation index (CII). Find below the cost inflation index from the income tax website until 2014/15.

Financial Year CII
Before 1/4/1981 100
1981-82 100
1982-83 109
1983-84 116
1984-85 125
1985-86 133
1986-87 140
1987-88 150
1988-89 161
1989-90 172
1990-91 182
1991-92 199
1992-93 223
1993-94 244
1994-95 259
1995-96 281
1996-97 305
1997-98 331
1998-99 351
1999-00 389
2000-01 406
2001-02 426
2002-03 447
2003-04 463
2004-05 480
2005-06 497
2006-07 519
2007-08 551
2008-09 582
2009-10 632
2010-11 711
2011-12 785
2012-13 852
2013-14 939
2014-15 1024

Going back to the above example,

CII in the year of purchase (2005): 497

CII in the year of sale (2015): 1024

Indexed purchase value = Purchase value * (CII for year of sale/ CII for year of purchase)

So –

Indexed purchase value = Rs 100000 * (1024/497)

= Rs 206036

Long term capital gain = Sale value – Indexed purchase value

Therefore, in our example

LTCG = Rs 300,000 – Rs 206,036

= Rs 93,964/-

So the tax now would be 20% of Rs 93,964 = Rs 18,792, much lesser than Rs 40,000/- you would have had to pay without the indexation benefit.

Like I had said earlier, the indexed purchase value can be calculated using the above method for all long term capital gains which are taxable like debt funds, real estate, gold, among others. You could use the IT department’s Cost inflation index utility to check on indexed purchase value of your capital assets instead of having to calculate manually.

Interesting thing to note in regards to 20% after indexation for non-equity oriented or debt funds: Most of these funds return between 8 to 10% and typically inflation in India has been around that for the last many years. So with the indexation benefit, you typically won’t have to pay any tax on LTCG of non-equity oriented funds.

4.4 – Short term capital gain (STCG)

Tax on short term capital gains for equity and mutual funds are discussed below –

For stocks/equity: 15% of the gain

It is 15% of the gain if the transactions (buy/sells) are executed on recognized stock exchanges where STT (Security transaction tax) is paid. STCG is applicable for holding period over 1 day and not more than 12 months.

If the transactions (buy/sells) are executed via off-market transfer (where shares are transferred from one person to another via delivery instruction booklet and not on the exchange) where STT is not paid, STCG will be taxable as per your applicable tax slab rate. For example, if you are earning over Rs.10,00,000/- per year in salary, you will fall in the 30% slab, and hence STCG will also be taxed at 30%. Also STCG is applicable only when the income exceeds the minimum tax slab of Rs 2.5lks/year. So if there is no other income for the year and assuming there was Rs 1lk STCG, it would not entail the flat 15% tax.

For equity mutual funds (MF): 15% of the gain

Similar to STCG for equity delivery based trades, any gain in investment in equity oriented mutual funds held for lesser than 1 year is considered as STCG and taxed at 15% of the gain. Do note a fund is considered Equity based if 65% of the funds are invested in domestic companies.

For non-equity oriented/Debt MF: As per your individual tax slab

Union budget 2014 brought in a major change to non-equity mutual funds. You have to now stay invested for 3 years for the investment to be considered as long term capital gain. All gains made on investments in such funds held for less than 3 years are now considered as STCG. STCG in this case has to be added to your other business income and tax paid according to your income tax slab.

For example, if you are earning around Rs 800,000/- per year in your normal business/salary and you had STCG of Rs 100,000/- from debt funds, you will fall in the 20% slab as your total income is Rs 9,00,000/-. So effectively in this example you will pay 20% of STCG as taxes.

4.5 – Days of holding

For an investor, the taxation difference between LTCG and STCG is quite huge. If you sold stocks 360 days from when you had bought, you would have to pay 15% of all gains as taxes on STCG. The same stock if held for 5 days more (1 year or 365 days), the entire gain would be exempt from taxation as it would be LTCG now.

It becomes imperative that you as an investor keep a tab on the number of days since you purchased your stock holdings. If you have purchased the same stock multiple times during the holding period, then the period will be determined using FIFO (First in First out) method.

Let me explain –

Assume on 10th April 2014, you bought 100 shares of Reliance at Rs.800 per share, and on June 1st 2014 another 100 shares were bought at Rs.820 per share.

A year later, on May 1st 2015, you sold 150 shares at 920.

Following FIFO guidelines, 100 shares bought on 10th April 2014 and 50 shares from the 100 bought on June 1st 2014 should be considered as being sold.

Hence, for shares bought on 10th April 2014 gains = Rs 120 (920-800) x 100 = Rs 12,000/- (LTCG and hence 0 tax).

For shares bought on June 1st, Gain = Rs 100 (920-820) x 50 = Rs 5,000/- (STCG and hence 15% tax).

Small little sales pitch here 🙂 – if you are trading at Zerodha the holdings page in our back office assistant Q will keep a tab for you on number of days since your holdings were purchased, and even a breakdown if bought in multiple trades.

Here is a snapshot of the same –


The highlights shows –

  1. Day counter
  2. A green arrow signifying holdings more than 365 days, selling which won’t attract any taxes.
  3. If you have bought the same holdings in multiple trades, the split up showing the same.

Besides Zerodha Q, equity tax P&L is probably the only report offered by an Indian brokerage which gives you a complete breakdown of speculative income, STCG and LTCG.

4.6 – Quick note on STT, Advance Tax, and more

STT (Securities Transaction Tax) is a tax payable to the government of India on trades executed on recognized stock exchanges. The tax is not applicable on off-market transactions which is when shares are transferred from one DEMAT to another through delivery instruction slips instead of routing the trades via exchange. But off market transactions attracts higher capital gains tax as explained previously. Current rate of STT for equity delivery based trades is 0.1% of the trade value.

When calculating taxes on capital gains, STT can’t be added to the cost of acquisition or sale of shares/stocks/equity. Whereas brokerage and all other charges (which includes exchange charges, SEBI charges, stamp duty, service tax) that you pay when buying/selling shares on the exchange can be added to the cost of share, hence indirectly taking benefit of these expenses that you incur.

Advance tax when you have realized capital gains (STCG)

Every tax payer with business income or with realized (profit booked) short term capital gains is required to pay advance tax on 15th June, 15th Sept, 15th December, and 15th March. Advance tax is paid keeping in mind an approximate income and taxes that you would have to pay on your business and capital gain income by the end of the year. You as an individual are required to pay 15% of the expected annual tax that you are likely to pay for that financial year by 15th June, 45% by 15th Sept, 75% by 15th Dec, and 100% by 15th March. Not paying would entail a penalty of annualized interest of around 12% for the period by which it was delayed.

When you are investing in the stock markets, it is very tough to extrapolate the capital gain (STCG) or profit that will be earned by selling shares for an entire year just based on STCG earned for a small period of time. So if you have sold shares and are sitting on profits (STCG), it is best to pay advance tax only on that profit which is booked until now. Even if you eventually end up making a profit for the entire year which is lesser than for what you had paid advance tax, you can claim for a tax refund. Tax refunds are processed in quick time by the IT department now.

You can make your advance tax payments online by clicking on Challan No./ITNS 280 on

Which ITR form to use

You can declare capital gains either on ITR 2 or ITR3

ITR3 (ITR 4 until 2017): When you have business income and capital gains

ITR 2: When you have salary and capital gains or just capital gains

4.7 – Short and long term capital losses

We pay 15% tax on short term capital gains and 0% on long term capital gains, what if these were not gains but net losses for the year.

Short term capital losses if filed within time can be carried forward for 8 consecutive years, and set off against any gains made in those years. For example if the net short term capital loss for this year is Rs.100,000/-, this can be carried forward to next year, and if net short term capital gain next year is say Rs.50,000/- then 15% of this gain need not be paid as taxes because this gain can be set off against the loss which was carried forward. We will still be left with Rs Rs.50,000 (Rs.100,000 – Rs.50,000) loss which be carried forward for another 7 years.

Long term capital losses can’t be used to set off against long term gains as in the first place long term capital gains is exempt from any tax. So long term capital loss is a dead loss, and can’t be set off or carried forward.

