Costs & Taxation in India

1. What you'll learn and why it matters

Every trade you make has two silent partners: the government and the market infrastructure, which take transaction charges whether you win or lose, and the tax department, which takes a share of what you keep. Beginners often ignore both, because each charge looks tiny (0.1% here, ₹20 there) and tax feels like a problem for next July. Both matter. Costs decide whether a small edge survives at all, and taxes decide how fast your capital compounds.

By the end of this chapter you will be able to:

• name every charge on an Indian equity, futures or options trade and calculate it from the current rates (brokerage, STT, exchange transaction charges, SEBI fee, stamp duty, GST, DP charge);
• work out the breakeven move, meaning how far the price must move before you make anything, for a delivery swing trade, a long-term sale, a futures trade and an options trade, using real 2026 prices;
• classify each market activity correctly: short-term capital gain, long-term capital gain, speculative business income (equity intraday) or non-speculative business income (F&O);
• calculate STCG (20%) and LTCG (12.5% above ₹1.25 lakh), including holding period, FIFO and grandfathering for pre-2018 shares;
• apply the set-off and carry-forward rules for losses, and avoid the most common mistake (trying to set F&O losses against salary);
• handle dividends (slab rate, 10% TDS, i.e. tax deducted at source by the company, above ₹10,000 per company) and the 2026 change to buyback taxation;
• compute F&O turnover the way the ICAI (Institute of Chartered Accountants of India) prescribes, check whether you need a tax audit, choose the right ITR (income-tax return) form, and pay advance tax on time;
• use legal habits such as yearly LTCG harvesting and 12-month timing, and see what they were worth on real data;
• put it all together in a complete tax computation for a sample learner's year built from real 2026 trades.

2. The charges on every trade, one by one

When you press "Buy" and later "Sell", seven kinds of money leave your account in addition to the share price. Some go to your broker, some to the exchange, some to the regulator, and some are taxes to the Central or State Government. A contract note (emailed by your broker after every trading day) lists each one. Here is what each charge is and why it exists.

1. Brokerage: your broker's fee. Discount brokers such as Zerodha charge ₹0 for equity delivery, and 0.03% or ₹20 per executed order, whichever is lower, for intraday and futures, and a flat ₹20 per order for options. Full-service brokers often charge a percentage (0.2–0.5% for delivery is common), which on a ₹1.5 lakh trade can be more than all the other charges together.
2. STT (Securities Transaction Tax): a Central Government tax on every trade in listed securities, collected by the exchange through your broker. It is the largest cost for most retail trades. It was introduced in 2004 as a simple way to collect tax on market activity. Its rate depends on the product (table below). CTT (Commodities Transaction Tax) is the equivalent on commodity derivatives: 0.01% on the sell side of non-agri commodity futures and 0.05% on the sell side of commodity options.
3. Exchange transaction charges: the exchange's fee for running the market (NSE or BSE), charged on turnover. NSE also collects a tiny Investor Protection Fund Trust (IPFT) charge of ₹0.01 per crore, small enough to ignore.
4. SEBI turnover fee: ₹10 per crore of turnover (0.0001%), paid to the market regulator.
5. Stamp duty: a State-level duty collected centrally since July 2020 under the Indian Stamp Act. It is charged only on the buy side.
6. GST: 18% on the services part of the bill: brokerage + exchange transaction charges + SEBI fee. There is no GST on STT or stamp duty, because those are themselves taxes.
7. DP (depository participant) charge: when shares leave your demat account on a sale, the depository (CDSL/NSDL) and your broker charge a flat fee per stock per day sold, whatever the quantity. At Zerodha it is ₹15.34 (₹3.50 CDSL + ₹9.50 Zerodha + GST).

Current rates (as listed on zerodha.com/charges, 2 Oct 2026)

The SEBI fee is ₹10 per crore as listed on 2 Oct 2026: a few paise on a normal trade. Other brokers' exchange and statutory charges are the same; only brokerage and DP charges differ. Other occasional charges include the demat AMC (annual maintenance charge; free under ₹4 lakh of holdings for a BSDA, or Basic Services Demat Account, at Zerodha), pledge fees, MTF (margin trading facility, i.e. buying shares with borrowed money) interest at 0.04% per day, and call-and-trade fees. They are not part of a normal round trip.

