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Discussion > Income Tax > Tax queries >

Tax on Income from Share Trading

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Student

[ Scorecard : 38]
Posted On 06 May 2011 at 20:28 Report Abuse

Suppose, Mr. A is 55 years old person who trades in shares and income from share trading is only his income. He normally buys and sells on the same day without taking delivery or takes delivery and sells the shares afterwards but before 1 year.
 
1) What will the nature of income from this two types of transactions? Whether the income from day trading without trading will be treated as speculation gains or business income?
2) How can we show the same for the tax purpose?
3) Are these incomes chargeable at different income tax rates? at what rate of tax?
4) Which ITR form to be used? What could be the nature of business?
5) Is he eligible for any deductions from Section 80C of Income tax Act?
6) If there are losses under these two types of transactions, whether the same can be carried forward?
 
Kindly revert.

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U S Sharma
glidor@gmail.com

[ Scorecard : 19366]
Posted On 06 May 2011 at 21:32

Originally posted by : bharati vidhyadhar marathe

Suppose, Mr. A is 55 years old person who trades in shares and income from share trading is only his income. He normally buys and sells on the same day without taking delivery or takes delivery and sells the shares afterwards but before 1 year.

 

1) What will the nature of income from this two types of transactions? Whether the income from day trading without trading will be treated as speculation gains or business income?

2) How can we show the same for the tax purpose?

3) Are these incomes chargeable at different income tax rates? at what rate of tax?

4) Which ITR form to be used? What could be the nature of business?

5) Is he eligible for any deductions from Section 80C of Income tax Act?

6) If there are losses under these two types of transactions, whether the same can be carried forward?

 

Kindly revert.

1) shares hold more then 365 days in demat then sell , it would come under LTCG, exempted if stt paid on sales.

2) intraday is speculation, and such income is directly added to taxable income, such loss can not be adjusted with any other head except speculation 

3) F&O trades are business income / loss.

4) he can avail 80C fron all his turnover except LTCG

5) if business income then ITR4, otherwise ITR2





Nitin Grover
CS

[ Scorecard : 1113]
Posted On 06 May 2011 at 23:57

Dear Friend

If You Share hold for more than 365 days and then sell it will be treated as LTCG. Its Exempt from Tax because STT has been paid on it with brokerage.

If its short terms then Tax on net profit is 15%

No Exemption in 80 C is allowed because flat rate of Tax is applicable.

In other STCG which clubbed with Total Income is eligible to get exemption uunder section 80C.

Form ITR 2 will be applicable.

 

To sell share on same day or sell afterwards but before completion of 365 days it has same meaning for Income Tax.

 

Regards

CS Nitin Grover

+91-9582009494

Email : nitinsgrover @ gmaill.com




bharati marathe
Student

[ Scorecard : 38]
Posted On 07 May 2011 at 08:31

Originally posted by : U S Sharma





Originally posted by : bharati vidhyadhar marathe


Dear Shrma Sir,

Thank you for your reply.

If Mr. A has, suppose, some other income of Rs. 350000 & speculation gain on shares is of Rs. 200000 and also Short term capital gain tax of Rs. 500000 then, STGL will be carried forward for next 8 years can be set off in future against any STCG.

In case of speculation income, Rs. 2 lacs will be added to Rs. 3.50 lacs and thus on total of Rs. 5.50 lacs, income tax as per tax slab rate will be calculated.

Am I right??

Is this speculation income is not chargeable @ 30% special tax rate??

It is not a business of Mr. A but he just trades on day to day to get some income from this. Still he has to file ITR4??

I think there is provision for Nature of Business in ITR4. Which option I need to select?

Sir, please reply.

Thanks.



Suppose, Mr. A is 55 years old person who trades in shares and income from share trading is only his income. He normally buys and sells on the same day without taking delivery or takes delivery and sells the shares afterwards but before 1 year.

 

1) What will the nature of income from this two types of transactions? Whether the income from day trading without trading will be treated as speculation gains or business income?

2) How can we show the same for the tax purpose?

3) Are these incomes chargeable at different income tax rates? at what rate of tax?

4) Which ITR form to be used? What could be the nature of business?

5) Is he eligible for any deductions from Section 80C of Income tax Act?

6) If there are losses under these two types of transactions, whether the same can be carried forward?

 

Kindly revert.






