It’s ITR filing season again! For the financial year 2024-25 (Assessment Year 2025-26), the Income Tax Department has already rolled out Excel Utilities, and people are starting to file. While online filing is still getting ready, if you’re a salaried individual, it’s generally best to wait for your Form 16.
With more and more people getting into the stock market, a common question for salaried individuals is how to correctly report their share market income alongside their salary. Here’s what you need to know, according to income tax experts:
Understanding Your Stock Market Income
Before you file, it’s crucial to identify what kind of income you’ve earned from the stock market:
- Capital Gains: This is profit made from selling shares or equity-oriented mutual funds held as investments.
- Short-Term Capital Gains (STCG): If you sell listed shares or equity mutual funds within 12 months, your gains are short-term. They’re usually taxed at 15% (or 20% if transferred on or after July 23, 2024).
- Long-Term Capital Gains (LTCG): If you hold listed shares or equity mutual funds for over 12 months before selling, it’s LTCG. Any LTCG above ₹1 lakh in a financial year is taxed at 10% (or 12.5% if transferred on or after July 23, 2024), without indexation benefits. Special “grandfathering” rules apply for gains made before January 31, 2018.
- Business Income: If your stock market activity is frequent and substantial—more like a business than an investment—then it’s considered business income. This typically applies to:
- Intraday Trading: Classified as speculative business income.
- Futures & Options (F&O) Trading: Classified as non-speculative business income.
Choosing the Right ITR Form
The ITR form you file depends on your income sources:
- ITR-1 (Sahaj): You can use this if your total income is up to ₹50 lakh from salary, one house property, and other sources (excluding lottery winnings and racehorse income).
- New for FY 2024-25: If you have LTCG under Section 112A from listed equity shares or equity mutual funds, you can now use ITR-1, provided the total LTCG doesn’t exceed ₹1.25 lakh and you don’t have any carried forward or brought forward capital losses.
- ITR-2: This is for individuals and HUFs who don’t have income from “profits and gains from business or profession” but have income from salary, house property, capital gains, and other sources (including foreign income/assets).
- If you’re a salaried individual with capital gains (STCG or LTCG) that don’t fit the new ITR-1 LTCG limits, or if you have brought forward/carried forward capital losses, you’ll likely need to file ITR-2. You’ll also need to provide scrip-wise details for LTCG under Section 112A.
- ITR-3: This form is for individuals and HUFs with income from “profits and gains from business or profession,” in addition to salary, house property, capital gains, and other sources.
- If you engage in intraday trading or F&O trading, you must file ITR-3. This form allows you to report both your business income from trading and any capital gains from other share investments.
Essential Documents and Information
Have these ready before you start filing:
- Form 16: From your employer, for your salary details.
- Form 26AS: To verify your Tax Deducted at Source (TDS).
- AIS (Annual Information Statement) / TIS (Taxpayer Information Summary): These provide a comprehensive overview of your financial transactions, including stock market dealings.
- Capital Gains Statement: Get this from your broker or fund house for details of your gains and losses.
- Brokerage Statements/Contract Notes: Especially important for business income from trading.
- Bank Statements: For verifying interest income, dividends, etc.
- Details of Expenses: If you’re reporting business income, gather all records for expenses like brokerage fees, internet costs, software subscriptions, etc., as these are deductible.
How to Report in Your ITR (General Steps)
- Access the Portal: Go to the Income Tax Department’s e-filing portal (incometax.gov.in).
- Log In: Use your PAN and password.
- Select Assessment Year: Choose AY 2025-26 (for FY 2024-25).
- Choose ITR Form: Select the correct form (ITR-1, ITR-2, or ITR-3) based on your income sources.
- Pre-fill Data: The portal will often pre-fill some information from Form 26AS and AIS. Always verify this data carefully.
- Report Capital Gains:
- Go to the “Schedule Capital Gains” section.
- Report STCG and LTCG separately.
- For LTCG under Section 112A, you’ll need to provide scrip-wise details like the ISIN, sale price, purchase price, transaction date, and Fair Market Value as of January 31, 2018 (if applicable).
- Report Business Income (for ITR-3):
- Report your turnover and profit/loss from F&O and intraday trading under the “Profit and Gains from Business or Profession” head.
- You can declare income under the presumptive taxation scheme (Section 44AD/44AE) if you’re eligible, or maintain proper books of accounts.
- Remember to deduct eligible business expenses.
- Dividend Income: Report any dividend income under “Income from Other Sources.” This needs to be reported quarterly in the ITR form.
- Verify and Submit: After entering all your details, thoroughly review your return, pay any outstanding tax, and then e-verify your return.
Important Reminders
- Due Date: For FY 2024-25 (AY 2025-26), the due date for individuals not subject to audit is September 15, 2025.
- Consistency is Key: Try to be consistent in how you classify your stock market activities (investment vs. business) year after year to avoid issues with the tax department.
- Seek Expert Advice: If your stock market income is significant or complex, it’s always smart to consult an income tax expert or Chartered Accountant for precise filing and effective tax planning.
- Maintain Records: Keep all your transaction statements, contract notes, and capital gains statements organized. They’re vital for future reference and in case of any tax department inquiries.
Understanding these details will help you navigate the ITR filing process smoothly, especially with your stock market earnings. Do you have any specific types of stock market income you’d like to discuss further?