STT has been raised twice in two years: know which rate applies

The October 2024 rise came from Budget 2024. The April 2026 rise came from Budget 2026 and applies to F&O trades entered on or after 1 April 2026. Its stated aim was to cool speculative derivatives trading. Cash-market rates did not change. When you read older articles, tutorials or backtests, check which STT they assumed.

3. Four real round trips and their breakeven

All prices below are actual NSE closing prices from the course data. Charges come from course/scripts/ch13_figures.py, and the framework's framework.costs functions give identical totals (cross-checked: ₹345.41 and ₹931.34).

Trade size matters for delivery

Two parts of the delivery bill are fixed per trade: the ₹15.34 DP charge, and any per-order brokerage. On a small trade they become a large percentage. The 0.1% + 0.1% STT sets a floor near 0.2% that you cannot get below.

4. Cost drag: why trade frequency matters

One round trip is cheap. A year of them is not. Take a ₹5 lakh account that swings ₹1.5 lakh positions (₹349.06 per delivery round trip at Zerodha rates), or trades one Nifty futures lot (₹932.77 per round trip at a ₹15.66 lakh contract value):

How to use it: before adopting any strategy, multiply its expected trades per year by the cost per trade, and compare that with its expected gross return. If costs take more than a third of the gross edge, the strategy is fragile: small changes in market behaviour will push it into loss.

5. Income-tax basics for tax year 2026-27

Income tax in India is charged on your total income for a tax year, grouped under "heads": salary, house property, business or profession, capital gains, and other sources. For a trader the relevant heads are salary (if employed), capital gains, business income and other sources (dividends, interest). The key idea is that some income is taxed at your slab rate and some at a flat special rate.

The new regime slabs (default since FY 2023-24; unchanged by Budget 2026)

• Standard deduction for salaried people: ₹75,000.
• Rebate (old s.87A): if total income is up to ₹12,00,000, slab tax up to ₹60,000 is rebated, so tax is zero. Just above ₹12 lakh, marginal relief caps your slab tax at the amount by which your income exceeds ₹12 lakh, so earning ₹1 more never costs you more than ₹1 in tax. Since Budget 2025 this rebate cannot be used against tax on special-rate income such as STCG (20%) or LTCG (12.5%). Many people miss this.
• Health & education cess: 4% on the tax.
• Surcharge applies only above ₹50 lakh of income (10%, 15% above ₹1 crore, 25% above ₹2 crore in the new regime). On listed-equity capital gains and dividends it is capped at 15%.
• Basic-exemption adjustment: a resident whose slab income is below ₹4 lakh can use the unused part of the ₹4 lakh against STCG/LTCG. A student with only capital gains often pays nothing.
• The old regime (lower basic exemption, deductions like 80C/80D) still exists if you opt into it. It is worth comparing only if you have large deductions. This chapter uses the new regime throughout.

6. Classifying your market activity

Step one of every tax question is: what kind of income is this? The same ₹1 lakh profit can be taxed at 0%, 12.5%, 20% or 30% depending on how it was earned and how you classify it. Varsity's Module 7 is built around this idea.

Why F&O is "non-speculative"

The law defines a speculative transaction as one settled without actual delivery. Intraday equity fits that definition. Derivatives traded on a recognised exchange are expressly excluded from it, even though most are cash-settled. So F&O profits are ordinary (non-speculative) business income. This matters for losses (see part 9): non-speculative losses are far more flexible than speculative ones.

