Overnight Position

“Overnight Positions” refers to the practice of holding trading positions in financial instruments, such as stocks, commodities, or currencies, beyond the trading day. In other words, it means keeping a position open overnight, from one trading day to the next.

Tax implication of overnight positions

The tax implication of overnight positions in India are highlighted below.
Capital gains
Profits or gains from the sale of stocks, mutual funds, or other securities held overnight are treated as capital gains and are subject to taxation. The tax rates for capital gains depend on the holding period and the type of capital asset in question.
STT
Securities Transaction Tax (STT) is levied on the purchase and sale of securities in recognized stock exchanges. STT is applicable to both day trades and overnight trades and is generally borne by the seller. The rates of STT vary depending on the type of security and the transaction.
Taxation of derivatives
Trading in derivatives, such as futures and options, has specific tax implications in India. Profits or losses from derivative transactions held in overnight positions are treated as business income or speculative income, depending on the frequency and volume of trades. While the business income is taxed at applicable slab rates, the speculative income is taxed at a flat rate of 30% as per the provisions of the Act.