How to File ITR for Stock Market Income
Start With the Right Form
Individuals with capital gains from stocks or mutual funds, but no business income, typically file ITR-2. If you also have trading income that qualifies as business income — commonly the case for frequent F&O traders — ITR-3 is generally the applicable form instead. Picking the wrong form is one of the most common, and easily avoidable, filing errors.
Capital Gains Get Their Own Schedule
Schedule CG in the ITR is where short-term and long-term capital gains must be reported separately, with details of individual transactions or a consolidated summary depending on your broker's reporting format and the volume of trades involved.
Use Your Broker's Statement — But Verify It
Most brokers provide a capital gains statement or tax P&L report that maps closely to what Schedule CG requires. Even so, it's worth cross-checking this against your Annual Information Statement (AIS) and Form 26AS, since the tax department's own records are what your return will ultimately be compared against.
Don't Forget Dividend Income
Dividend income is reported separately, under "Income from Other Sources," not within the capital gains schedule. It's easy to overlook this when your attention is focused on capital gains, but the department's AIS will already reflect it.
Claiming Losses the Right Way
Short-term capital losses can be set off against both STCG and LTCG in the same year. Long-term capital losses can only be set off against LTCG, not STCG. Any unabsorbed losses can be carried forward for up to 8 assessment years — but only if you file your return before the due date, making timely filing genuinely valuable even when you're not expecting a large tax bill.
Paying What's Due Before You File
If your capital gains and other income generate a tax liability beyond what's already been deducted via TDS, ensure any balance tax, including applicable advance tax instalments, is paid before filing to avoid interest under Sections 234A, 234B, and 234C.
When It's Worth Bringing in a Professional
Given the granularity now required — transaction-wise disclosures, grandfathering calculations for pre-2018 holdings, and differing tax treatment across fund categories — investors with more than occasional trading activity, or any F&O exposure, generally benefit from having a Chartered Accountant review the return before filing. Powered by Mahir Research, investors can at least walk into that conversation with a clear picture of their own portfolio activity, making the professional review faster and more useful.