1) shares hold more then 365 days in demat then sell , it would come under LTCG, exempted if stt paid on sales.

2) intraday is speculation, and such income is directly added to taxable income, such loss can not be adjusted with any other head except speculation 

3) F&O trades are business income / loss.

4) he can avail 80C fron all his turnover except LTCG

5) if business income then ITR4, otherwise ITR2




U S Sharma
glidor@gmail.com

[ Scorecard : 19366]
Posted On 07 May 2011 at 08:45

 

If Mr. A has, suppose, some other income of Rs. 350000 & speculation gain on shares is of Rs. 200000 and also Short term capital gain tax of Rs. 500000 then, STGL will be carried forward for next 8 years can be set off in future against any STCG.

 

 3.5+2.0 = 5.5 normal income

5.0 income at spl rate @ 15% ( STCG u/s 111A)

 

 

In case of speculation income, Rs. 2 lacs will be added to Rs. 3.50 lacs and thus on total of Rs. 5.50 lacs, income tax as per tax slab rate will be calculated.

 

There are two types of speculation - cash delivery based and F&O based -

any loss from cash delivery based under intraday is speculation and not available for carry forward, it can not be adjusted with any other income except speculation 

any loss from F&O based is business loss and available for carry forward upto 8 years max.

Am I right??

Is this speculation income is not chargeable @ 30% special tax rate??

No, speculation income is added to taxable income, and taxed as per slab.

 

It is not a business of Mr. A but he just trades on day to day to get some income from this. Still he has to file ITR4??

if he has to carry forward the losses for adjustment in subsequent years, then he has to show this as business ( Except LTCG), as carry forward of losses is allowed under business loss only.

 

I think there is provision for Nature of Business in ITR4. Which option I need to select?

speculation of both catagory comes under business

 

 

if he does not want to file ITR 4 then speculation income would go as "income from other sources" and carry forward of losses is not possible.

 

without taking notice of his 3.5L other income, he is free to select the ITR to filed. but ITR 4 preferred as there is lots of clarity regarding to transactions.



Total thanks : 2 times



bharati marathe
Student

[ Scorecard : 38]
Posted On 07 May 2011 at 10:57

Originally posted by : U S Sharma

 

If Mr. A has, suppose, some other income of Rs. 350000 & speculation gain on shares is of Rs. 200000 and also Short term capital gain tax of Rs. 500000 then, STGL will be carried forward for next 8 years can be set off in future against any STCG.

 

 3.5+2.0 = 5.5 normal income

5.0 income at spl rate @ 15% ( STCG u/s 111A)

 

 

In case of speculation income, Rs. 2 lacs will be added to Rs. 3.50 lacs and thus on total of Rs. 5.50 lacs, income tax as per tax slab rate will be calculated.

 

There are two types of speculation - cash delivery based and F&O based -


any loss from cash delivery based under intraday is speculation and not available for carry forward, it can not be adjusted with any other income except speculation 

any loss from F&O based is business loss and available for carry forward upto 8 years max.

Am I right??

Is this speculation income is not chargeable @ 30% special tax rate??

No, speculation income is added to taxable income, and taxed as per slab.

 

It is not a business of Mr. A but he just trades on day to day to get some income from this. Still he has to file ITR4??

if he has to carry forward the losses for adjustment in subsequent years, then he has to show this as business ( Except LTCG), as carry forward of losses is allowed under business loss only.

 

I think there is provision for Nature of Business in ITR4. Which option I need to select?

speculation of both catagory comes under business

 

 

if he does not want to file ITR 4 then speculation income would go as "income from other sources" and carry forward of losses is not possible.

 

without taking notice of his 3.5L other income, he is free to select the ITR to filed. but ITR 4 preferred as there is lots of clarity regarding to transactions.

 

Sir, much clarity has come after your reply. Thanks.

Points which are cleared, are as follows:

1) If shares are traded on the same day, without delivery, then its a speculation trascation. Income from this transactions will be added to the normal income and taxed as per tax slab rate.

If there is speculation loss, then the same can be carried forward for 4 years and can  be adjusted against future speculation gain from shares only.

2) Gains other than 1 above, will either be short term or long term. Short term cap gain will be taxed @ 15% separately. Short term loss if any can be carried forward for next 8 years and adjusted against short term gains in future.