Delivery trades: capital gains or business? You choose, then stay consistent

For listed shares, CBDT (Central Board of Direct Taxes, which administers income tax) Circular 6/2016 lets the taxpayer decide whether to treat holdings as investments (capital gains) or stock-in-trade (business income). Once chosen, you must apply it consistently in later years unless your situation genuinely changes. For shares held more than 12 months, if you choose capital gains the department will not dispute it. Very frequent short-term delivery trading is where tax officers may argue it is really a business. Many CAs advise treating a high-volume, short-holding delivery book as business income. You can keep two separate portfolios, a trading book and an investment book, and classify them differently, provided the records clearly separate them.

7. Capital gains on listed shares: STCG and LTCG

The rules (tax year 2026-27, unchanged by Budget 2026)

• Applies to listed equity shares, equity-oriented mutual funds and equity ETFs, and business trust units, sold through a recognised exchange with STT paid. These rates took effect for sales from 23 Jul 2024 (before that: STCG 15%, LTCG 10% above ₹1 lakh). Which funds count as equity-oriented, and how each SIP instalment is taxed, is covered in Chapter 15.
• The ₹1.25 lakh exemption is per person per tax year, across all your listed-equity LTCG combined. It does not carry over if unused.
• Holding period: "more than 12 months" is counted in calendar months from the purchase date (trade date) to the sale date. A share bought on 15 Sep 2025 becomes long-term if sold on or after 16 Sep 2026. Counting days can mislead around leap years (bought 1 Mar 2023, sold 1 Mar 2024 is 366 days but still exactly 12 months, so it is short-term). If unsure, wait an extra day.
• Indexation does not apply to listed equity.

FIFO: which shares did you sell?

If you bought the same stock more than once, the tax law (CBDT Circular 768 of 1998, for demat holdings) and the depository both treat a sale as coming from your oldest lot first (First In, First Out). You cannot pick a lot. FIFO decides the holding period of what you sold, and therefore its tax treatment.

8. Grandfathering for shares bought before 1 Feb 2018

Until 31 Mar 2018, LTCG on listed shares was fully exempt. When the tax was brought back (Budget 2018), gains already earned up to 31 Jan 2018 were protected, or "grandfathered". For shares bought on or before 31 Jan 2018, the cost used is stepped up to the fair market value (FMV): the highest price quoted on a recognised exchange on 31 Jan 2018. The step-up can remove gains but cannot create a loss:

We took the FMVs from the actual NSE cash-market bhavcopy of 31 Jan 2018 (the day's HIGH column). Your broker's tax P&L report should apply the same figures.

Grandfathering applies to listed shares and equity-oriented MF units acquired on or before 31 Jan 2018 (for MF units, the FMV is the NAV on that date). It matters only for long-term sales, which these always are now.

9. Setting off and carrying forward losses

Losses are worth money: a loss you are allowed to set off reduces the tax on a gain. The rules say which losses may absorb which income, in the same year and in future years.

• Capital losses never touch salary, business or other income.
• F&O losses cannot reduce salary. This is the most common misconception. Salaried traders with F&O losses still pay full tax on salary; the loss waits for future business profits.
• Carrying forward any of these losses requires filing your return by the original due date (see part 13). A late (belated) return loses the carry-forward.
• Set off within the same head first, then across heads.
• The LTCG exemption applies after set-off. A long-term loss used against LTCG that would have been exempt anyway is "wasted", but the law requires the set-off; you cannot choose to save the loss for later.

10. Dividends and buybacks

Since 1 Apr 2020, dividends are taxed in the shareholder's hands at slab rate under "income from other sources". Points that matter in tax year 2026-27:

