Any income from sale of property(movable or immovable) is know as Capital gains. Now a days many people trade in equity market However, trading in shares may lead to both high losses or profit. Th gains from transfer shares is liable for income tax, and the losses can be carried forward to future years. In this article we have explained about capital gain tax on shares and all its aspects.

Types of Capital Gains Tax on Shares?

Capital Gains are of two types as mentioned below:-

Short-term Capital Gain Tax on transfer of Security

Sale of listed equity shares within 12 months from the date of its buying leads to short tem capital gain or loss and 24 month for unlisted security

Short-term capital gain = Sale amount less Expenses on Sale less the Purchase price

Example: Mr. A purchase 100 share of XYZ Ltd. on January 1, 2024, at ₹400 per share.

He sell these 100 shares on June 1, 2024, at ₹500 per share.

Calculation:

Purchase Price: ₹400 × 100 = ₹40,000

Sale Price: ₹500 × 100 = ₹50,000

Short-Term Capital Gain: ₹50,000 – ₹40,000 = ₹10,000

Hence this implies short term capital gain because the holding period is less than 12 months

Long-Term Capital Gain Tax on transfer of Security

Sale of listed equity share more than 12 month from the date of its buying leads to long term capital gains and 24 month for unlisted security.

Example

Mr. A purchase 100 shares of ABC Ltd. on January 10, 2022, at Rs.300 per share. He sell these 100 shares on February 11, 2025, at Rs 800 per share.

Calculation:

Purchase Price: ₹300 × 100 = ₹30,000

Sale Price: 800 × 100 = ₹80,000

Profit (Long-Term Capital Gain): ₹80,000 – ₹30,000 = ₹50,000

Capital Gains Tax Rates on Security

Type of Share	Holding period	Tax Rate Before July 22, 2024	Tax rate after july23,2024	Additional Details
Listed Security	within 12 months (Short-Term)	15%	20%	Short-term capital gains
	after12 months (Long-Term)	10% (on above₹1,00,000)	12.5% (on above ₹1,25,000)	Long-term capital gains
Unlisted Security	Less than 24 months (Short-Term)	For individual –normal slab rate	For individual –normal slab rate	No change in STCG treatment
	More than24 months (Long-Term)	with indexation benefits ,20%	without indexation,12.5%	LTCG tax reduced but indexation benefit removed

Tax rate for short- term capital gains shall be as under:

Section	Person	Nature of asset	Rate applicable up to 22.07.24	Rate applicable from 23.07.24
111A	Resident	Short Term capital asset being an Equity share in a company or unit of equity oriented fund or unit of a business trust , chargeable to STT	15%	20%
111A	Non-resident	equity oriented fund or unit of a business trust , chargeable to STT	15%	20%
Other STCG	Both	For all transactions of transfer other than mentioned above	Normal slab rate	Normal slab rate

Tax rate for long –term capital gains

Section	Person	Nature of asset	Rate applicable up to 22.07.24	Rate applicable from 23.07.24
112	Resident	Bonds or debenture(other than capital indexed bond and sovereign gold bond)	20%	12.5%
112(1)	Resident	Listed securities (other than a unit) or zero coupon bonds	20% with indexation or 10% without indexation ,whichever is lower	12.5%
112(1)(a)	Resident individual or HUF	Transfer of a long-term capital asset(other than mentioned above)	20%	12.5%

Tax Planning for Capital Gains Tax on Shares

1. Book LTCG Within ₹1.25 Lakh Exemption Limit

LTCG on shares is tax-free up to ₹1.25 lakh per financial year.
Sell shares in a way that total gains do not exceed ₹1.25 lakh annually.

2. Set Off Gains Against Losses (Tax-Loss Harvesting)

Short-term losses can offset short-term or long-term gains.
Any losses from long term can offset only long-term gains.
Unused losses can be carried forward for 8 years and adjusted in future years.

3. Use Agricultural or Rural Bonds (Section 54EC)

If you sell unlisted shares and earn LTCG, invest in 54EC bonds (like NHAI or REC) within 6 months.
Up to ₹50 lakh can be invested, locking in funds for 5 years to avoid LTCG tax.

4. Gift Shares to Family Members in Lower Tax Slabs

Gift shares to parents, spouse, or children (who are not earning much).
Their capital gains tax liability will be lower (or zero if within tax-free slab).

Example of Tax Saving Using Gifting Strategy

🔹 Scenario 1: You Hold Shares and Sell Directly

You sell shares and make ₹3 lakh LTCG.

After the ₹1 lakh exemption, taxable LTCG = ₹2 lakh.

Tax = 10% of ₹2 lakh = ₹20,000.

🔹 Scenario 2: You Gift Shares to Your Retired Father (No Other Income)

Your father sells the same shares and earns ₹3 lakh LTCG.

He uses the ₹1 lakh exemption → taxable LTCG = ₹2 lakh.

If he has no other income, taxable income remains within the ₹3 lakh slab (senior citizen).

Final Tax = ₹0 (as it’s within the tax-free limit).

