Consider I make profit of 2 lakhs in derivatives and I invest the profit amount (2 lakhs) in Equities. And after two years I’m selling the shares and got profit of 3 lakhs. Should I consider this as long term capital gain or should I pay tax for the profit I made in derivatives?
You make a gain of Rs.2 lacs trading derivatives - You will have to add this to your other sources of income and pay tax according to the slab you fall in. However before adding, you can deduct expenses that you incur to earn this income like internet bills, software expenses etc.
You invest 2 lacs using that amount and after 2 years you make a profit of Rs. 3 lacs - These gains are long term capital gains and are exempt from taxes.
There’s a more detailed explanation given here: http://zerodha.com/z-connect/traders-zone/taxation-for-traders/taxation-simplified