MTF Trading

How is MTF taxed?

Profits on shares bought with MTF are taxed like any listed shares: 20% if sold within 12 months, 12.5% on long-term gains above ₹1.25 lakh. Whether you can deduct the interest isn’t settled for most investors.

This page explains the official guidance in plain words. It isn’t tax advice. Tax depends on your situation, and the rules change, so check with a chartered accountant before you file.

A ₹10,000 gain on MTF shares

Sold within 12 months: 20% ₹2,000
Sold after 12 months, if your long-term gains for the year stay under ₹1,25,000 ₹0

Rates for sales from 23 July 2024, from the Income Tax Department’s guidance as amended by the Finance Act 2026. Cess and surcharge left out.

What tax do you pay on MTF profits?

The same as on any listed shares: 20% if you held them 12 months or less, and 12.5% on long-term gains above ₹1.25 lakh in a year.

Buying with MTF doesn’t change how the shares are taxed. These rates apply to sales of listed shares on or after 23 July 2024, where securities transaction tax (STT) is paid. Before that date the rates were 15% and 10%.

HeldTax
12 months or less (short-term)20% of the gain
More than 12 months (long-term)12.5% of gains above ₹1.25 lakh in the year

Sources: Income Tax Department: tax on short-term capital gains; Income Tax Department: tax on long-term capital gains, as amended by the Finance Act 2026

What about losses?

A loss on MTF shares is treated the same way as a loss on shares bought with your own money.

How losses can be set off against gains depends on whether they are short-term or long-term. A CA can work this out from your contract notes and your broker’s profit-and-loss statement.

Sources: Income Tax Department: tax on long-term capital gains, as amended by the Finance Act 2026

Can you deduct the MTF interest you paid?

For most investors this isn’t settled. The Income Tax Department’s guidance doesn’t say whether MTF interest can be added to the cost of your shares, so ask a CA before claiming it.

There are two cases where the official guidance does say something:

  • Against dividends. Interest on money borrowed to earn dividends can be deducted from that dividend income, but only up to 20% of the dividend.
  • If trading is your business. Shares held as stock-in-trade, rather than as investments, are taxed as business income, not capital gains. Whether your trading counts as a business depends on your facts.

Sources: Income Tax Department: deductions from dividend income; Income Tax Department: tax on long-term capital gains, as amended by the Finance Act 2026

What should you keep for your tax return?

Contract notes, the broker’s profit-and-loss statement, and its interest and charges statements for the year.

Your broker’s tax P&L shows each sale with its buy date, so you can see which gains are short-term and which are long-term. Keep the interest statements even if you don’t claim them; a CA may need them.

Sources: Income Tax Department: tax on long-term capital gains, as amended by the Finance Act 2026