Key takeaways:

  1. LTCG : Equity: 0%, Equity MF: 0%, Debt MF: 20% after indexation benefit
  2. STCG: Equity: 15%, Equity MF: 15%, Debt MF: as per individual tax slab
  3. You can use cost inflation index to determine and get the benefit from the indexed purchase value
  4. Index purchase price = Indexed purchase value = Purchase value * (CII for year of sale/ CII for year of purchase)
  5. If you have bought and sold the same shares multiple times then use FIFO methodology to calculate holding period and Capital gains
  6. STT is payable to the Govt and cannot be claimed as expense when investing

Interesting reads:

Livemint: If you pay STT STCG is 15% otherwise as per tax slab

Income tax India website – Cost inflation index utility

Taxguru – Taxation of income & capital gains for mutual funds

HDFC- Debt mutual funds scenario post finance bill (no2), 2014


Disclaimer – Do consult a chartered accountant (CA) before filing your returns. The content above is in the context of taxation for retail individual investors/traders only.


  1. Praveen says:

    In the previous chapter you mentioned that Speculative loss can be carried forward only for 4 year whereas in the section 4.7 it is mentioned that, the period is 8 years. Please clarify which is correct.

    • Nithin Kamath says:

      Praveen, speculative or intraday equity trading losses can be carried forward to 8 years. What we are talking about in Section 4.7 is not intraday equity losses but short term equity losses (short term delivery based trades).

      • Anurag says:

        Hello Mr.Nithin,
        Suppose i earn a short term capital gain of 60000 (stocks selling in less than 1 year) and a loss of 50000 in FNO in same year , how the taxation is calculated?

        • Nithin Kamath says:

          You have to pay 15% on short term gain (if your total income doesn’t add upto 2.5lks, no need to pay), declare the loss and carry forward.

  2. Rajeev Juneja says:

    Thank you so much Zerodha. I have one question please. If STCG is Rs25000/- so I pay 15% on that..right which gives me profit Rs21250/-.
    Now if I have other income from rentals /FDs totalling to Rs300,000/- . Now do I have to add the Rs21,250/- to the Rs300,000/- and then find out my total tax liability or the STCG doesnt hv to be taken in this calculation as it has already bben taxed. Please advise.

    • Nithin Kamath says:

      Rajeev, if you are using ITR forms. You can show the entire STCG of Rs 25000 under that head. Rental and FD’s etc is shown under a separate head. So STCG shouldn’t be taken in this case.

      • Mangesh says:

        Hi Nithin,

        I think you wanted to mention that “Speculative losses i.e. Intraday equity losses” can be carried over for a period of 4 years only… whereas the “Short term equity losses” can be carried over for a period of 8 years. Please correct if my understanding is wrong.

      • shakti says:

        Suppose i bought 100 shares @ 10 and sold 50 shares @ 20 to recover my investment within 1 year. And sold another 50 shares after 1 year holding. I am in 10% tax bracket. So what will be tax implications in this situation.

  3. Soundararajan says:

    Can loss incurred in intra day equity market be carried over to next year? Can it be adjusted towards STCG incurred in the same year and net STCG/STCL be shown in tax return?

    • Nithin Kamath says:

      Intraday equity trading losses are speculative, so they can be carried forward for 4 years. It cannot be offset with STCG, it can be offset with only any other speculative gains.

  4. shok says:

    Hi Nithin,

    I have to show the loss made under STCG in ITR 4. But in Schedule CG tab , its not accepting -ve numbers. Is it done somewhere else??

    • Nithin Kamath says:

      Schedule CG, look at point 3. Full value of consideration is the price at which you sell, cost of acquisition without indexation is your buying value. Balance will automatically become negative.

  5. Nilesh Soni says:

    If i purchase stocks on delivery options but sell them on the same day, would it be considered Intra-day or delivery based transaction.

  6. HASH says:

    Fantastic. I had no ideas on taxation. What were amts. Just been filing form 16 by my company. Now That i am only trading zerodha gave me a brighter picture. Thank u Nitin. My friends trading (non zerodha) are not aware of most of these facts. I should enlighten them on the same. Excuse me for my spelling.

  7. Peeyush says:

    Hi Nitin,
    thanks for this wonderful forum.
    I and a NRI based in UAE and have following questions.
    1. while discussing with a few freinds came cross trading SGX nifty options on singapore exchange through a international broker through my overseas US dollar account. If I decide to go ahead with this. what will be the tax implications in India. as of now I have investments in equities and MF through my NRE account and a Indian broker and have invested for long term gains selling mostly after 1-2 years. will trading in SGX nifty options make a me a trader for Indian taxation and returns perspective?
    2. through my total investments of around 65 lakhs. If my total income is only NRE deposits interest ( tax exempt), LTG and dividends from equities/MF investments( tax exempt) NRO deposit saving interest around 20K with 30% TDS deducted. in this case as mostly all income is tax exempt and total income is less than 250,000 do I need to file returns.
    3. If I have to file returns while filing returns do we need to show LTG, dividend income and NRE deposit interest in the returns forms?

    Thanks and Regards,

    • Nithin Kamath says:

      1. For a non resident Indian, only your trading activity done on Indian exchanges need to be considered to determine if you are a trader or an investor in India.

      2. If income less than Rs 2.5lks, no need to file returns. But if you want income tax refund which would be deducted on your NRO A/C, then yes you have to file.

      3. Yes you have to show all income while filing ITR.

  8. Amol says:

    Dear Nitin,
    i have received shares as gift from my mother in law, i have hold the shares for about 18 months, now i am in need of funds for buying property so i want to sell them, what will be the taxation. Also i normally give all details to my CA for filing returns, i had not mentioned the receipt of shares as gift in my ITR in that year but my Dmat statement can reflect the date of receipt of shares in my account. Please advice asap…


    sir suppose I am trading with two broker 1-nine star broking pvt ltd & 2- is zerodha . I purchase 100 share of sbi on 14.6.2014 on nine star & 100 share of sbi on 15.6.15 at zerodha. if I sell 100 share of sbi on 20.8.2015 at zerodha then according to FIFO witch share would be count as trading nine star ( more then one year–LTCG) or zerodha(less then one year–STCG) for incom tax purpose

    • Nithin Kamath says:

      Pravin, FIFO demat account wise. When you sell 100 share at Zerodha, it will be considered as STCG for the shares that you held. Nine star will continue to be long term.

  10. Peeyush says:

    Hi Nitin,
    I had 800 Shares of IDFC Ltd for past 2 years with an average price of 100 Rs which recently got demerged and I got 800 free shares of IDFC Bank.
    I have following queries.
    1. how do I adjust the portfolio for each share to reflect correct profit loss for taxation purpose?
    How to arrive at the correct price for each for my portfolio?
    2. Do I keep the IDFC Ltd price same and put new entry in to portfolio for IDFC bank( again confusion is at what price as I received it free)
    3. If I sell IDFC Ltd I guess that qualifies as LTG? am I correct? but the price has gone down by almost 50% now so its a loss.
    4. If I sell IDFC bank does that qualify as LTG? if no How will be taxation on that be calculated? as I had got these Shares for free?

    Looking forward to get these doubts cleared.

    Thanks a lot

    • Nithin Kamath says:

      Ah.. had missed this query.
      Firstly, the holding period (based on date of purchase) for both the stocks will remain the same based on the purchase of the original IDFC ltd. So if it was long term before, it will continue to be long term for both IDFC and IDFC bank.
      To determine cost of Acquisition IDFC had shared this with all the share holders.

      If you have purchased equity shares of IDFC Limited prior to the Record Date, to determine post demerger cost of acquisition for equity share(s) of IDFC Limited and IDFC Bank Limited, you are advised to apportion your pre demerger cost of equity share(s) of IDFC Limited in the following manner:

      Name of the Company % of Cost of Acquisition of IDFC Limited equity shares
      IDFC Limited 60.58
      IDFC Bank Limited 39.42

      So if you originally had IDFC purchased at Rs 100. You can mention the cost of the new IDFC as Rs 60.58 and for IDFC Bank as Rs 39.42. So your long term profit and loss will be based on this.

  11. Shruti Patil says:

    How to compute tax on UTI Mutual funds ,if i bought them in 2010 with dividend reinvestment option and sold all of them in 2015 ?
    Will the units bought using reinvested dividend for period Jan 15 to Dec 15 be considered as STCG ?

