Securities Transaction

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Ravindranath G K (Querist)
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21 July 2010 Hello,

on what basis do we consider profit from securities dealing, as income from head
1. capital gains
OR
2. speculative bussiness

is it on the basis of frequency, or having got the delivery of securities or IS there any provision in IT Act or Companies Act please let me know.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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21 July 2010 If the securities are held as investments and frequency of transaction is less, the profit or less will have to be considered under the head capital gains.
On the other hand if securities are frequently bought and sold the gain or loss will be booked under the head income from business.
If the transaction is not delivery based, in the case of shares, ie., intra day trading, the gain or loss is speculative.
But in the case of futures and options, though there is no delivery, the profit or loss is non-speculative vide proviso(d) to section 43(5) of the Income tax Act,1961.

Ravindranath G K

Ravindranath G K (Querist)
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23 July 2010 Thanks for ur answer,but

what is the scale or basis to consider the frequency of transactions..
my client deals frequently wit som sort of share & holds on som shares for upto 1year..
in this case shd i split those transaction into both the 2 heads of income.,ie bussiness & capital gains according the nature of such transactions

Ravindranath G K

Ravindranath G K (Querist)
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23 July 2010 Is it neccesary to divide such income into bussiness & capital gains head of income

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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23 July 2010 There is no hard and fast rules to distinguish whether share transaction is business income or capital gains. May be judged how a common man view the issue considering the following situations.
The period of holding, the frequency of transactions, the motive of the transactions, the entries in the books, the infrastructure deployed , nature of systems monitoring, the source of funds etc.

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Ravindranath G K

Ravindranath G K (Querist)
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23 July 2010 Thank, will get back for my prospective doubts

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