Regarding share trading

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 September 2018 Dear Experts

I hold some Equity share as Investment in my books of Account as on 31-3-17, now in FY 17-18 I have profit from the Selling those stock and other income also.

If I want to go STCG then Tax liability is much.
So my Consultant suggest that we will Consider these stock as Business Income.

So my question is that, is this proper as Income Tax ?

can we consider stock of Equtiy Share holding as investment.

Any valuation change as on 1-4-17 or Invest price.

Kindly do the advice me.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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14 September 2018 Investment option is the best one for STCG tax rate is 15% and for LTCG the rate is 10%.

Querist : Anonymous

Querist : Anonymous (Querist)

14 September 2018 Thanks sir for your reply ..but STCG is more than 6% profit of Turn Over.
and my main Question is I hold some Equity share as Investment in my books of Account as on 31-3-17, now in FY 17-18 not this Investment can we consider Stock in hand ?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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20 July 2025 Got it! Here’s a detailed explanation about treating equity shares as business income vs. investment for tax purposes:

1. Investment vs. Business Income (Trading) of Shares
Investment:
If shares are held as a long-term investment, any profit from sale is generally treated as Capital Gains (Short Term or Long Term depending on holding period).
STCG on equity shares sold on a recognized stock exchange with STT paid: taxed at 15%
LTCG (held more than 1 year) taxed at 10% (on gains exceeding ₹1 lakh, no indexation benefit).
Business Income (Trading):
If the shares are held with an intention of frequent buying and selling, the income is treated as business income and taxed as per the applicable slab rates (which may be higher than 15%).
The turnover from share sales can also lead to applicability of presumptive tax provisions if conditions are met.
Losses can be set off against other business income.
2. Whether you can switch from Investment to Business income
There is no hard and fast rule, but the key factor is the intention at the time of purchase.
If you held the shares as an investment on 31-03-2017, reclassifying those shares suddenly as stock-in-trade (business inventory) may raise tax scrutiny.
However, some taxpayers switch to business income if trading volume and frequency increase significantly.
3. Valuation on 01-04-2017 (Beginning of FY 2017-18)
If you decide to treat shares as stock-in-trade from FY 2017-18 onward, you should value your opening stock (shares held on 31-03-2017) at fair market value on 01-04-2017 to determine the opening inventory.
This will be your cost of inventory for business income calculation.
4. Practical Tips
Maintain clear documentation about your intention (investment vs trading) and turnover.
If you switch to business income treatment, maintain books of account accordingly.
Consider the impact on income tax, audit requirements, and other compliances.
Consult a tax expert for detailed analysis of your specific facts and situation.
Summary
Aspect Investment Business Income (Trading)
Intention Long term holding Frequent buying & selling
Tax rate on profit STCG @ 15%, LTCG @ 10% Taxed as per slab rate
Valuation at start of year Cost price (no revaluation) FMV as on 01-04-2017 for opening stock
Treatment of losses Capital loss rules apply Can set off against business income

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