  12. Imtiyaz says:

    I trade in F&O & hence it is NON SPECULATIVE business as per definition. In addition I buy NIFTY ETFs and SELL them only after one year plus. Since no LTCG on Nifty etf trades so Do I have to reflect Nifty trades in ITR4 ? Or I can ignore Nifty etf trades since holding period more than one yr..

  13. Amit says:

    Suppose meri income Yearly 1 lac rs hai, equity mutual fund or shares me 1000/- rs ka short term capital gain hua?
    to meri total income 101000/- Hua, toh kya mujhe 1000/- rs ka 15% tax dena hoga, jabki meri income tax slab se bahut neeche hai.

  14. vidya says:

    For NRE account, short term capital gain at what frequency banks/brokers needs to deposit with govt. is there any need to match tax deducted in a quarter to match and profit and loss of that quarter


    Hi Nithin,

    I’ve some doubt about the long term holding. If i arbitrage (“Sell NSE & Buy back immediate on BSE” ) on the “HINDUNILVR” on 783 days holding period, it’s still remaining on 783 holding period or taken as fresh holding days for counting.

    Thanks in advance.

  16. Shri says:

    Dear Nithin,

    I am a Zerodha customer and Highly appreciate the module on Taxation. I have a question based on a off-market transaction you mentioned in this module:

    “Do note that when you carry an off-market transaction Security Transaction Tax (STT) is not paid, but you end up paying higher capital gains tax. A typical example of an off-market transaction could be a father transferring equity holdings to his son via a ‘delivery instruction booklet’.”

    Few Qs pertaining to the above point where the stock is listed and the equity is held for more than a year :

    1. Any cash gifted to a ‘Relative’ is exempt from taxation. However, as per what has been stated above, the transfer of equity between Relatives via DIS attracts STCG/LTCG?
    Can you please provide a link to substantiate the same?

    2. Is there a way to transfer equity between ‘Relative’ that does not attract STCG or LTCG?

    3. If equity is held in physical form and the same is transferred between Relatives, with the corresponding stamp duty being paid, does it still attract a STCG/LTCG?
    Could you please provide a link?

    4. In case 3, does the equity need to be classified as ‘Gift’ for tax purposes? Is the STCG/LTCG based on the holding period when equity was initially acquired or when the equity was transferred?

    Look forward to your responses. Thanks!

    • Nithin Kamath says:

      Hey Shri, my bad. Have corrected the post.
      Note that a gift from a relative through DIS slip is not considered as a transaction and hence not capital gain. It is important that gift not be treated as transfer, and relative could be (i) spouse of the individual (ii) brother or sister of the individual (iii) brother or sister of the spouse of the individual(iv) brother or sister of either of the parents of the individual (v) any lineal ascendant or descendant of the individual(vi) any lineal ascendant or descendant of the spouse of the individual (vii) spouse of the person referred to in clauses (ii) to (vi)

      3. If it is a transfer, it is a transaction and hence capital gain will apply. You need to show this as a gift, and yes physical demat certificates can be transferred between relatives.
      4. Original holding period will continue

    • shanker says:

      I have Dmat account on the name of A as ist holder (me) and B(Brother) as joint holder. I have another Dmat account with A(myself) as the sole holder.
      If I transfer 95% of holdings(approx.150 companies) from Dmat account of A+B to another Dmat account A. My questions are:
      1. What charges I have to pay to DP for transfer of shares from Dmat A+B to another Dmat A, if I give DIS for 95% of companies to DP
      2. Regarding taxation on those 95% companies—I suppose my holding period should be counted for taxation purpose. For example if shares of RIL were hold for 11 months and if I sell those RIL shares say after 2 month of transfer into Dmat account A from Dmat account A+B (i.e 13 months total from date of purchase). I think LTCG will apply as holding period is 11+2=13 months (>12 Months).

      • Nithin Kamath says:

        1. Depends on the DP you are trading with. At Zerodha it is flat Rs 13 per scrip. (some DP’s charge Rs 25 or 0.05% whichever higher).
        2. Yes, Holding period will not get affected.

  17. raman.anantha says:

    Hi Nithin,
    I have a query regarding investments under 80C for non speculative income (I trade only Nifty Futures). Trading is the only source of income for me.
    Last FY (2014 – 2015) I had shown a loss in my ITR of 6 lakhs (ITR was filed before due date). I know that if this FY (2015 – 2016), I show a gain of 4 lakhs, this will be offset with the 6 lakhs loss last year (I don’t have to pay any tax this year) and I will carry forward a loss of 2 lakhs for next year. My query is if I show investment of 1.5 lakhs under 80C this FY, will my income for this FY become 2.5 Lakhs (4 – 1.5 = 2.5) so that I can carry forward a loss of 3.5 lakhs for next FY (6 – 2.5 = 3.5)? or will 80C come into affect only after I have cleared my losses and show gains?
    Kindly help.

    • Nithin Kamath says:

      80C and business income are part of different sections. SO if you have business gain of 4lks and loss of 6lks, they first get netted out to give you a 2lk loss that can be carried forward. You cannot declare it the way you have mentioned.

  18. Sharath says:

    Hi Nithin,
    Thanks for an easy explanation.
    How are stock transactions in foreign exchanges taxed?
    As an Indian national, If I gain profits from buying and selling in Nasdaq (both Long term and short term), how are these treated?

    • Nithin Kamath says:

      It is considered as normal income, you can get indexation benefit. Check more about indexation in the chapter above.

  19. Shri says:

    Hi Nithin,

    Would appreciate your response to my query posted yesterday (March 2nd) wrt off-market transactions.

  20. Debarya says:

    I am salaried person.I have opened an account with zerodha in the last year and started trading/investing since 19th october, 2015. I have done both investing(equity delivery) and trading(intraday equity) in the last few months. In both cases I have gained profits but the losses are maximum. According to ‘EQ tax P&L breakdown – FY-15/16’, my
    Short term Equity Total turnover : 2,29,114.80
    Short term Equity Total realized profit : -20,318.50
    Intraday Equity Total turnover : 16,692.95
    Intraday Equity Total realized profit : -11,431.85.

    So I am running under losses and I am not holding any security/stock in my demat account. My Questions are

    1] Should I need to show these losses when I would file income tax return for the financial return 2015-2016?
    2] Which ITR should I file?
    3] Can I show the losses in both equity delivery and equity intraday trading as “investment”?

    With Regards
    Debarya Das

    • Nithin Kamath says:

      1. Yes it is best to show the losses.
      2. ITR 4 since you have also done intraday equity trading.
      3. No, both have to be kept separate. Do go through the module once, have explained all this in detail.


      • Debarya says:

        Thanks for replying to my queries. I have few more questions.
        1] Since I have not make overall profit both in equity delivery and equity intraday till now, so I did not pay any advance tax. Should I need to pay it?

        With Regards
        Debarya Das

        • Nithin Kamath says:

          Not required. Equity delivery anyways if you are showing as capital gains, don’t need advance tax to be paid.

  21. sai says:

    I exercise only Equity Delivery and would like to know what would constitute high-frequency-trade in order to determine business or capital gain income. You have mentioned that, number of “trade”s few times per week on average over whole year can be viewed as business income rather than investment.
    Q1. Does “trade” mean pair of buy and sell ?
    Q2. If single buy or sell exercise can be seen as “trade”, does this mean 104 (2*52) equity delivery order execution per year i.e 2 times/week will be termed as business income ? (or can it be < 3 times/week i.e. 155 per year)
    best regards

    • Nithin Kamath says:

      Hey Sai, I have recently updated the chapter. CBDT has finally let the investor decide to choose if it were a business income or capital gain. Updated 2nd March 2016
      Finally the income tax department has brought in clarity by allowing an individual to decide on his own to either show his stock investments as capital gains or as a business income (trading) irrespective of the period of holding the listed shares and securities. Whatever is the stance once taken, the taxpayer will have to continue with the same in the subsequent years. Check this circular.

  22. arindam_gzb says:

    I have recieved tax notice for AY 2014-2015 for trades in F&O. Zerodha Account was in the name of my wife and all other documents is in the name of my wife. She is a housewife with no income. Since there was a loss of Rs 1.5 Lacs I did not file income tax return. Moreover Income tax to be filed for income above Rs 2.5 Lacs. Please suggest what is to be done.

    • Nithin Kamath says:

      You will have to reply to that notice saying the same, and attach proofs (bank statement, trading account ledger and P&L). It is best to file returns even if there is a loss.