3) If the loss from Speculation transaction needs to be claimed in future, one has to file ITR4.

 

Points not cleared:-

I have gone through ITR4. It seems to be more tedious to show any income or loss from share trading activity in the same. Also, Nature of Business sheet, I am not clear as to which code to select.

How do I show short term capital loss of Rs. 6.5 lacs and Speculation gain of Rs. 1.65 lacs?

Please guide Sir. 




U S Sharma
glidor@gmail.com

[ Scorecard : 19366]
Posted On 07 May 2011 at 11:17

 

1) If shares are traded on the same day, without delivery, then its a speculation trascation. Income from this transactions will be added to the normal income and taxed as per tax slab rate.

If there is speculation loss, then the same can be carried forward for 4 years and can  be adjusted against future speculation gain from shares only.

 

- for speculation the loss can be carried forward only when its named as "speculation business" 

 

 

2) Gains other than 1 above, will either be short term or long term. Short term cap gain will be taxed @ 15% separately. Short term loss if any can be carried forward for next 8 years and adjusted against short term gains in future.

 

- short term gain after adjusting short term loss of the year or any previous year would be subject to spl rate of tax @ 15%, if loss is unabsorbed then it would be carried forward.

 

3) If the loss from Speculation transaction needs to be claimed in future, one has to file ITR4.

 

Points not cleared:-

I have gone through ITR4. It seems to be more tedious to show any income or loss from share trading activity in the same. Also, Nature of Business sheet, I am not clear as to which code to select.

 

to claim LTCG you have to make balance sheet and have the shares in asset in previous year, to get some sweet results we have to work a little bit.

 

 

How do I show short term capital loss of Rs. 6.5 lacs and Speculation gain of Rs. 1.65 lacs?

Please guide Sir. 

under ITR, CFL is there to forward the losses
 
 
 
 
 
you need to use form ITR4, if
 
1) you are claiming LTCG
2) you are claiming carry forward of losses other than capital loss.


Total thanks : 2 times



bharati marathe
Student

[ Scorecard : 38]
Posted On 16 May 2011 at 18:43

Originally posted by : U S Sharma


 


1) If shares are traded on the same day, without delivery, then its a speculation trascation. Income from this transactions will be added to the normal income and taxed as per tax slab rate.

If there is speculation loss, then the same can be carried forward for 4 years and can  be adjusted against future speculation gain from shares only.

 

- for speculation the loss can be carried forward only when its named as "speculation business" 

 

 

2) Gains other than 1 above, will either be short term or long term. Short term cap gain will be taxed @ 15% separately. Short term loss if any can be carried forward for next 8 years and adjusted against short term gains in future.

 

- short term gain after adjusting short term loss of the year or any previous year would be subject to spl rate of tax @ 15%, if loss is unabsorbed then it would be carried forward.

 

3) If the loss from Speculation transaction needs to be claimed in future, one has to file ITR4.

 

Points not cleared:-

I have gone through ITR4. It seems to be more tedious to show any income or loss from share trading activity in the same. Also, Nature of Business sheet, I am not clear as to which code to select.
 

to claim LTCG you have to make balance sheet and have the shares in asset in previous year, to get some sweet results we have to work a little bit.

 

 

How do I show short term capital loss of Rs. 6.5 lacs and Speculation gain of Rs. 1.65 lacs?

Please guide Sir. 

under ITR, CFL is there to forward the losses

 

 

 

 

 

you need to use form ITR4, if

 

1) you are claiming LTCG

2) you are claiming carry forward of losses other than capital loss.
 

 Dear Sir,

 

I refer to yellow highlighted point above. As per earlier discussions, the speculation profit is to be added to normal income & taxed as per slab rate.

I just came to know that such profits should be taxed @ 30% plus edu &HEcess.

which one is correct?




U S Sharma
glidor@gmail.com

[ Scorecard : 19366]
Posted On 16 May 2011 at 21:45

speculation is shares is taxed as per slab, 

spaeculation in lottery/ horse race is taxed @ 30%

 

hope now u r clear. 



Total thanks : 1 times



Nitin Grover
CS

[ Scorecard : 1113]
Posted On 16 May 2011 at 21:50

Dear Sir

Income from Shares is taxed @ 15% if its Short Term & Nil if its Long Term because STT is paid on this already (except if u sale this in open market).

 

Regrads



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