Income from shares

1.Investor: If you do not frequently buy and sell shares than all the gains from share trading is to be assessed as capital gains and the dividend received shall be exempt.

If you have held shares for more than 12 months before selling then the gains earned shall be treated as long-term capital gains which are to be taxed at the rate of 20% u/s 112. In case you have sold the shares through recognized stock exchange by paying STT (security transaction tax) then this LTCG is exempt u/s 10(38) and no tax shall be payable. On the other hand, if the shares are sold off-market then 20% tax becomes payable on the gains earned.

To prove the gain as long-term capital gain, you can attach the contract notes for the buy/sell trades and the DEMAT statement which shows the credit/debit of shares, if required.In case you have sold shares within 12 months of buying then the gains earned shall be treated as

In case you have sold shares within 12 months of buying then the gains earned shall be treated as short-term capital gains which are to be taxed at the rate of 15% u/s 111A.

In case there is long term or short term losses, the same can be carried forward for 8 years. The short-term capital loss can be set-off either against short term or long term capital gains from any source but the long-term capital loss can only be set off against long-term capital gains from any sources.

Also, remember that long-term capital losses occur for shares where STT is paid cannot be carried forward for future set-off.

Remember, an investor cannot claim any expenses such as internet charges, rent etc. All the gains earned is net income of the investor and tax is payable on this amount.

2.Intraday Trading: Follow our blog:https://blog.cleartax.in/treat-share-trading-losses/

3 Normal Trader means a person who does trading in shares but not on day to day basis as an intraday trader. Normal Traders buy shares, take delivery and then sell it to book profit or gain.

Normal Trader can also be categorized as an Investor but there is one major difference between the normal trader and an investor i.e. Normal Trader holding period of shares is always short-term while holding period of shares in case of an investor could be long-term as well as short-term. Apart from this difference, both normal trader and an investor are same in all aspects. Both take delivery before selling but a point to remember is that in case normal trader who shows shares under stock-in-trade shall always be assessed under the head of Income from Business even he takes delivery of shares.

Taxation of the Normal Trader is also same as an Investor i.e. gains shall be assessed as Short term capital gains which are taxed at the rate of 15% u/s 111A.

4.Derivative trading embraces Futures and Options trading on the various stock, commodity and currency exchanges in India.

All derivatives trading activities done through recognized exchange are not considered as speculative income like in intraday trading.  Hence any profit or loss arising from derivative trading is treated as arising from business activity. In the case of a trader who trades in derivatives and also buys shares and receives delivery, can claim short-term capital gain for money made in shares for which he receives delivery in his DP and claims income/loss from derivatives trading as business income/loss.