Speculation business

Save Share

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)

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

(Expert)

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:

---

### 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.

---

### 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.

---

### 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.

---

### 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.

---

### 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 |

---

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?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now