Share market income in India is taxable, and the applicable slab rate depends on your total income.
If your income is below Rs. 2.5 lakhs in a financial year, you are exempt from income tax.
If your total income is between Rs. 2.5 lakhs and Rs. 5 lakhs, then the applicable tax rate is 5%.
For income between Rs. 5 lakhs and Rs. 10 lakhs, the applicable tax rate is 20%.
For income above Rs. 10 lakhs, the applicable tax rate is 30%.
In addition to the applicable tax rate, you also have to pay a securities transaction tax (STT) of 0.025% while buying or selling shares.
There are also certain tax exemptions available for long-term capital gains from equity shares and equity mutual funds. If you have held the shares or mutual funds for more than 12 months, the applicable tax rate is 10%, with no indexation benefit. If you have held the investments for less than 12 months, the applicable tax rate will be the same as your marginal tax rate, depending on your total income.
You can also save tax by investing in equity-linked savings schemes (ELSS). ELSS has a lock-in period of 3 years, and investments up to Rs. 1.5 lakhs are eligible for a tax deduction under Section 80C of the Income Tax Act.
Finally, you can also avail of tax deductions on interest payments on margin money borrowed from a bank or a broker for investment in shares.
We recommend that you consult a qualified tax professional for advice specific to your situation.