  23. SP says:

    How is STCG calculated in below case: reliance inds bought 100 shares @ Rs. 920 on 12-02-2016. Again bought 50 shares of reliance Inds @ Rs.940 on 15-02-16. Again bought 50 shares @ Rs.950 on 26-02-2016. On 10-03-2016 done intraday in Reliance by selling 50 shares @ Rs.1020 and buying 50 reliance shares @ 1035. How is the sold quantiy on 10-03-2016 treated on basis of STCG. Is the intraday acitivity not considered for STCG as it is speculative acitivity but the same shares are with us in Demat account so net delivery is considered. Should the sold 50 quantities be sold on basis of FIFO for STCG bought on 12-02-16. Please clarify

  24. PG says:


    I have the following

    1) Income from Salary (30% Tax bracket)
    2) Income from Long Term Capital Gain (Holding period > 10 years)
    3) Loss from Short Term Capital Gain (16K)
    4) Loss from Intra-day (3K)

    2), 3) and 4) are from the same trading account.
    Can I still declare 2) as Long Term Capital Gain (Tax Exempt)
    and 3) and 4) as Short Term Capital Loss to be carried forward?

    Appreciate your help.


    • Nithin Kamath says:

      Yes 2) is exempt (the recent circular has cleared all ambiguity) 3 can be carried forward as short term capital loss, 4) is speculative business income. This can’t be carried forward as short term capital loss, has to be shown as speculative business loss on ITR4.

      • PG says:

        Thank you, I am a satisfied client of zerodha and I have never ever seen any CEO getting involved in resolving petty queries of customers (probably even at the cost of your day job of managing the company). .. You are truly passionate about what you do and will remain a role model for entrepreneurs for many generations… All the best.

      • PG says:

        A follow-up question…
        As mentioned earlier I have
        1) Income from Salary (30% Tax bracket)
        2) Income from Long Term Capital Gain (Holding period > 10 years)
        3) Loss from Short Term Capital Gain (16K)
        4) Loss from Intra-day (3K)

        Now, if I have to declare my return in ITR-4, do I have to get audit done for all of 1), 2), 3), 4) or only on the total turnover for 4), which I am showing as speculative business loss?

        Thanks again…

        • Nithin Kamath says:

          Audit is required on the entire ITR (so all included). But since your intraday loss is so little and if you don’t really intend to carry forward this loss, you can show a small profit instead of a loss, and this could mean no need of getting an audit (as per section 44AD). If your CA is smart, he will know what to do.

  25. Ramesh kumar says:

    I am salaried person. I had purchased 100 shares of sks microfinance in 2013 and sold them in Feb, 2016. I booked profit of Rs. 20000/-. I had also invested Rs. 5000/- in UTI banking sector fund (mutual fund) (equity fund) in may, 2013 and sold them in 2015 and booked profit of 1700/-. both these come under NIL tax liability as the holding period is more than one year. is it necessary to show these incomes or simply file ITR1?

    if not ITR1 then which ITR form?


  26. Anuj says:

    I bought 100 shares of X on 01-May-2016 at Rs.100 per share. On Jun 17th its price is Rs.52. I again bought 100. On Jun 20(2 days after the last transaction date) I sold the earlier 100 shares at Rs.50. Will this be entitled as tax loss harvesting ? Please clarify as your post mentions sell first and buy same script after 2 business days

  27. Arun says:

    I have one query…Suppose I buy 1000 shares of Tata Motors. Now I sell 500 shares after 6 months and rest of the 500 shares after 12 months.
    Then I can take the benefit of long term capital gains(i.e No Tax) on 500 shares. Am I right?

  28. Shivaprasad says:

    Hi Nitin,
    I am ZeroDHA customer. I have one more demat account, holding good amount of shares in it. All shares are purchase more than a year back. Now if I transfer that to zeroDHA demat account, Should I need to wait more than a year to sell to avoid short term capital gain? Or it is considered as long term holding? Basically I assume by doing off-market transfer to ZeroDHA I can save brokerage. Pls clarify.

    • Nithin Kamath says:

      Transferring from one demat to another of your own, won’t change the holding period to determine long/short term gain. So you can transfer and sell, and it will still be long term capital gain.

  29. Vishal says:


    I have moved my shares from ICICI to Zerodha DMAT. On Q I am suppose to enter the buy price for those shares. Please suggest should I enter the Price inclusive of STT and other tax components or the buy price ?

  30. PAUL says:

    I invested only in delivery last year but the number of transactions i did with my 20 Lakh capital is 10. ie i bought and sold several stocks in last one year with this amount. Over all i made 6 lakhs profit ( stcg). I am really confused whether i have to show the full value consideration as 2 crore 6 lakhs (approx 10 x 20 lakhs+ 6.5 lakhs – Brokerage 0.5 lakhs) =20600000.
    and cost of acquisition as 2 crore. This will project the money i invested is a huge amount. is it correct or wrong ?

    How do i capture the money spending on purchasing research report, internet connection..etc..
    Can i consider these amounts in cost of improvement ? if not what all items can be considered for cost of improvement.

    • Nithin Kamath says:

      It is correct, doesn’t matter if this number is huge.

      Yes you can consider all of that as cost of improvement.

  31. PAUL says:

    Thank you sir..

  32. Muralidhar says:

    Dear Nithin,
    In the last paragraph
    “Long term capital losses can’t be used to set off against long term gains as in the first place long term capital gains is exempt from any tax. So long term capital loss is a dead loss, and can’t be set off or carried forward.”
    But in LTCG (non equity oriented) we are paying 20% on gain with indexation. If we get loss here, can it be set off and/or carry forward?

    • Nithin Kamath says:

      I was speaking more in the equity context. But yes, you can carry forward and set it off against non-equity long term gains.

  33. BABUBHAI AJANI says:

    Hello Sir:

    I have started my SIP for MF as Resident Indian for a 1 year. Now, I am NRI. I had switch off Equity to debt fund and vice versa. So,due these got profit of around 12K. So, Its STCG if I am not Wrong ? Also, I have done few transaction in delivery based in stock market and profit is very less. All transaction comes under STCG. So I have few question.
    1). Should I have to pay STCG tax in IT return ?
    2). When I came to knew that NRI profile its not easy to do trading. I had gifted all my holding to my mother. Would it be any problem ?
    3). Which ITR form I should use ? Previously I was salaried person. So I was filing ITR1.

    Thanks in Advance.


    • Nithin Kamath says:

      1. Yes, if there is STCG, yeah you have to pay. If the STCG was earned when you were a NRI, then no benefit of tax slabs, so you have to pay this.
      2. No problem
      3. ITR2

  34. Puneet says:

    I am filing return as STCG where in profit is 10000 on a turnover of total 2 crore buy value and 2crore and 10 thousand. what should i fill in cost of acquisition and cost of sale in IT form 2. As my turnover is above 2 crore do i have to do TAX Audit as well.

  35. B.Natarajan says:

    Hi Nithin,

    1. In FY 15, I made profits in F & O trading and shown its income as other sources and filed ITR2
    2. In FY 16, I made losses in F & O trading (~ 3 lacs on a turnover of 30 lacs). Can I file ITR2 and avoid tax audit by CA.
    3. If I do not intent to carry forward losses, can I file ITR1 or ITR2 without showing the above losses.

  36. Vyomesh Sheth says:

    I have following income
    1. salary
    2.long term capital gain from equity/equity mf
    3.sort term capital gain from equity/equity mf
    4.profit from intraday trading
    5.profit from btst(without delivery )
    6.loss from equity (without delivery)

    I have following questions.
    1. can I declare myself as Investor?
    2. which ITR form I have to use.
    3. Can I consider income from item 2 as LTCG?
    4.Can I consider income from item 3 as STCG?
    5.Can I combine income from item 4,5,6 and consider as speculative income?

  37. Santosh kumar panday says:

    Hi Nithin, I am a government employee and I have opened an account with Zerodha and do both intra day and delivery based trading. But o e of my colleague told me that we can not do trading in share market? Is this true? Please elaborate thanks .

    • Nithin Kamath says:

      Santosh, there is no issue with delivery based trades for sure (as long as you don’t have access to sensitive information). Intraday is something you will have to find out from your department.

