I think government employees are prohibited from speculative trading. You can buy securities for short term or long term. But I think there are restrictions in intraday trading. You can refer this article :
You must mandatorily show losses in stock market trading in ITR returns.
If you are a state govt employee, get in touch with rule book while you joined the job. You should not be allowed to do trading since it is a business. However you can do investing. Better option would be to do it on your mother’s or wife’s name.
You should fill ITR3 or ITR4. However, in ITR4, you can’t carry forward your loss to next year.
Because government officials or employees are often privy to insider information. That way they can get unfair advantages. That is why short term speculative participation is prohibited. Not because they think that it is gambling. You can invest for long term. In fact it is the same scenario in many developed nations. Not only in India.
I think as per income tax act trading in F&O is considered as non speculative. As it can be done for risk mitigation and hedging purpose. That speculative trading is related to intraday stock trading only.