is demat account gain is taxable?

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Querist : Anonymous

Querist : Anonymous (Querist)

22 March 2011 Dear sir
One of my client having demat account doing share trading. my question is
1)whether the gain is taxable?
2) whether interest paid on gold loan is deductible?
3) any need to file return?
4) which is the head of income if taxable?
5)what is the treat of STT?

kindly give answers if anybody have idea

Thanks in advance

CA Namrata Dedhia

CA Namrata Dedhia (Expert)
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22 March 2011 1. Yes, Gain is taxable. However, if this income is not business income for your client, then, long term gains (period of holding more than 12 months) is exempt if STT is paid on sale.

2. Interest on Gold loan is not deductible if the gain is a capital gain. If the gain is treated as business income, interest will be deductible only if loan is taken for the purpose of earning this income.

3. Return needs to be filed if total taxable income exceeds basic exemption limit of 1,60,000/- for AY 11-12.

4. Head of income - if share trading is business for your client, then Business Income, if not, then Capital Gains.

5. If Capital Gains, STT can be reduced from Sale Consideration as selling expenses.
If Business Income, STT is not a allowable expense.

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Querist : Anonymous

Querist : Anonymous (Querist)

22 March 2011 Dear namaratha

Thanks for the reply

One more doubt remains me is that whether i can consider it as business. What the client is doing that he has a demat account and he is doing buying and selling of shares intra-day. Can we take it as business and claim gold loan interest as an expense

thanking you

CA Namrata Dedhia

CA Namrata Dedhia (Expert)
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23 March 2011 Whether you can consider it as business or not will depend on lot of factors like -
1. Volume of transactions
2. Frequency of transactions
3. Efforts involved
4. Whether activity is done in an organised manner?
5. Capital employed
6. Intention of client, etc.

If you treat it as business income, intra-day transactions will have to treated as speculation business separately. Interest on gold loan can be taken as an expense against business income if the loan is taken specifically for this purpose and money is utilised in this business.

If you treat it as capital gain, you cannot claim any interest expense.

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