Taxation of trading income in India: a practical overview

Indian tax treatment depends on what you trade and how you hold it. Intraday equity trading is generally treated as speculative business income. Futures and options are generally treated as non-speculative business income. Delivery-based holdings are typically capital gains, short or long term depending on the holding period.

The distinction is not cosmetic. Business income allows deduction of trading-related expenses — brokerage, data subscriptions, internet, depreciation on equipment — and losses have their own set-off and carry-forward rules. Speculative losses can generally only be set off against speculative gains.

Turnover computation for F&O has its own methodology and drives whether a tax audit applies, alongside the profit percentage you declare. Because the thresholds and presumptive provisions change from time to time, this is the part worth confirming with a chartered accountant each year rather than relying on a forum post.

Payouts from a prop firm are usually professional or business income against an invoice, often with TDS deducted, and appear in your Form 26AS. Reconcile that statement with your own records before filing.

Whatever your structure, the operational advice is identical: download contract notes and ledgers monthly, keep bank statements separate for trading, and do not attempt to reconstruct a financial year in the last week of filing season. This article is general information, not tax advice.