The income tax return (ITR) filing season for Assessment Year 2025–26 is in full swing. The deadline to file ITR for salaried and most other taxpayers is 15 September 2025. While many have already filed their returns, experts warn that people with multiple income sources, especially from share trading, F&O, or freelancing, must be extra cautious while filing.
One small mistake in income reporting or tax calculation can lead to a notice from the Income Tax Department, and possibly a hefty tax demand.
Real Case: Taxpayer Got Rs.74,375 Notice Due to Wrong Income Calculation
Sujit Bangar, founder of Taxbadi.com, recently shared a case that highlights how a lack of knowledge about tax rules can backfire. He posted on LinkedIn about a full-time investor named Rahul, who miscalculated his total income and was later issued a notice to pay Rs.74,375 in taxes.
Rahul thought that since his total income was under Rs.12 lakh, he wouldn’t have to pay any tax. But his miscalculation and misunderstanding of tax rules led to trouble.
What Went Wrong in Rahul’s ITR Filing?
Rahul earned income from various types of stock market activities:
- Intraday trading loss: Rs.3 lakh
- Futures & Options (F&O) gain: Rs.2.5 lakh
- Short-Term Capital Gains (STCG): Rs.3.5 lakh
- Long-Term Capital Gains (LTCG): Rs.4 lakh
He calculated his total income as:Rs.2.5L (F&O) + Rs.3.5L (STCG) + Rs.4L (LTCG) - Rs.3L (Intraday loss) = Rs.7 lakh
Based on this, he assumed that since his net income is under Rs.12 lakh, he falls under the tax rebate limit and won’t owe anything. But this assumption was completely wrong as per income tax laws.
Tax Rules Differ for Every Type of Income
Income from different sources is taxed under different heads, and the method of calculating tax for each is also different:
- Intraday trading is treated as speculative business income.
- F&O trading is treated as non-speculative business income.
- Short-Term Capital Gains (STCG) on listed shares are taxed at 15% flat rate.
- Long-Term Capital Gains (LTCG) above Rs.1 lakh are taxed at 10% without indexation.
You cannot combine all types of income and simply subtract losses from profits across heads. Each type of income must be shown under its respective head, and taxes must be calculated separately.
Why the Rs.12 Lakh Rebate Belief Was Wrong
Rahul assumed that income below Rs.12 lakh gets a tax rebate. In truth, Section 87A of the Income Tax Act allows a maximum rebate of Rs.12,500 only if your total taxable income is below Rs.5 lakh (for old regime) or Rs.7 lakh (under the new regime).
Also, this rebate doesn’t apply if the taxpayer has taxable LTCG income exceeding Rs.1 lakh. Since Rahul had LTCG of Rs.4 lakh, and after Rs.1 lakh exemption, Rs.3 lakh became taxable at 10%, he became ineligible for the rebate.
This misunderstanding led to the tax department sending him a demand notice.
Important Tips for Taxpayers with Multiple Income Sources
- Classify your income properly: Don’t mix capital gains with business income or salary.
- Use correct ITR form: Use ITR-3 if you have income from F&O or speculative trading.
- Maintain proper records: Stock transactions, intraday trades, F&O contracts, and profit-loss statements must be kept ready.
- Calculate tax by head: Use the right tax rate for each income type — don’t apply slab rate to everything.
- Rebate is not for everyone: Section 87A rebate does not apply if LTCG exceeds Rs.1 lakh.
- Consider professional help: If you earn from stocks, crypto, or freelancing, consult a tax advisor.
What Can Happen If You File Incorrect ITR?
If your ITR doesn’t match your AIS (Annual Information Statement) or Form 26AS, the Income Tax Department may send a notice under sections like 139(9), 143(1), or even 148 for reassessment.
Penalties, interest under Section 234A/B/C, and legal action are also possible in some cases.
So, it is important to file accurate ITR, especially when your income is spread across multiple categories like business, capital gains, speculative trading, salary, or rental income.