  38. Niranjan says:

    Lets say I own a stock for 300+ days and suddenly I am expecting an intraday fall of say 15% , if I sell my holdings and buy it back again on the same day , does my cap gain status change for the same stock which I was holding for 300 days ? or any square off resets the counter and Upon rebuy the counter resets to 1 . please explain the taxation here.

  39. chiru says:

    3. what is the difference between business income and speculative business income?
    4. suppose if i’m an investor , should i show the speculative business income under other income?
    1. I don’t have time to maintain books. so i don’t want audit. so what type of trades( ltcg.stcg,intraday) ihave to do?
    2. I want to take stance as an investor. so what type of trades( ltcg.stcg,intraday) ihave to do?

  40. chiru says:

    5. As i take stance as an investor , I have to show my income under capitalgains( which is not bother to do ltcg and stcg trades) only. I have not going to show my income under business income. suppose if i have done intra day trading , under which head ihave to show this ( business income or other income)? otherwise shall i have to restricted to do only ltcg and stcg trades as an ivestor stance?

    • Nithin Kamath says:

      Chiru, I am answering based on both your questions, whatever I can make sense of it.

      1. As an investor, you can only show equity delivery investing as capital gains.
      2. Intraday equity has to be shown as speculative business income.
      3. If you have only capital gains, there is no need of an audit.

      Suggest you to go through all the chapters, I have explained all that you have asked in detail already.

  41. Parveen Kumar Kataria says:

    I have a question to ask.
    I bought 100 shares of one company in year 1988 around sometime.
    These are in name of my sister and myself(brother).
    At that time i was having many folios in the same company due to Gift purpose in AGMs.
    All the shares in other folios sold out in mean time.
    This particular folio left unsold and shares are in physical forms till date.
    The company grown up like anything and issued many bonus issues and splitting of shares from Rs 10 to Rs 1.
    As a result, the holding increased by many folds and today its increased to 8000 shares from 100 shares in 1988.
    The first name in Share certificate is of my sister, who not an income tax payee, whereas myself is salaried one and income tax payee.
    My questions in this regard are:
    1. Since I invested the money in origin for 100 shares, but my name is second in holding pattern, how can i get the shares transferred in my name.
    2 I just want to transfer the shares in my name due to taxation issue, as the dividend received during the period is not shown anywhere.
    And company is declaring handsome dividend of Rs 6.00 per share last year.
    3 I am scared from taxing point of view. Whereas myself is investor and files the ITR 2 since long for showing STCG and LTCG. But due to second holder in subjected holding I am not able to show Dividend Income in my ITR under Tax free income.
    I humbly seek your guidance.
    I have an account with Zerodha in my wife’s name.

    • Nithin Kamath says:

      The best way to go about this is open a demat account with your sister as first holder and you as second. Convert the shares into demat. Once the shares are converted, you can either decide to keep them in this demat or transfer the shares into your individual demat account. There is no taxation aspect that you need to be worried about.
      All dividends paid out by companies anyways don’t attract tax. Since all these stocks are held from 1988 (>1year) there is no capital gain tax as well. Even if you were to transfer shares from this joint demat to your individual demat, sister can gift brother without affecting the holding period or attracting any tax.

  42. Mini T says:

    I am currently unemployed, and living(and paying tax) on interest from FDs. After quitting my job, i also started investing in shares. In November 2016, i sold some shares which i had bought prior to March 2015. The amount is 3.5 lacs( i needed money for further investments, and also personal needs). However, although i understand from your lesson that i don’t have to pay tax( as it is long term CG), but where do i show it while filing my income tax (My understanding is that while i don’t have to pay tax, i do however have to disclose this). Please clarify?


  43. NARESH THAMPI says:

    my total buy / sell in a year is more than 2 crores . But I do only delivery based trading (min 5 days). I am showing the income as STCG. If have no other income except Interest and rent (Together less than 1 lack). My question is Whether Tax audit is applicable. I am ready to pay 15% tax on STCG. Is this right. If Frequency of trade is more then is there any problem

    • Nithin Kamath says:

      Naresh, it is okay to show this as STCG. If you are showing as capital gains, no audit requirement. Make sure to speak to your CA.

  44. omkar says:

    Nice to see some many queries answered and great job.
    Had a confusion:
    If equities are sold and the STCG are re-invested as business income, will that still be taxable?
    Eg. A holding company running trades only(preferably both investing and speculative) can use the head of business income?
    Been looking for a workaround on that front – any creative solutions if the re-investment way is not right?

    • Nithin Kamath says:

      Hmm.. the gains you make from STCG can be used for trading (it is not business income, it is your capital now). Capital is not taxable, only profits/income is.

  45. Anon says:

    Hi guys

    i got a text from the IT department saying the last date of payment for the third installment of advance tax is 15th december. In the chapter above, you have said that 15th dec is the date for the second instalment. Can you clarify? I can send you a screenshot of the text.

  46. Anon says:

    I had no gains before august 2016, therefore no liability for 15th june. So I have to pay a penalty on the 15% tax that was not paid on 15 sept?

    From which date were the new rules effective? which date should I consider to calculate the penalty from?


    • Nithin Kamath says:

      hmm… I can’t figure out what new rules you are talking about. If there was no income, it is okay to no pay any advance tax. There is no penalty.

      • Anon says:

        Hi Nitin

        The new rules I am alluding to the links that Armaan has referred to in his post and also to the list of advance tax payment dates he has written.

        I had gains by 15th sept towards which I payed advance tax according to the earlier (3 times a year sept, dec and march) regime. I did not pay 45% of the total tax on 15th sept, I paid 30%. There would be a penalty on the 15% that was not paid. To calculate that, I want to find out what date should I consider as the start of the “penalty period”? Were the new rules( 4 dates of payment) in effect beofre that? How do I calculate this penalty? Where should I go to pay this penalty? How do I notify the It dept that I have deposited the penalty amount?

  47. GVB NARASIMHAM says:

    I have been doing the Intraday trading viz Equity and Nifty Futures from Mid October 2016. On Zerodha platform.There are some profits and losses in my account.Shall I need to pay any advance tax in December 20,16 particularly towards the above trading.Please reply per return.Regards.

  48. Lokesh Kumar says:

    ” STCG is applicable for holding period over 1 day and not more than 12 months. ” suppose i bought share on 1 st aug. 2015 and sold on 31st july 2016. Here holding period is less than 12 months but 365 days completed (because of 29th feb). Will it be short term capital gain or long term capital gain.?

  49. krishna says:

    Hi karthik,
    Recently i’ve opened an account with zerodha. Before this i use to trade through another brokerage firm .I have some shares in that(own) account and some in my father’s account, now i want to transfer them to zerodha account. How can i do that transfer and Any taxes will be levied on this transfer???

    • Nithin Kamath says:

      When you transfer shares from your account or your immediate family account (as gift), there are no taxes applicable. Axis might charge you a small fee to transfer shares out of their demat. Check this answer.

  50. Rajesh says:

    Hi, On “LTCG for non equity/debt, gold/international etf”, isnt it true that you can calculate either 10% without indexation or 20% with indexation, and take whichever is lower? Above article seems to suggest 20% with indexation is the only option. Can you clarify pls.

    • Nithin Kamath says:

      Rajesh what you were saying was only upto 10.07.2014.

      • Rajesh says:

        Oh, I see. Its getting hard to keep track of the changes 🙂 Thanks so much for replying. On a separate note, want to thank you guys for setting up these tutorials; fantastic. I havent seen anywhere on the internet so far, such good content, adequately and elegantly described to a painfully detailed level (as a compliment), and consolidated. Thank you so much.
        I havent been able to find a chapter that describes the zerodha’s trading tools (kite in particular) with examples on various types of orders. Is it there somewhere already? I have seen bits here and there, but a consolidated doc would really help.

  51. SD says:

    How the taxation works for below case?
    I have 1Lakh funds in my account. now on 13th Jan 2017 I have bought 10000 (ten thousand) shares of script A with CMP 10Rs.

    in 3 months CMP reached t 20Rs now i have not sold all my shares but have sold only 5000 (5 thousand) to get back my capital back.

    Now these remaining 5000 are my gift stocks. Which tax will be applicable for this sale transaction.
    Note – I am not going to sell remaining 5000 for 2 years.

    • Nithin Kamath says:

      For what you have sold, you have booked profits, so it is an income. You will have to pay 15% as short term capital gain on 5000 x 20 = Rs 1lk, so 15000 as taxes for this financial year.

