Tax on income from selling shares

When you sell shares, the difference between your sale price and your cost is a capital gain (or loss) in the eyes of the tax law — it's the gain that's taxed, not the whole sale value. Your cost includes what you paid plus allowable expenses on the transaction. Getting this base figure right is the foundation for everything that follows.

The single biggest factor is your holding period. Shares held only a short while produce short-term capital gains, while those held longer produce long-term capital gains, and the two are taxed differently. Because the classification changes the tax treatment, track your purchase and sale dates carefully — especially when you've bought the same scrip in tranches over time.

Listed equity gains carry their own special tax treatment that differs from your ordinary slab rates, and that treatment turns on the short-term or long-term classification above. The exact rates here are being confirmed and we keep them off this page rather than risk stating a figure that's changed. The practical point holds regardless: how long you held the shares materially changes your tax, so plan exits with that in mind.

Not every trade is a winner, and losses have value at tax time. Capital losses can generally be set off against capital gains under the rules, and unabsorbed losses may be carried forward to future years — but only if you file your return on time. This is one more reason not to skip filing in a loss year: an unreported loss is a benefit thrown away.

Capital gains are reported in the ITR form that allows for them — typically ITR-2 (or ITR-3 if you also have business income) rather than the simple ITR-1. Use your broker's capital-gains statement, and reconcile it against your AIS, which now reflects securities transactions. Reporting every trade and matching it to the department's data keeps your return clean and query-free.