'₹7 Lakh In Trading Gains, ₹74,000 Tax Hit': The Brutal Mistake Thousands Of Indian Investors Are Making

India’s unit investors are stumbling into taxation traps—many learning nan difficult measurement that profits nether ₹12 lakh don’t guarantee taxation exemption. Sujit Bangar, laminitis of TaxBuddy.com, says it’s not nan income size but its classification that triggers nan taxman.

Bangar collapsed down a caller lawsuit involving a full-time investor who assumed ₹7 lakh successful nett marketplace profits meant a zero-tax liability. Instead, he sewage deed pinch a taxation measure of ₹74,375. “Don’t confuse debased income pinch debased tax,” Bangar warned successful a elaborate LinkedIn post. “Understand really each income is classified—and taxed.”

The investor’s ₹7 lakh summation included ₹3 lakh successful intraday losses, ₹2.5 lakh successful futures & options gains, ₹3.5 lakh successful short-term superior gains (STCG), and ₹4 lakh successful semipermanent superior gains (LTCG). He thought nan total, being nether ₹12 lakh, would autumn beneath nan period for taxation. It didn’t.

Here’s why: each income type is treated otherwise nether taxation law.

Intraday trades are classified arsenic speculative business income, taxed astatine slab rates and only group disconnected against speculative profits, pinch a 4-year transportation forward.
F&O trades autumn nether non-speculative business income, besides taxed astatine slab rates but pinch broader set-off options and an 8-year transportation forward.

STCG from equity is taxed astatine a level 20% nether Section 111A. Losses present tin offset some short- and semipermanent gains.
LTCG, however, only gets a ₹1.25 lakh exemption nether Section 112A. Gains beyond that are taxed astatine 12.5%, without indexation aliases Section 87A rebate.

Bangar emphasized that communal investor mistakes stem from treating each marketplace income arsenic 1 pool. “What sewage him successful problem wasn’t profit—it was classification.”

His informing comes amid a surge successful unit investing, pinch millions of Indians trading stocks and derivatives connected mobile apps—often without knowing taxation consequences.

“Tag personification who trades but thinks ₹12L = ‘tax-free zone,’” Bangar wrote. The connection is clear: marketplace occurrence intends thing if it ends successful a taxation shock.

Published on: Jul 2, 2025 8:16 AM IST