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head of income for mcx income/loss (Income Tax)

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This query is : Resolved


( Author )
07 January 2011

My husband has incurred a loss in mcx commodity trading. Please let me know under what head of income it has to be whether income from business or income from speculation?? the FY is 2007-08 and AY 2008-09.


Aditya Maheshwari

( Expert )
07 January 2011

Speculation business income.


Nischint Kumar Somani

( Expert )
08 January 2011

u have to report this income and business head..income from speculation..

further you are very late to file this return as u can not set off this loss


sudha

( Author )
10 January 2011

thank you for the response but i found in net as follows please go through


http://elagaan.com/income-tax-blogs/now-derivative-trading-mcx-tax-friendlier-ncdex
Now Derivative Trading From MCX is Tax Friendlier Than NCDEX!
In India , there are two main commodity exchanges –Multi Commodity Exchange of India Ltd (MCX ) and National Commodity & Derivative Exchange Ltd NCDEX in India where one can trade in derivative contract of different items –from pulse to metal. Till now , the transactions in derivative segments were regarded as “Speculative transaction” which has a great bearing on the taxation of one’s income as the loss out of speculation is not allowed to be adjusted with any other income . Speculation loss is allowed to be adjusted with only speculation gain.
For example , a person having income of 10 lakhs from share dealing and Rs 10 lakhs loss out of commodity derivatives transaction , has actually did not earn any penny. Still, as per the provision of I T Act , he will have to pay tax on share dealing income of Rs 10 lakhs and the loss of Rs 10 lakhs will have to be carried forward as unadjusted speculation loss. That is the reason , the moment you incur loss in speculation , it becomes problematic if there is no speculation gain ti adjust.
Section 43(5) of the I T Act defines what is speculative transaction. The government vide Finance Act 2005 inserted a proviso (d) in section 5 to provide that trade in derivative segments of recognised stock exchange shall not be regarded as “speculative transaction” . The recognition of the stock exchange for the purpose of Futures and Options trades in shares was notified vide notification no SO 89(E) dated 25/01/2006.As per this notification NSE and BSE are recognised stock exchange for trade in Futures and Option . Therefore, now if the trade is done through these stock exchange , the trade will not be regarded as Speculative Transaction with effect from 25/01/2006.
What is new now?
Now the CBDT has issued Notification No. 46/2009, dated 22-5-2009 by which Multi Commodity Exchange of India Ltd (MCX ) has been recognised under section 43(5)(d) which means that the trade in derivatives through MCX exchange will now be regarded as Business transaction and therefore , the loss , if in unfortunate event of incurring loss will be allowed to be adjusted with any other business income or or from other heads. If you trade through , NCDEX , you will not have this facility.
The the notification 46/2005 dated 22-5-2009 is given below
In exercise of the powers conferred by clause (ii) in the Explanation to clause (d) of the proviso to sub-section (5) of section 43 of the Income-tax Act, 1961 (43 of 1961), read with rule 6DDB of the Income-tax Rules, 1962, the Central Government hereby notifies MCX Stock Exchange Ltd. as a recognized stock exchange for the purpose of the said clause with effect from the date of publication of this notification in the Official Gazette.
2. MCX Stock Exchange Ltd. shall separately maintain data regarding all transactions registered in the system in which client codes have been allowed to be changed for periodical inspection by the Director-General of Income-tax (Investigation) having jurisdiction over such exchange and provide copies of the relevant information as and when required.
3. The Central Government may withdraw the recognition granted to MCX Stock Exchange Ltd. if any of the conditions specified in rule 6DDA of the Income-tax Rules, 1962, subject to which the recognition is granted, is violated.
4. This notification shall remain in force until the approval granted by the Securities and Exchange Board of India is withdrawn or expires, or this notification is rescinded by the Central Government as provided in sub-rule (5) of rule 6DDB of the Income-tax Rules, 1962.


Aditya Maheshwari

( Expert )
10 January 2011

MCX Stock Exchange Ltd. has been recognised under section 43(5)(d) which means that the trade in derivatives through this exchange will now be regarded as Business transaction which deals in currency derivatives.

I agree with the above but please see which exchange trades in commodities. It is Multi Commodity Exchange of India Limited and not MCX Stock Exchange Ltd. So commodities trading in MCX still speculative only.


Aditya Maheshwari

( Expert )
10 January 2011

Also see the notes in the bottom of the post.

Now Derivative Trading From MCX is Tax Friendlier Than NCDEX!
Submitted by bordia on Tue, 11/03/2009 - 13:10.
Dear I think that you did not read that Notification Correctly. Notification 46/2005 dated 22-5-2009 recognised MCX Stock Exchange Ltd (MCX'SX) as recognised stock exchange and not MCX (for commodities). MCX Stock Exchange Ltd. (MCX'SX) and MCX are different exchanges. Former is trading in shares and other in commodities. So still MCX and NCDEX are on same platform with regards to treatment of loss.


sudha

( Author )
12 January 2011

thank you for the response please go through this

http://taxguru.in/income-tax/sale-purchase-in-mcx-is-not-speculative-transaction.html

2 Responses to “Sale Purchase in MCX is Not speculative transaction”
1. suresh says:
December 15, 2009 at 2:09 pm
MCX Stock Exchange Ltd is the same as multi commodity exchange of india ltd. please clarify.
2. admin says:
December 15, 2009 at 3:41 pm
Yup


Aditya Maheshwari

( Expert )
12 January 2011

Read the notification for recognised stock exchange. First of all commodities business & stock market business cannot be carried out in the same company. So MCX Stock Exchange Ltd is the same as multi commodity exchange of india ltd. This is totally wrong. Do not go by this.

Read the notification and check and also check on the MCX website.

Also check your contract note which exchange name is enlisted.


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