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Speculative business income

Priya J (Tax Consultant)     21 August 2019

Priya J
Tax Consultant 
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Speculative Income

Trading in shares is taxable under the Income Tax Act, 1961.

It is taxed either as business income or capital gain. Based on the intention of holding shares and frequency of transactions, such income can either be classified as business income or capital gain.

Speculative income is derived from a speculative transaction. In speculative transactions, intra-day buying and selling shares result in gaining speculative income. 

Speculative transactions are settled otherwise than by actual delivery or transfer of commodity. There is no actual delivery of shares to the DEMAT account of the dealers.

However, there are a few exceptions to speculative transactions. Income from Hedging (contracts guarding against loss of merchandise or raw materials, or a dealer guarding against price fluctuation in commodities), F&O (future & options), trading in derivates or commodity derivatives are non-speculative transactions.

Turnover for the purpose of speculative income will be the net difference between buying and selling price of shares. Such differences can be either positive or negative. 

Calculating Income tax on Speculative income is similar to the taxability of any business income. However, loss derived from speculative business can be set off only against income from other speculation business. Loss from speculative business can be carried forward for 4 years.

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