• TDS (s.393, old s.194): the company deducts 10% if it pays you more than ₹10,000 in a tax year (raised from ₹5,000 from 1 Apr 2025). The threshold is per company. TDS is not the final tax: you add the gross dividend to income and claim the TDS as a credit. Without a valid PAN, TDS is 20%. If your total income is below the taxable limit you can submit Form 15G (15H for seniors) to avoid TDS.
• No deductions from tax year 2026-27: Budget 2026 amended the rules (s.93 of the new Act) so that no expense, not even interest on money borrowed to buy the shares, can be deducted from dividend or mutual-fund income. Until 31 Mar 2026, interest up to 20% of the dividend was deductible.
• Timing: you get the dividend only if you hold the share at the close of the day before the ex-date. On the ex-date the price usually drops by about the dividend, so "dividend stripping" by buying just before is not free money (Chapter 1).
• Buybacks, changed again by Budget 2026: from 1 Oct 2024 to 31 Mar 2026, buyback money was taxed as a dividend at slab rate, and your cost became a separate capital loss. From 1 Apr 2026, buyback proceeds are again treated as capital gains for shareholders: sale price minus cost, STCG or LTCG by holding period. Promoters pay an additional levy. If you tendered in a buyback in FY 2025-26, the older rule applied.

11. F&O and intraday as business income

What you may deduct

Because F&O (and intraday) profit is business income, you are taxed on net profit after legitimate business expenses, at slab rate:

• all trading charges, including STT (deductible as a business expense), brokerage, exchange charges, stamp duty, GST and DP charges;
• a proportionate share of internet and phone bills, data and charting subscriptions, research and advisory fees (from SEBI-registered advisers), trading books and courses;
• depreciation on a computer or laptop used for trading;
• rent for a dedicated trading space, and salaries of anyone assisting you;
• interest on money borrowed for the trading business.

Keep bills and a bank statement trail for every expense. "Proportionate" means only the business share: a home broadband plan used mostly by the family cannot be claimed in full.

Turnover: the number that decides audit, not your tax

For business income, "turnover" is used to check audit and presumptive-tax limits. It does not affect how much tax you pay. Under the ICAI Guidance Note on Tax Audit (8th edition, Aug 2022):

• Futures and options: the sum of the absolute profit or loss of each trade ("favourable and unfavourable differences"). Since the 2022 revision, option premium received is no longer added. Varsity's text still mentions the old method, which is now outdated.
• Intraday equity: also the absolute sum of differences.
• Delivery shares treated as business: the full sale value.
• Compute it trade-wise (most conservative). Broker tax P&L reports generally provide a turnover figure.

Tax audit (s.63, old s.44AB)

• Turnover above ₹10 crore requires a tax audit, if cash receipts and cash payments are each no more than 5% of the total (always true for exchange trading). Otherwise the limit is ₹1 crore. Very few retail traders reach ₹10 crore of absolute P&L.
• The presumptive-scheme trap: if you used the presumptive scheme (next point) in any of the previous five years and now declare profit below the presumptive rate (6%) while your total income exceeds the basic exemption, you need an audit. The often-repeated rule "profit below 6% of turnover means audit" applies only in this opt-out situation. A trader who has never used the presumptive scheme and makes a loss does not need an audit below ₹10 crore of turnover.
• Audit cases have later due dates (see part 13) and a CA must sign Form 26 (old Form 3CD).

Presumptive taxation (s.58, old s.44AD)

Businesses with turnover up to ₹2 crore (₹3 crore if cash receipts ≤ 5%) may declare a deemed profit of 6% of digitally received turnover (8% for cash) instead of keeping full books. Advance tax is then a single payment by 15 March. For traders, this scheme is a mixed blessing:

• Whether it should apply to F&O at all is debated among CAs. Declaring 6% of an "absolute P&L" turnover when actual profit is much higher is an aggressive position.
• If you opt out within five years of opting in, you are locked out for the next five and face the audit rule above.
• Losses cannot be carried forward under presumptive income.

Most traders are better off filing ITR-3 with actual profit or loss and proper books. Ask a CA before using it.

Books of accounts

Varsity suggests a simple practical setup that still works: (1) a bank book: download all bank statements and note what each entry was; (2) a trading book: the broker's tax P&L, ledger, contract notes and year-end open-position statement. Formal books become mandatory once business income or turnover crosses prescribed limits. Business filers also report a simple balance sheet (what you own and owe) and P&L (trading revenue minus expenses) in ITR-3. Salary goes in its own schedule, not in this P&L.