      • SD says:

        If I take back my Invested funds then why it will be profit. My profit is still invested in stocks.

        • Manish says:

          Taxes doesn’t work your way. If you have sold to recover the original amount invested it would be considered as a sum of investment + profit out of which you have to pay taxes on profit, now the remaining amount that still remains invested in the stocks can go to long term profit depending on how long you keep it. One thing to note is that this calculation is considering that you have already paid taxes on the initial investment amount.

        • Nithin Kamath says:

          Your invested amount is how much you invested into a stock, not how much you transferred to your trading account.

  52. SS2489 says:

    The tax p&l shows a profit of -188.35 for intraday and SHORT TERM GROSS PROFIT ₹8,764.60…

    How do I include this in my tax evaluation?? I think for short term gross profit (equity delivery) tax has already been deducted @15%. The total INTRADAY TURNOVER is ₹201.25 and SHORT TERM TURNOVER is ₹1,72,947.20. With this much turnover (small amount) do I need to file tax returns ?? Is there any minimum turnover amount for tax filing??

    I job and used to file itr-4 for that in 20% tax slab. If I need to file tax for intraday amount how it has to be done? can I set off intraday loss(-188.35) against any like savings bank interest etc.

    Please suggest, I am new to this field.


  53. SAILAJA says:

    I recently opened an account with Zerodha. I want to transfer shares worth 7 lakhs from husband DP account, which is with a different broker to my Zerodha DP account. Will there be any tax litigation involved for the transfer of shares ? Which option is safer to select in DIS slip….. ‘Transfer among family members’ or ‘ Gift” option. what will be the difference between these options? Please guide me.

  54. G Sankara says:

    My friend is a novice to trading. He want me to operate his account for a fees. i have my own separate account. I want some clarifications on
    1. Whether i have to pay STCGT on the fees paid to me?
    2. Whether he has to pay STCGT on the total profits?
    3. If yes for both the above we are paying tax twice for the same amount. Is it correct?
    Pl clarify?

  55. Praveen says:

    In your example above (4.7 – Short and long term capital losses) I’ve an extended question. I’m now left with STCG of 50k losses in the 2nd year. Now in case i made long term capital gain of 1,00,000. I don’t have to pay any tax againt 1 lakh. Now my question to you is, even thought i made good profit in LTCG and i don’t pay tax on it, i still continue to enjoy the benefit of not paying tax till i make another 50k in profit under STCG to net off my losses to zero? and then pay taxes when i make profits only under STCG?

  56. Pallab says:

    Hi Nithin,
    I am new to Zerodha and stock business.
    Below is my stock investment details in Zerodha.
    SHORT TERM TURNOVER ₹55,913.55
    TOTAL CHARGES ₹211.82

    Also I have salary income above 3lac and below 4.5lac, my main income.

    My question is 1) can I simply file ITR2 ? (stock profits as capital gain) , OR I have to make audit for this small income ?

    • Nithin Kamath says:

      Pallab, Ideally best to use ITR4. Many people also show it as capital gains if turnover is less (not the best approach). Whatever you do, make sure to declare in your ITR that you have traded.

  57. Ashish B says:

    Hello sir, one question.
    for example I am only doing short term trading only of shares of different companies for entire year. On some I made profits on some losses. do the STGC (15%) is applicable on every trade I made profit on? or i can just use like this “profit – (minus) loss = balanced amount taxed as 15%?

  58. Sajjan says:

    Hi Nithin,
    Thank you for addressing all the concerns regarding taxation in capital market. I had a quick question, can we claim AMC charge as an expense while calculating STCG?

  59. Sudarshan Prasad says:

    Hi Nithin – I am a Zerodha client, which I use primarily for trading. Additionally, for my long term equity investment, I am subscribed to equity PMS. Can I show PMS fees as expenses (cost of improvement) to reduce my STCG, which have arisen due to PMS selling shares with holding of less than a year.

  60. Nirav Kapadia says:

    I want to see all EQ, F&O, Commodity all market transaction or tradebook within single reporting for a whole year eg. from 01.04.2014 to 31.03.2015. How can we find the same? and also the Net Profit/Loss in the same way we require, then how we get the reporting in a single report?

    • Nithin Kamath says:

      These are all different segments, not possible to include them in one report. You can download all the three as excel and maybe combine it yourself.

  61. sukant arora says:

    my business income is 3 lacs and i bought shares worth 2lacs of single company,do i need to show shares at the time of purchase in IT return or at the time of sale ,i searched on internet that shares purchase worth 1 lac or more reported to IT dept. and its comes under AIR 005 ,is anything to worry?

    • Nithin Kamath says:

      Yeah, ideally you should have shown the investment in your balance sheet. Nothing to worry though, if someone asks for clarification just explain.

  62. Yuvraj says:

    Sir I usually trade in commodity,and also get benefit of leverages what should my total sales or total turnover,
    For example-i have 5000 rupees, with support of leverages I bought 2 unit of [email protected] and sells them @40500. In these case what is my turnover

    • Nithin Kamath says:

      Do read the chapter on turnover. Turnover is not contract turnover, it is absolute sum of your profits and losses. In this case around Rs 1000 profit, and hence that is the turnover.

  63. renuka hardasani says:

    I and my husband have trading accounts with you
    I understand , this is not platform to complain
    but, I have no choice to reach you

    the problem is
    my chartered accountant is taking objection
    on ledger statement of my husbands trading account with zerodha
    which shows 0.01 paisa difference in reconciliation
    between your ledger statement of my husband A/C. DG0240
    ledger statement as mirror account prepared in TALLY ERP.9
    I give here the transaction which Zerodha ledger shows
    (DOTS are added to prevent the distortion of message , after posting and made it to remain intact.)
    Date……………………………………………………………… Debit……………….. Credit………………………Net
    28.02.17 opening Balance …………………………………………………………………………………….660414.31
    28.02.17 bening Payment Gateway Charges…………..10.35……………………………………….660403.96
    28.02.17 Settlement value for……………………. ….246981.35……………………………………….413422.62
    this the net balance , which zerodha lydger shows as 413422.62
    this is wrong sir
    Tally EPR.9 Shows the correct balance as 413422.61
    my husband asked to support section to contact YOU/CHARTERED ACCOUNTANT
    They mantain that they are correct and say they have taken opinion of chartered accountant
    and so zerodha ledger is correct

    • Nithin Kamath says:

      Renuka, rounding off errors will always happen, there is no way to avoid this. This is no big deal at all, surprised your auditor is bothered about this.

  64. Bindas_N says:

    I have heard that there is an Income Slab excessing which a person needs to pay Income Tax. But, If the total Income of a Person including income from the Stock Trading do not cross that Minimum Income Tax Slab, Still Is it Mandatory to Pay Tax? Suppose, the Yearly Income of a person from other sources is Rs. 2 Lakh and the Income from Stock Trading is Rs. 30000 (Yearly) totaling Rs.2,30000 in a Year that is lesser than the Minimum Income Taxation Slab, then Still Is he Required to Pay Tax? Please Reply.

  65. DA8918 says:

    Hi nithin,

    I have losses in trading,So don’t to spend more on audit.

    Can we do audit by ourselves and file income tax returns??

    Thanks in advance

  66. Is considering stcg better than ltcg for debt mutual funds if i have no other income. says:

    For debt mutual funds ltcg is flat 20% after indexation,,,wheras for stcg its as per tax slab,,,,now if i have no other income,,then reedeming before three years and showing it as stcg is better right,,or is my thinking wrong.

  67. mohit says:

    i bought on 1 company share on 31 aug 2016, but sold on 25 april 2017. so do i pay short term tax on assesment year 1 april 2016-31 march 2017

  68. Sonia says:

    Dear Nithin , I joined Zerodha in Nov 2016. I have made STCG on EQ delivery in 16-17 of about Rs.50000/= with a turnover of about 25 lakh. I am a salaried person in the 20% slab. 1) Is it OK to file my return under ITR2 ? 2) The charges related to Zerodha EQ delivery trading amount to be about Rs.6000/= Can these be used a setoff in ITR2. Thanks

  69. Ankit Mehta says:

    Please advise:

    I am a salaried person. This year I have made STCG of 2,46,000 by selling equity shares. Previous year I have carry forwarded the loss of 1,60,000. My salary for this year was 1,91,000. Also I have earned 16,000 from fixed deposit interest. I have certain deductions which I can take such as mediclaim, pf, dividend and saving bank interest. How much is my tax to be paid if any, can you help me on this?

