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SHACHI SHAH (Querist)
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28 March 2015 one my client wants to file return fr A.Y. 2014-15. He is dealing in shares and derivatives. so he has given me bifurcation for ds transactions. So, under which had i have to show ds transaction. pls let me know urgently. Tnks in advance

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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28 March 2015 Trading shares & debentures are speculative business income and should show under Income from business

SHACHI SHAH

SHACHI SHAH (Querist)
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31 March 2015 I have also done the same but as his receipts exceeds one crore and his expenses exceeds his reciepts i.e. he is incurring loss. Software ask me about audit and since he is not maintaining books of account so audit is also not possible.So pls help me out what to do in this regard?

Aashok Kumar Sharma online

Aashok Kumar Sharma

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02 August 2025 Here’s what you should consider for your client’s case (dealing in shares and derivatives):

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### 1. **Nature of Income from Shares & Derivatives:**

* **Delivery-based (DS) transactions in shares**:
Income from delivery-based share trading is generally treated as **Capital Gains** (short-term or long-term depending on holding period), **NOT** as business income.

* **Trading in derivatives and intraday/speculative transactions**:
These are treated as **Business Income**, specifically **speculative business income**.

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### 2. **Where to show DS transactions?**

* Show **Delivery-based share transactions** under **Capital Gains** (Schedule CG in ITR-3/ITR-4).
* Show **Derivatives and Intraday trading** under **Business Income** (Schedule BP in ITR-3/ITR-4).

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### 3. **Regarding Audit Applicability:**

* Section **44AB** mandates audit if:

* Turnover > Rs 1 crore for business (Rs 2 crore for business with digital records).
* Or Loss > Rs 1 lakh in presumptive business income cases, etc.

* For **capital gains**, audit is generally **NOT** mandatory.

* If your client’s **delivery-based share transactions** turnover is above Rs 1 crore, but it's **capital gains** income (not business), audit **does not apply** on that income.

* However, if your client treats delivery-based share trading as **business income** (not capital gains), then audit is applicable if turnover crosses Rs 1 crore.

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### 4. **Client not maintaining books & incurring loss:**

* If your client is **treating delivery-based transactions as business income**, books should be maintained, and audit is compulsory if turnover exceeds Rs 1 crore.

* Since books are not maintained and audit is not possible, you should advise your client:

* Either maintain proper books and get audit done.
* Or treat delivery-based share transactions as **capital gains** (if facts support), which avoids audit.

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### **Summary advice:**

| Transaction Type | Income Head | Audit Applicable if Turnover > 1 Cr? | Books Maintenance Required? |
| ------------------------------ | --------------- | ------------------------------------ | -------------------------------- |
| Delivery-based shares (DS) | Capital Gains | No | No (if treated as capital gains) |
| Derivatives & Intraday Trading | Business Income | Yes | Yes |

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If your client insists on treating delivery-based share trading as business income without books & audit, it is not compliant and may attract penalty and scrutiny.

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**Please confirm the exact nature of delivery-based transactions and advise your client accordingly.**

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