12. Advance tax and interest

Salary has tax deducted at source. Trading income usually does not. If your tax for the year, after TDS, is ₹10,000 or more, you must pay it in instalments during the year as advance tax:

• Deferment interest (s.425, old s.234C): 1% per month on each shortfall, for 3 months for each of the first three instalments and 1 month for the last.
• Default interest (s.424, old s.234B): if less than 90% of the year's tax is paid by 31 March, 1% per month from April until you pay.
• Exception for capital gains and dividends: because you cannot predict them, no deferment interest is charged on these if you pay the tax in the remaining instalments after the gain or dividend arises. There is no such exception for F&O business income: you are expected to estimate it.
• Pay through the e-filing portal (challan ITNS 280, "advance tax"). Varsity's practical advice still works: pay on profits already booked; if the year ends lower, the excess is refunded with interest.

13. ITR forms, due dates and records

This is the form structure used for returns filed in 2026. Under the new Act the CBDT notifies the forms each year, so check the e-filing portal for the year you file.

Due dates

Records to keep for each tax year

• Broker tax P&L (split into STCG, LTCG, intraday, F&O, with turnover), tradebook, ledger, contract notes, dividend statement;
• AIS and Form 26AS reconciled against the broker reports (look for missing dividends and mismatched sale values);
• advance-tax challans; expense bills for business deductions; your carried-forward-loss schedule from earlier years' returns;
• for grandfathered shares, the purchase evidence and FMV used.

14. Legal tax habits: harvesting and timing

LTCG harvesting: use the ₹1.25 lakh exemption every year

The exemption resets every tax year and cannot be carried over. A long-term investor who never sells wastes it each year and later pays 12.5% on the whole accumulated gain. Harvesting means selling enough long-term units each year (typically in February or March) to book about ₹1.25 lakh of LTCG tax-free, then buying back. The new purchase price becomes your higher cost, so that gain is never taxed. The catch: the repurchased units start a new 12-month clock, and you pay a round trip of charges.

Tax-loss harvesting

The opposite move: if you have booked gains, selling a losing position before 31 March realises a loss to set against them (a short-term loss can absorb both kinds of gain). India has no explicit wash-sale rule, but Varsity cautions that rapid sell-and-rebuy of the same stock purely to create a loss can draw scrutiny. Have a genuine reason, keep it simple, and ask a CA if the amounts are large. Never hold a bad position just to keep a loss for "tax reasons", and never sell a good one just to save tax.

For mutual funds and ETFs, Chapter 15, parts 10–11 work through both kinds of harvesting on SIP lots, and Chapter 16, part 14 combines the March harvest with rebalancing.

Other timing habits

• Check the 12-month date before selling a winner that is close to it (TITAN in part 7), but only if your stop and your plan allow you to wait.
• Split large long-term sales across two tax years (late March and early April) to use two exemptions.
• Gifting shares to a spouse or relative is not a taxable transfer, but income on gifts to a spouse is usually clubbed back into your income. Ask a CA first.
• Off-market transfers (outside the exchange) pay no STT, so the concessional equity rates do not apply.

15. Other assets and foreign stocks (brief)

"Debt mutual funds" here means specified mutual funds: from 1 Apr 2025, funds with more than 65% in debt and money-market instruments (s.76 of the Income-tax Act, 2025; old s.50AA). Units of such funds bought before 1 Apr 2023 are long-term after 24 months and taxed at 12.5%. Chapter 15 sorts every kind of fund into its tax class, with debt, gold and international funds in part 12.

Foreign stocks (Varsity chapter 8): residents may remit up to US$250,000 a year under the Liberalised Remittance Scheme. Remittances for investment above ₹10 lakh a year attract 20% TCS (tax collected at source by your bank), which you can claim back against your tax. Budget 2026 cut TCS to 2% only for education and medical remittances; investment remittances stay at 20%. Foreign shares are long-term only after 24 months, taxed at 12.5%; short-term gains go at slab rate. Foreign dividends are taxed at slab, with credit for tax withheld abroad (e.g. 25% in the US) claimed through Form 67 under the tax treaty. Every foreign asset must be disclosed in Schedule FA (calendar-year basis), even if it earned nothing. Missing it can trigger a ₹10 lakh penalty under the Black Money Act (the penalty does not apply when the undisclosed assets other than immovable property total ₹20 lakh or less, and Budget 2026 aligned the prosecution provision with that threshold). Do not rely on the threshold: just fill in Schedule FA. Convert values using the SBI TT buying rate as the rules specify.

