Capital income or F&O income

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Quick Summary

When you exercise an option contract on expiry and provide physical delivery of stocks from your Demat holdings, this is treated as a sale of those stocks. Consequently, any profits or losses incurred from this transaction should be reported as capital gains or losses in your Income Tax Return (ITR), not as Futures and Options (F&O) income.

Arvind K

Arvind K (Querist)

22 March 2025 My query is - When option contract is exercised on Expiry day, we need to give physical delivery of stocks from our Demat Holding to broker for physical settlement. Is giving physical delivery of stocks consider as Capital Gain/loss or F&O income?
As Giving physical delivery from Demat Holding is considered as "Sale of stocks".
So, is it needed to report in ITR as Capital income or F&O income ?

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

22 March 2025 Physical delivery upon exercising an options contract is treated as a sale of stocks, and any resultant gains or losses should be reported as capital gains or losses in your ITR, not as F&O income.

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

30 September 2025 Good luck....

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