💡 Result: You saved ₹20,000 in taxes! 🎯

Important: Clubbing of Income (Section 64)

The clubbing provisions prevent tax evasion by transferring assets to family members. Here’s when income will be clubbed (added back to your income):

Recipient	Is Clubbing Applicable?	Section
Spouse (Husband/Wife)	✅ Yes, if the gifted shares generate capital gains	Section 64(1)(iv)
Minor Child (below 18 years)	✅ Yes, gains are added to the parent’s income	Section 64(1A)
Major Child (18+ years)	❌ No clubbing, child’s income is separate	Not Applicable
Parents (if not dependent on you)	❌ No clubbing, parent’s income is separate	Not Applicable
Brother/Sister (Not financially dependent on you)	❌ No clubbing, their income is separate	Not Applicable

📌 Best Strategy:
✔ Gift shares to major children (18+ years), parents, or siblings who have lower or no income to save tax.
❌ Avoid gifting shares to spouse or minor children as capital gains will still be taxed in your hands due to clubbing rules.

Key Takeaways:

✅ Gifting shares to family members in a lower tax bracket reduces tax liability.
✅ No tax on gifts to relatives like parents, children (major), or siblings under Section 56(2)(vii).
✅ Avoid clubbing rules by gifting to major children (18+ years), parents, or siblings.

5. Invest Through HUF (Hindu Undivided Family) or Family Members

If you have an HUF, invest in shares through it and claim separate tax exemptions.
Family members can also use their ₹1.25 lakh LTCG exemption separately.

6. Stay Invested for the Long Term

LTCG tax is lower than STCG tax, so holding stocks for more than a year reduces tax burden.

How to file ITR for share trading?

Filing an Income Tax Return (ITR) for share trading in India depends on the type of trading you do—intraday, delivery-based, Futures & Options (F&O), etc. Here’s a step-by-step guide:

Step 1: Determine the Type of Income

Intraday Trading (Equity) – Considered speculative business income.
Delivery-Based Trading (Equity) – Considered capital gains:
- Short-term capital gains (STCG) if held for <1 year (taxed at 20%)
- Long-term capital gains (LTCG) if held for >1 year (taxed at 12.5%on gains exceeding ₹.25 lakh)
Futures & Options (F&O) – Considered non-speculative business income.
IPO, Dividends, Mutual Funds – Taxed separately based on LTCG, STCG, or Dividend Tax.

Step 2: Choose the Right ITR Form

ITR-2 – For individuals with capital gains from share trading (delivery-based).
ITR-3 – For individuals doing intraday trading or F&O (business income).
ITR-4 – If opting for presumptive taxation (not for capital gains but for small F&O traders).

Step 3: Maintain Proper Records

Profit/Loss Statements (Download from broker’s portal)
Contract Notes from your broker
Bank Statements for transactions
Demat Holding Statement

Step 4: Calculate Taxable Income

Business Income (Intraday & F&O) – Deduct expenses like brokerage, internet, software, and SEBI charges.
Capital Gains (Delivery-Based) – Deduct purchase cost and brokerage.

Step 5: Pay Advance Tax (If Applicable)

If tax liability exceeds ₹10,000 in a year, pay advance tax in installments (June 15, Sept 15, Dec 15, March 15).

Step 6: File ITR Online

Go to the e-Filing Portal: https://www.incometax.gov.in
Login with PAN/Aadhaar
Select the Appropriate ITR Form
Enter Income Details (Capital Gains, Business Income, etc.)
Claim Deductions (If Any) – Section 80C, 80D, etc.
Verify Tax Payable & Pay If Needed
E-Verify the Return via Aadhaar OTP, Net Banking, or DSC

Step 7: Get Acknowledgment

After e-verification, you will receive an ITR-V acknowledgment.

How to get capital gain statement for share trading .

To get a Capital Gains Statement for share trading in India, follow these steps:

1 Download Capital Gains Report from Your Broker

Most brokers provide a Tax P&L Statement that includes capital gains (short-term & long-term). Here’s how to download it for popular brokers:

Zerodha

Login to Zerodha Console → https://console.zerodha.com
Click on Reports → Select Tax P&L
Choose the Financial Year
Select Download Report (Excel/PDF)

Upstox

Login to Upstox Pro Web → https://pro.upstox.com
Click on Reports → Go to Tax Reports
Select Financial Year → Download P&L Statement

Angel One

Login to Angel One → Go to Reports
Click on Portfolio → P&L Report
Select Capital Gains Statement → Download PDF/Excel

ICICI Direct / Other Brokers

Log in to your broker’s website/app
Navigate to Reports / Portfolio / Tax P&L
Select Capital Gains Report and Download

2 Get a Consolidated Capital Gains Report from CDSL/NSDL

If you trade across multiple brokers, get a Consolidated Account Statement (CAS) from CDSL/NSDL.

Steps for CDSL (Most Discount Brokers Use CDSL)

Go to https://www.cdslindia.com
Click on CAS (Consolidated Account Statement)
Enter PAN & DP ID → Request Statement
Receive it via email

Steps for NSDL (Full-Service Brokers Like ICICI Direct, HDFC Securities Use NSDL)

Go to https://nsdlcas.nsdl.com
Click Login to NSDL e-CAS
Enter PAN & Email ID
Download the Capital Gains Statement

3 Use Tax Filing Software (Optional)

If you use Cleartax, Quicko, or Taxbuddy, you can upload the broker P&L report to auto-calculate capital gains.

4 Share Statement with your CA

If you have a CA, send the downloaded Tax P&L Statement and CDSL/NSDL CAS Report for ITR filing.
If you file yourself, use ITR-2 (for capital gains) while filing.

Read in this article on future and options taxability