16. A full year for a sample learner

Let's put everything together. Our learner is a salaried resident (₹15,00,000 salary, employer deducts TDS on salary) on the new regime, doing what this course teaches: some delivery swing trades, a few long-term sales, a handful of futures trades, and collecting dividends. All prices are real closes; the dates fall in tax year 2026-27 (trades to 30 Sep 2026; nothing else happens later in the year).

(a) Nine delivery swing trades (about ₹1.5 lakh each) → STCG

*Sale value minus cost, after deducting brokerage, exchange charges, SEBI fee, GST, stamp duty and DP charges, but not STT. Five of nine trades lost money: a normal win rate for swing trading. The ONGC trade was bought in the previous tax year; only the sale date matters. Charges on the nine trades came to ₹3,113.50, of which STT was ₹2,675.93 and not deductible. That non-deductibility cost about ₹556.59 of extra tax (20% × 2,675.93 × 1.04). The cash P&L after all charges was ₹13,888.89 on ₹17,002.39 gross.

(b) Three long-term sales → LTCG

The ASIANPAINT long-term loss can only reduce long-term gains, so it is set against SBIN and MARUTI. Net LTCG above the exemption: 1,54,705.41 − 1,25,000 = ₹29,705.41 taxable.

(c) Four futures trades → non-speculative business income

• Less other trading expenses (share of data subscription and internet, illustrative): ₹9,000. Business income = ₹52,128.36. All charges, including ₹2,300.48 of STT, were deductible.
• Turnover (ICAI) = 6,591.00 + 25,499.50 + 46,725.00 + 36,100.00 = ₹1,14,915.50. Far below ₹10 crore and presumptive never used, so no audit. (Profit is 45.36% of turnover anyway.)
• These are only four trades with one lot each. Futures at this size need roughly ₹1–2.5 lakh of margin per lot and tolerance for swings like the −₹26,430 one. Chapters 9 and 11 come first.

(d) Dividends → other sources: ₹17,540 (see part 10)

(e) The computation (new regime, resident, below 60)

Two "what if" versions of the same year

17. In your framework, and try it yourself

Snippet 1 uses the course's framework package; snippets 2 and 3 need only pandas. All three read files from the course repository's data/ folder, so save each as a .py file and run it from the repository's root folder (for example .venv/bin/python snippet.py; setup steps are in framework/README.md). If you do not have the repository, the self-contained charges() and equity_cg_tax() functions still work: type in your own prices instead of reading the CSV files.

1. Cost and breakeven of any delivery trade (reproduces the SUNPHARMA example):

import sys; sys.path.insert(0, ".")          # run from the repository root, so framework/ is importable
import pandas as pd
from framework.costs import equity_delivery_charges

df = pd.read_csv("data/ohlc/SUNPHARMA.csv",
                 index_col=0, parse_dates=True)
buy, sell, qty = df.loc["2026-06-15", "Close"], df.loc["2026-08-24", "Close"], 80
c = equity_delivery_charges(buy, sell, qty)
for k in ["brokerage", "stt", "exchange_txn", "sebi", "gst", "stamp_duty", "dp_charges", "total"]:
    print(f"{k:>13}: Rs {c[k]:>8.2f}")
print("breakeven move:", round(c["total"] / qty / buy * 100, 3), "%")   # 345.41 total, 0.239 %