    • Nithin Kamath says:

      You can set off the loss, so I am guessing you have 85k of STCG. If you add 85k to 191, it is around 2.7lks + 16, Say around 3lks. Apply all your deductions. You have to pay 10% above Rs 2.5lks as taxes after all deductions.

  70. Ritesh Patel says:

    I have a confusion!
    If i bought Stock “X” at Rs. 100 on 26 September 2016 and got delivery in DEMAT A/C
    on 29 September 2016 Market Started falling after Surgical Strike and i sold stock “X”at 10:20 AM and bought back at 03:20 PM.
    With this activity i saved the loss of Rs.20 that i could have suffered but technically it’s shown as “Profit”
    After 2 Months i sold Stock “X” at Rs.200
    Now it is clear that Rs. 100 (200-100) are STCG
    but what about Rs. 20 that i saved on 29 September ?
    Will it be Speculative income Despite having Stock in DEMAT?
    Do i have to disclose it ?
    As it is not real profit it just saving of Loss that could have suffered

    Thank You

  71. navin verma says:

    I have a SIP from last two years in 3 different MFs however they have never been redeemed or sold and they are in still in continuation. But their current values are higher than the amount invested. Will this qualify as capital gain even if the units are not being sold??

  72. RIA says:

    My husband sadly passed away last year. He had invested in some stocks for us in 2 demat accounts –
    Account 1 in HDFC was in his name as 1st holder and mine as 2nd holder,
    Account 2 in ICICI was in my name as 1st holder and his as 2nd holder.

    When I submitted my husband’s death certificate to HDFC and ICICI, they asked me to open new accounts claiming that they cannot just delete my husband’s name (RBI circular says they should be able to just delete the name of the deceased person). Because the banks were not helpful, since last month I have 2 new demat accounts at HDFC and ICICI.

    I would like to combine all shares from the 2 accounts into one account at Zerodha to avoid paying their ridiculous brokerage fees (ICICI is charging me 0.75% + other charges on top of that).

    However, after reading the FIFO rule for taxation I am concerned about selling any shares. All shares I hold were bought more than 2-3 years ago. So at first glance it looks like selling them should incur no tax. However, if the FIFO rule is for each demat account, does that mean that I cannot sell these shares before the end of 1 year of holding within a demat account?

    Example 1 – We bought Reliance Industries 100 shares in 2009. It was in my joint demat account with my husband with him as 1st holder and I was 2nd holder. Since April 15 2017, these 100 shares of RIL were transferred from the closed joint demat account to my single demat account at HDFC. If I sell those shares today in May 2017, is my holding period for long/short term tax treatment considered from 2009 or from April 15 2017? If I create a new Zerodha account and transfer shares to Zerodha on June 1, does this mean that I cannot sell for long-term tax treatment until June 1 2018?

    Example 2 – I have L&T 50 shares bought in 2010 in my joint demat account at ICICI with me as 1st holder and my husband as 2nd. Now those 50 L&T shares are in my single demat account at ICICI since April 10 2017. If I sell those 50 L&T shares today, are these long-term or short-term for tax treatment? If I transfer these shares to Zerodha and then sell, do I have to wait for 1 year of holding in Zerodha demat account before selling?

    Example 2 above, I presume I can claim that I was the 1st holder of the old demat account, so the purchase date still remains the old purchase date. Example 1 is harder for me to find the right info online about taxation. If I transfer all to Zerodha, how best to sell to avoid paying tax for my shares that were purchased many years ago?

    Thank you

    • Nithin Kamath says:

      Transferring shares between your own demat account doesn’t change the holding period. For that matter, all transfers between immediate family, husband/wife/children, can be shown as a gift and original holding period will apply.
      1. 2009 itself
      2. Long term if you sell now, or if you transfer it to Zerodha and sell.
      3. No tax implications like I said by transferring to your own demat account. It is like how transferring money between your own bank accounts has no tax implications, similarly if you move stocks between your own demat accounts, has no tax implication.

  73. Amarjit says:

    Wheather a govt employee in india can have investments in equities ? If yes what amount of tax is needed to be paid in LTCG . AND WHERE TO SHOW THE SHARES WHEN HELD IN DEMAT AND WHERE TO SHOW AS INCOME WHEN SOLD?

    • Nithin Kamath says:

      Investing in equity shouldn’t be an issue, best to confirm though. LTCG is 0 and STCG is 15%, just like for everyone else. ITR2.

  74. nishu says:

    respected sir,

    (1) i have done much losses from 2005 to till date and i am government servant i file IT return every year but not shown losses, if i have to rebeat this losses from new profit can i shown old year losses? or can i file old year return repeat?
    (2) if i purchase A company share qty 1000 @ 50 with brokerage of Rs.500 in may.2016 and i sold qty 500 @ 60 in Aug.2016 brokerage of Rs.300 (of 500 qty) when STCG counting brokerage of purchase side i have to count Rs.500/- or per unit findout brokerage and findout (500 qty) brokerage…… i mean i shown purchase side brokerage rs.250/- and when sell remaining 500/- qty then shown purchase side brokerage rs.250/- or total Rs.500/- on first time sell partly qty………please guide me thanks

    • Nithin Kamath says:

      1. If you haven’t filed your returns on time, you can’t claim the benefit of the loss.
      2. You can add cost of brokerage into cost of your holding. So STCG is calculated after all costs (except STT).

  75. nishu says:

    Respected Sir,

    my cousin brother transfer his share in my demat account approx before 5-6 years, he had want to close his demat account. can these stock consider as a gift or not? please guide me……. thanks

    • Nithin Kamath says:

      Hmm.. if it is cousin, it can’t be shown as a gift. Only father, mother, brother, sister, even uncle/aunty allowed.

  76. Shiv Dewangan says:

    Hi Nithin/Team,

    I was trying to submit details of my capital gain/loss ( I use Zerodha ). Do we have to mention purchase/sell date & price of each & every share ( for short term capital gain/loss) ? Or in actual ITR2 form (Java tool or Excel version) we’ve option to enter consolidated short term capital gain/loss(Already calculated by q.zerodha in P&L section) somewhere ?

    First time trying to fill ITR2.


    • Nithin Kamath says:

      Yes, in actual ITR2 form (Java tool or Excel version) we’ve option to enter consolidated short term capital gain/loss, but this has to be done quarterwise.

  77. joe says:

    Hi there,

    I have an existing computers business for which I file my itr under section 44 ad but fro time to time I also buy F&O. In this financial year, my total sum for options traded was 35 lakh but overall I had a loss of 1.5 lakh. Is it compulsory to show this turnover or can I consider myself as an investor as I really don’t want to audit the books and also do not want to increase turnover of my existing business.


  78. SAILAJA says:

    As I have salary income and Equity related capital gains, I have been filing ITR-2 returns till last financial year .
    1) Is it the same ITR-2 to be filled on revised ITR forms for AY 2017-18 ?.
    2) I have done gift transfer of shares worth 2 laks to my spouse account. Where this need to be shown in my ITR-2 ?.

  79. seema mitra says:

    Can you please tell me with example what is acquisition/full consideration for equity trading as an investor. I have LTCG / STCG. Shall be grateful if you kindly explain with example as you do always.

    • Nithin Kamath says:

      Hmm.. I have explained everything in the chapter above. Can you be more specific.

      • si991 says:

        Thanks for prompt reply. I have gone through your article. It is really excellent. And top of that your way / method/ process of explanation. Fantastic.
        My requirement is for filing return – acquisition/ full consideration value is asked.
        Suppose I bought shares worth 10 lakhs and sold the same at 11 lakhs.
        What will be acquisition/ full consideration value for LTCG. This fields are required to be filled in IT return.

  80. prasad says:

    i am a retired govt employee ,i had pension income, and now i am doing private job right now. I do intraday and delivery based in equities in my Demat account,i had opened account on my wife name in Zerodha and all the documents what i had submitted on her name only and she is a house wife.I do trading in zerodha too.can u pls tell me what ever the profit iam getting in my wife demat is taxable in my name or my wife name whether it is intraday or delivery based.

