Set off
This query is : Resolved
24 January 2010
Respected All,
The company is engaged in stock broking business.It also does trading of shares.
Further, it has income from interest on Fixed Deposits with banks.
Can the set off the loss from trading in shares with interst income on Fixed Deposits.the company has loss from stock broking business.
Regards,
Jyoti
The company is engaged in stock broking business.It also does trading of shares.
Further, it has income from interest on Fixed Deposits with banks.
Can the set off the loss from trading in shares with interst income on Fixed Deposits.the company has loss from stock broking business.
Regards,
Jyoti
25 January 2010
It is the business of the company to trade in shares and shares are held as Stock-in-trade and not as Investments.
Please refer to the Explanation to section 73 where it is mentioned that:
Where any part of the business of a company [other than a company whose gross total income consists mainly (51%) of income which is chargeable under the heads Interest on securities, Income from house property, Capital gains and Income from other sources], or a company the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.]
In our case, more than 51% of total income consists of Interest on FD, then can we treat Loss on trading in shares as non-speculation bus and set off with income from FD?
Regards
Please refer to the Explanation to section 73 where it is mentioned that:
Where any part of the business of a company [other than a company whose gross total income consists mainly (51%) of income which is chargeable under the heads Interest on securities, Income from house property, Capital gains and Income from other sources], or a company the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.]
In our case, more than 51% of total income consists of Interest on FD, then can we treat Loss on trading in shares as non-speculation bus and set off with income from FD?
Regards
25 July 2025
Hi Jyoti,
Great question — and it’s a nuanced one involving **Section 73 of the Income Tax Act**, particularly the **Explanation** to that section regarding **speculative business**.
Let’s go step by step and answer your query about **setting off trading loss against interest income**.
---
## 🔍 **Your Scenario:**
* Company is engaged in **stock broking** and **share trading**.
* It has **loss from share trading**.
* It also has **interest income from Fixed Deposits (FDs)**.
* You're asking whether the **loss from share trading** can be set off **against interest income** on FDs.
---
## ⚖️ **Section 73 — Explanation (Deemed Speculation):**
Under **Explanation to Section 73**, **share trading losses** are **deemed to be speculative losses** **unless** the company meets certain exceptions.
### 🔹 **Key part of Explanation to Section 73:**
> Where any part of the business of a company (other than a company
>
> * whose **gross total income** consists **mainly** (i.e., >51%) of **income under other heads** — like **Interest on securities, Capital Gains, House Property, Other Sources**,
> or
> * a company **engaged in banking or loans and advances**)
> carries on **share trading**, such share trading shall be deemed to be a **speculative business**.
---
## ✅ **Interpretation:**
In your case:
* **Share trading = Deemed speculative business** under Explanation to Sec. 73.
* However, **there’s an exception**:
> If **more than 51%** of **gross total income** is from heads like **Interest, House Property, Capital Gains, or Other Sources**,
> **→ The Explanation to Sec. 73 does not apply**.
So, if your company’s **main income (more than 51%) is from FD interest (Other Sources)**, then:
* The loss from share trading **is NOT deemed speculative**.
* It is treated as a **normal business loss**.
---
## ✅ **Conclusion:**
**Yes**, if:
* Your **FD interest income** is **more than 51%** of **gross total income**, and
* The company does **not fall under banking or loan-related business**, and
* You are **not otherwise classifying shares as investments**, but as **stock-in-trade**,
➡️ Then the **loss from share trading** is treated as **normal business loss**, and
➡️ It **can be set off** against **interest income from FDs** (under "Income from Other Sources") **in the same year**.
---
## 🧾 Supporting Reference:
**Explanation to Section 73**
**CBDT Circular No. 204 dated 24.07.1976** also provides interpretive guidance.
---
## ⚠️ Caveats:
* Ensure classification of **shares as stock-in-trade**, not investments.
* Maintain clear separation between **speculative transactions** (like intraday trading, derivatives) and **delivery-based trading**.
* If there is **interest income from margin lending or business-related FDs**, it might be treated as **business income**, which strengthens your case further.
---
Let me know if you'd like a working example or help preparing a tax computation sheet.
Great question — and it’s a nuanced one involving **Section 73 of the Income Tax Act**, particularly the **Explanation** to that section regarding **speculative business**.
Let’s go step by step and answer your query about **setting off trading loss against interest income**.
---
## 🔍 **Your Scenario:**
* Company is engaged in **stock broking** and **share trading**.
* It has **loss from share trading**.
* It also has **interest income from Fixed Deposits (FDs)**.
* You're asking whether the **loss from share trading** can be set off **against interest income** on FDs.
---
## ⚖️ **Section 73 — Explanation (Deemed Speculation):**
Under **Explanation to Section 73**, **share trading losses** are **deemed to be speculative losses** **unless** the company meets certain exceptions.
### 🔹 **Key part of Explanation to Section 73:**
> Where any part of the business of a company (other than a company
>
> * whose **gross total income** consists **mainly** (i.e., >51%) of **income under other heads** — like **Interest on securities, Capital Gains, House Property, Other Sources**,
> or
> * a company **engaged in banking or loans and advances**)
> carries on **share trading**, such share trading shall be deemed to be a **speculative business**.
---
## ✅ **Interpretation:**
In your case:
* **Share trading = Deemed speculative business** under Explanation to Sec. 73.
* However, **there’s an exception**:
> If **more than 51%** of **gross total income** is from heads like **Interest, House Property, Capital Gains, or Other Sources**,
> **→ The Explanation to Sec. 73 does not apply**.
So, if your company’s **main income (more than 51%) is from FD interest (Other Sources)**, then:
* The loss from share trading **is NOT deemed speculative**.
* It is treated as a **normal business loss**.
---
## ✅ **Conclusion:**
**Yes**, if:
* Your **FD interest income** is **more than 51%** of **gross total income**, and
* The company does **not fall under banking or loan-related business**, and
* You are **not otherwise classifying shares as investments**, but as **stock-in-trade**,
➡️ Then the **loss from share trading** is treated as **normal business loss**, and
➡️ It **can be set off** against **interest income from FDs** (under "Income from Other Sources") **in the same year**.
---
## 🧾 Supporting Reference:
**Explanation to Section 73**
**CBDT Circular No. 204 dated 24.07.1976** also provides interpretive guidance.
---
## ⚠️ Caveats:
* Ensure classification of **shares as stock-in-trade**, not investments.
* Maintain clear separation between **speculative transactions** (like intraday trading, derivatives) and **delivery-based trading**.
* If there is **interest income from margin lending or business-related FDs**, it might be treated as **business income**, which strengthens your case further.
---
Let me know if you'd like a working example or help preparing a tax computation sheet.
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