2. A self-contained charges function and a real futures round trip (no framework needed):

import pandas as pd

def charges(buy_value, sell_value, seg="delivery"):
    """Round-trip charges at Zerodha-listed rates (Oct 2026). Options: pass PREMIUM values."""
    R = {  # stt_buy, stt_sell, exchange, stamp(buy), dp(per sell)
        "delivery": (0.001, 0.001, 0.0000307, 0.00015, 15.34),
        "intraday": (0.0, 0.00025, 0.0000307, 0.00003, 0.0),
        "futures":  (0.0, 0.0005, 0.0000183, 0.00002, 0.0),
        "options":  (0.0, 0.0015, 0.0003553, 0.00003, 0.0),
    }[seg]
    def brk(v):
        if v <= 0 or seg == "delivery": return 0.0
        return 20.0 if seg == "options" else min(20.0, 0.0003 * v)
    b = brk(buy_value) + brk(sell_value)
    stt = buy_value * R[0] + sell_value * R[1]
    exch = (buy_value + sell_value) * R[2]
    sebi = (buy_value + sell_value) * 10 / 1e7
    gst = 0.18 * (b + exch + sebi)
    stamp = buy_value * R[3]
    dp = R[4] if sell_value > 0 else 0.0
    return round(b + stt + exch + sebi + gst + stamp + dp, 2)

fut = pd.read_csv("data/fno/futures_aug_sep_2026.csv",
                  parse_dates=["TradDt", "XpryDt"])
nf = fut[(fut.TckrSymb == "NIFTY") & (fut.XpryDt == "2026-09-29")].set_index("TradDt")
lot = int(nf.NewBrdLotQty.iloc[0])
b, s = nf.loc["2026-09-01", "ClsPric"], nf.loc["2026-09-04", "ClsPric"]
tot = charges(b * lot, s * lot, "futures")
print(f"NIFTY fut buy {b} sell {s} lot {lot}: charges Rs {tot}, breakeven {tot/lot:.2f} points")
# -> charges Rs 931.34, breakeven 14.33 points

3. Grandfathering and the year's capital-gains tax:

import pandas as pd

def grandfathered_cost(actual_cost, fmv_31jan2018, sale_price):
    return max(actual_cost, min(fmv_31jan2018, sale_price))

def equity_cg_tax(stcg, ltcg, exemption=125_000):
    """Listed equity, tax year 2026-27, ignoring rebate/basic-exemption effects. Includes 4% cess."""
    if stcg < 0:                       # a short-term loss can absorb long-term gains
        ltcg, stcg = ltcg + stcg, 0.0
    tax = max(stcg, 0) * 0.20 + max(ltcg - exemption, 0) * 0.125
    return round(tax * 1.04, 2)

px = pd.read_csv("data/ohlc/MARUTI.csv",
                 index_col=0, parse_dates=True)["Close"]
buy, sell = round(px["2017-10-03"], 2), round(px["2026-09-15"], 2)
cost = grandfathered_cost(buy, 9585.00, sell)          # 9585.00 = NSE high on 31-Jan-2018
print("cost used", cost, "gain on 20 sh", round((sell - cost) * 20, 2))       # 52920.0
print("tax:", equity_cg_tax(16_564.82, 154_705.41))                            # 7307.19

Exercise: replace the two numbers in the last line with your own broker's tax P&L totals. If you have the course repository, rerun course/scripts/ch13_figures.py after changing the sample learner's salary in the script (SAL) to see how the bill changes.