  81. si991 says:

    I am an investor and trader as I trade in equity and F&O.
    Shall I submit ITR4 for FY 2016-17 or AY 2017-18

  82. Pacific29 says:

    Hi Nithin,
    I have F&O Turnover of Rs. 1000000 (ten lakh), but made a loss of Rs. 100000 (one lakh).
    I am salaried in 30% IT bracket, have other capital gains.
    As I understand I need to get Audit done (because F&O turnover <2cr AND profit < 8% of turnover), and file ITR3.

    Can I avoid Audit by claiming (even when I have loss in reality) that I made a profit of Rs 80000 (8% of turnover), and paying a tax of Rs 24000 (30% of 80000) ? I am anyway paying more tax than required??
    If yes, can I do this by putting below entries in ITR3?
    1) Part A-Gen: Audit Information a) Are you liable to maintain accounts as per section 44AA = No
    2) Part A-Gen: Audit Information b) Are you liable to maintain accounts as per section 44AB = No
    3) Part A P&L: item 53b: Gross Profit=80000

    • Nithin Kamath says:

      yes, you can do this. But do consult your CA once. This way you will not be able to carry forward the losses to future.

  83. prasad says:

    my wife is a house maker and she do trading in zerodha which is on her name,if the profit is less than 2.5 lkh,is it mandatory to pay tax, and to declare the income.Trading is the only income for her.The money what she is using for trading is mine.

  84. Teja says:

    Sir iam going to gift my wife a amount 20 lakhs which i got as long term capital gains and that was reflected in income tax returns too in the last financial year.
    1.Is there is any limitations of amount to gift wife…
    2.She is a house wife ,she use to trade in zerodha,If she invests that amount in shares ,the profit what ever she is getting is getting clubbed with my earnings or on her name ,let it be STCG or LTCG.

  85. tej says:

    thx alot for ur suggestion

  86. HARSH SHARMA says:

    I have income of Rs 493000/- from salary and i have Short term capital gain from shares (STT Paid) of Rs 16000/-. Further I have long term capital loss of Rs 28000/-. What is my Income tax payable. In earlier years i had short term capital loss also. Can it be carried forward now.

    • Nithin Kamath says:

      If you had carry forwarded your short term loss from before, you can set it off against your gain this year. But if you have’t, STCG at 15%.

  87. Teja says:

    Is there is any procedure to gift money to wife OR parents…or directly we can transfer to their bank accounts(amount is 20 lkhs each ).I heard that bank will intimate income tax authorities for a amount more than 10lkhs deposition in a account in a year. is there is any problem for transferring that much of amount.

    • Nithin Kamath says:

      You can directly transfer. But make sure to show it while filing your returns. Banks might have an alert in place for higher value transaction. But that is okay, as long as your are showing this transaction in your ITR.

  88. Ankur Choudhary says:

    I have a joint demat account with my brother (I am the first holder). All the investments in the demat account have been done by me and paid for by me. Can I remove my brother’s name as the second holder and replace it with my sister’s? What would be the procedure for this?

  89. vijayaram says:

    I made loss, intraday=2000.00 ,short term capital loss=38000.00 in financial year 2013-2014. i didnt declare these losses in my itr1 at that time. now1) can I revise the itr, if so which form to be used.2) I made intraday loss=12000.00, stcg=22000.00 in fy2016-2017. which form to be used for filling itr. And can I adjust the stcg losses occurred in 2013-2014, with profit of 2016-2017

  90. vijay kumar says:

    Please see below and suggest which ITR form I need to fill.

    – Salaried employee with total annual income of 1.3L.
    – Intraday/speculative profit of 13k.
    – Intraday/speculative turnover of 15k.
    – Short-Term profit of 2L.
    – Short-Term Turnover of 80L.

    Thanks in advance.

  91. Sumaiya says:

    You mention in the article that STCG is applicable for holding period over 1 day and not more than 12 months.
    What about intraday trades which are bought and sold on the same day?

  92. PAWAN KUMAR says:

    Suppose I bought 100 shares of company XYZ on 01-08-2016 @RS. 200/share. Company demerged into XYZ and ABC in the ratio of 1:1. I received 100 shares of ABC in my demat a/c on 21-07-2017 but trading of ABC started on 02-08-2017. I sold 50 shares of XYZ on 15-07-2017 @Rs. 80/share and remaining 50 shares on 05-08-2017 @Rs. 70/share. I also sold all the 100 shares of ABC on 10-08-2017 @Rs. 150/share.
    Now while calculating STCG and LTCG
    1. What will be my buying cost for the shares of XYZ sold on 15-07-2017 and 05-08-2017?
    2. What will be my buying date and cost for ABC?
    3. What will be my STCG and LTCG?
    4. Will there be same tax treatment in case of Bonus shares in 1:1 ratio instead of demerger?

    • Nithin Kamath says:

      1. When company demerges the company also give a % value being demerged from the main company. So if it is 30%, you can mark 30% of your cost of buying company XYZ to Company ABC. ALso drop the main company cost to 70%.
      2. Buying date for ABC will be that of XYZ itself.
      3. Everything will be based on when you bought the main XYZ.
      4. In bonus, the new shares you get comes at 0 cost. Here it comes with a cost, so treatment slightly different.

  93. TP says:

    1) Can a person be a investor and trader at the same time?
    So is there is any advantage in maintaining two trading accounts-
    (a) one for investment
    (b) one for trading

    2) Does all tax accrue to the person in whose name the trading account stands in case he has multiple demat accounts in various combinations but in all such accounts he is first holder?
    I know zerodha permits only one demat account to be linked but ICICI/HDFC among others allow linking upto 5 demat accounts.

    3) With respect to point 2 above, isn’t the first account holder in joint demat the primary custodian of shares just as in case of savings a/c and MF holdings.

  94. Prasad says:

    If I am not coming under tax bracket and now I want to do trading in stocks. And buy a stock in small quantity and sell it on the same day. Will I come under tax bracket

  95. Prasad says:

    Wat is the best way in stocks to avoid coming under tax bracket

  96. Prasad says:

    My bank ac is joint . When Iam doing trading and if the interest is taxable, to whom it is taxed?

    If my wife has no much personal income and she starts trading. Is she taxable if she sells the stocks in a year which comes below Rs. 250000 of a year

    • Nithin Kamath says:

      If it is a joint account, ideally the person who earned the money is taxable. If you want to show it under your wife, best to open a bank and trading account in her name and do it separately.

  97. Mayank Kapoor says:

    Hi Nitin

    Great job You have made many things easier. Just a small confusion. I have Intra day trades and short term trades in equity. The frequency of short term trades is low as I am a Salaried person. So can I show the short term trades as STCG and the Intra-day trades as speculative business income? Or do I need to show both Short term trades and Intra-day as Business income ?

    Thanks a ton

  98. invest_novice says:

    Even if a person does 1 or 2 intra-day trading the entire year, still does he need to show the income under speculative business and file ITR3/4?

    The reason for the above question: I am a novice investor who has so far filed ITR2. I just wanted to try out trading for a few days. If it doesn’t work out I will do more deep dive and try again next year.

    • Nithin Kamath says:

      Technically you have to show all your intraday trading under speculative income on ITR3.

      • invest_novice says:

        Thanks for your reply.
        And can ITR3 be filled and filed by self? Or does it mandate a CA? And does it need to be audited before filing?

        • Nithin Kamath says:

          It can be filled yourself. But if you are liable for an audit then you need a CA.

          • invest_novice says:

            Ok thanks. I searched for liability for audit. So if turnover is more than 1 Crore then audit is necessary. By turnover in terms of trading means the total transaction amount right? Like if I have bought shares for 50 L and sold all of those for say 60L then total turnover is 110L(50+60)? Or is the turnover 60L(max(buy,sell)) or 10L(profit/loss)? Which is turnover?

          • Nithin Kamath says:

            10L. Can you please go through all the chapters, I have explained in detail.

          • invest_novice says:

            Thanks for your reply. I will go through the chapters.

          • Karthik Rangappa says:


  99. raj kumar says:

    Hi Nithin
    I am a state govt employee with annual income of rs.480000. I am very much interested to invest in stock market but i have certain confusion. Please clear all my confusion and my queries are:

    1- Can i invest in stock market being a govt employee?
    2- Suppose i buy some shares today and after getting delivery sell them after 7-10 days. Can i repeatedly do the same transaction in a month?
    3- Which itr form should be used?

    Thank you

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