Speculation business

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 August 2016 Sir

I have received from my client is doing trading in shares during 2015-16.
he has provided me a profit and loss a/c of shares trading from shares brokers.
my client is not maintaining books of accounts.

in this profit and loss A/c is showing
Name of company oty buy buy rate amount Qty sale sale rate amount Profit /loss

Speculation profit /loss to the party

Name of company oty buy buy rate amount Qty sale sale rate amount Profit /loss

Short term capital profit/ loss to the party

Name of company oty buy buy rate amount Qty sale sale rate amount Profit /loss

Notional profit/ loss to the party

my question are
Ho w can I show in Income Tax return?

Anand

Anand (Expert)
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02 August 2016 you just need short term or long term gain out of it.. details are not required..

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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25 July 2025 Got it — your client is trading shares and has a P\&L statement from brokers, but no books of accounts, and the statement shows various types of profits/losses like speculation profit/loss, short-term capital gains/losses, and notional profits/losses.

Here’s how you can report these in the **Income Tax Return (ITR)** for FY 2015-16:

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### 1. **Speculation Business Profit / Loss**

* **Speculative transactions** generally mean intraday trades (buy and sell shares on the same day).
* These profits or losses are treated as **“Income from Business”** under the head **“Speculation Business”**.
* You should report speculation business profit/loss under **Profit & Gains from Business or Profession** (Schedule BP in ITR).
* If there is a **loss**, it can be set off only against speculation business income, not against other heads.
* Since the client is not maintaining books, try to get at least basic details of transactions from brokers for reconciliation.

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### 2. **Short Term Capital Gain / Loss**

* If shares are sold after holding for more than 1 day but less than 12 months, profit/loss is treated as **Short Term Capital Gain (STCG) / Loss**.
* This is reported under **Capital Gains** section in ITR.
* Gains on shares listed on recognized stock exchange and subject to Securities Transaction Tax (STT) are eligible for concessional tax rates (15%).
* Loss under this head can be set off against other capital gains.

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### 3. **Notional Profit / Loss**

* Notional profit/loss refers to unrealized gains or losses — for example, the difference between closing prices and purchase prices if shares are still held.
* **Notional profits/losses are not taxable** because they are unrealized.
* Only realized profits or losses (on sale of shares) are reported in ITR.
* So, do **not** report notional profits/losses in Income Tax Return.

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### Additional Points

* Since your client is not maintaining books, it is advisable to maintain **broker-wise contract notes**, **purchase and sale details**, and **demat statements** to substantiate income.
* For speculation business, **a separate computation of income and expenses** related to that business should be prepared.
* If income exceeds the basic exemption limit and client is trading regularly, it is advisable to get the accounts audited by a Chartered Accountant as per tax provisions.

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### Summary for ITR

| Income Type | Where to report | Treatment |
| --------------------------- | ---------------------------------- | ---------------------------------------------- |
| Speculation Business Profit | Income from Business (Schedule BP) | Taxed as business income |
| Speculation Business Loss | Income from Business (Schedule BP) | Can be set off against speculation income only |
| Short Term Capital Gain | Capital Gains Section | Taxed at 15% if shares are listed and STT paid |
| Short Term Capital Loss | Capital Gains Section | Set off against other capital gains |
| Notional Profit/Loss | Not reported | Not taxable |

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If you want, I can help draft a **sample computation** or a **reporting format** for the ITR based on your client’s data.

Would that help?

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