18. Practical checklist

• Before a strategy goes live: cost per round trip × trades per year compared with expected gross return. Costs should take well under a third of the edge.
• Every backtest uses the 1 Apr 2026 F&O STT (0.05% futures, 0.15% options) and the 0.1% + 0.1% delivery STT.
• Delivery trades sized at ₹50,000 or more where possible, so fixed charges stay small.
• Keep a separate "investment book" and "trading book" (different tags or demat accounts) and classify each consistently every year.
• Before selling a winner, check whether it is within a few weeks of its 12-month date, and whether waiting fits your stop.
• Track realised LTCG during the year. In February–March, harvest up to ₹1.25 lakh if the exemption is unused.
• Track realised STCG, F&O profit and dividends monthly. Pay advance tax by 15 Jun / 15 Sep / 15 Dec / 15 Mar once the extra tax is ₹10,000 or more.
• F&O or intraday in the year means ITR-3, filed by the due date (31 Aug for non-audit cases) so losses can be carried forward.
• Compute F&O turnover (sum of |P&L|, no premium) and confirm you are under the ₹10 crore audit limit. Avoid the presumptive scheme unless a CA recommends it.
• Reconcile the broker tax P&L with AIS/26AS. Report every dividend, even those without TDS.
• Keep bills for business expenses (data, internet share, laptop) if you have business income.
• After every Budget (1 February) and every 1 April, re-check STT, slabs, exemption limits and due dates, and update framework/config.py.
• Have a CA review the return in any year with F&O, losses to carry forward, grandfathered sales or foreign assets.

19. Key takeaways

20. Quiz and exercises

21. Sources

Zerodha Varsity, Module 7, Markets and Taxation (concepts; explained here in our own words, and updated where Varsity's figures are older): 1. Introduction (Setting the Context) · 2. Basics · 3. Classifying Your Market Activity · 4. Taxation for Investors · 5. Taxation for Traders · 6. Turnover, Balance Sheet and P&L · 7. ITR Forms (The Finale) · 8. Foreign Stocks and Taxation.

Charges (checked 2 Oct 2026): Zerodha charges page (brokerage, STT, NSE transaction charges, SEBI fee, stamp duty, GST, DP ₹15.34) · Zerodha Z-Connect: new STT and CTT rates · ClearTax: STT rates incl. Budget 2026 F&O hike · ICICI Direct: STT changes in Budget 2026 (futures 0.02%→0.05%, options 0.1%→0.15%, exercise 0.125%→0.15%, from 1 Apr 2026) · STT on ETFs (0.001% on sell).

Tax rules for tax year 2026-27 (checked 2 Oct 2026): Income Tax Department e-filing portal · Ministry of Finance: Memorandum explaining the Finance Bill, 2026 (official; STT rates and the 1 Apr 2026 effective date, buyback as capital gains, no interest deduction against dividends under s.93, ITR-3/4 due date 31 Aug under s.263(1)(c), revised return to 12 months, CG sections 196–198) · Budget Speech 2026-27 (official) · Finance Bill, 2026 (official text) · PRS Legislative Research: Union Budget 2026-27 analysis · KPMG: India Union Budget highlights 2026-27 · Business Today: slabs for FY 2026-27 unchanged · Taxguru: capital gains under the Income-tax Act, 2025 (s.196, s.198) · Taxguru: tax audit under s.63 · Presumptive taxation, s.58 (new Act) · Taxguru: advance tax and interest (s.424/425) · TDS on dividends, s.393(1), ₹10,000 threshold · Taxguru: Budget 2026 bars interest deduction against dividend/MF income · ClearTax: buyback taxed as capital gains from 1 Apr 2026 · ClearTax: Budget 2026 highlights (ITR-3/4 due 31 Aug; revised return to 31 Mar) · ICAI Guidance Note on Tax Audit (2022): option premium not part of turnover · TCS on LRS remittances after Budget 2026 (20% above ₹10 lakh for investment) · CBDT Circular 6/2016 (shares as capital asset or stock-in-trade) and Circular 768/1998 (FIFO for demat holdings).

Data: daily OHLC and dividends from NSE via Yahoo Finance (data/ohlc/); NSE F&O UDiFF bhavcopy Aug–Sep 2026 (data/fno/futures_aug_sep_2026.csv) and Nifty option chain 30 Sep 2026 (data/fno/nifty_options_2026-09-30.csv); NSE cash-market bhavcopy of 31 Jan 2018 for grandfathering FMVs (data/extra/ch13_nse_bhav_31jan2018.csv); NIFTYBEES history (data/extra/NIFTYBEES.csv). All calculations and figures: course/scripts/ch13_figures.py (numbers saved to data/extra/ch13_numbers.json). Examples are historical analysis for education, not recommendations or tax advice.