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Tejas

Tejas Chokshi  |126 Answers  |Ask -

Tax Expert - Answered on Sep 11, 2023

CA Tejas Chokshi has over 20 years of experience in financial planning, income tax planning, strategic and risk advisory, banking and financial products and accounting and auditing.
He is an information system auditor, a forensic auditor and concurrent bank auditor.
Chokshi, who has a master’s degree in management, audit and accounting from Gujarat University, has completed his CA from the Institute of Chartered Accountants of India.... more
Asked by Anonymous - Aug 02, 2023Hindi
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If one does intraday trading in shares- the profit made is directly taxed as per his income slab. If he makes a loss- how is it treated in income tax? Also, is there any other implications like turnover tax or audit by CA on the total trade value involved at the time of filing IT returns?

Ans: Intraday trading is subject to specific tax rules and regulations. Here's how profits and losses from intraday trading are treated for income tax purposes, along with information on turnover tax and tax audits:

Tax Treatment of Intraday Trading Profits and Losses:

Profits: Profits made from intraday trading are considered as speculative business income in India. These profits are added to your total income and are taxed as per your applicable income tax slab rates.

Losses: Intraday trading losses can be treated in two ways:

Set Off Against Speculative Business Income: You can set off intraday trading losses against any other speculative income you have earned during the same financial year.
Carry Forward of Losses: If you are unable to set off the entire loss in a given financial year, you can carry forward the remaining loss for up to four assessment years. This can be adjusted against any speculative business income in those years.
Turnover Tax:

In India, there is no specific turnover tax on intraday trading. However, you may be subject to other charges and taxes, such as Securities Transaction Tax (STT), brokerage charges, and other regulatory fees.
Tax Audit:

In India, if your turnover from intraday trading exceeds a certain threshold, you may be required to get your accounts audited by a Chartered Accountant (CA) under Section 44AB of the Income Tax Act.
The limit is 1 cr for FY 2022-23. This limit may change over time.
Documentation and Compliance:

It's crucial to maintain proper records of all your intraday trading transactions, including contract notes, bank statements, and other relevant documents.
Ensure that you file your income tax returns accurately and disclose your speculative income, losses, and other financial details as required by the tax authorities.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Sanjeev

Sanjeev Govila  |458 Answers  |Ask -

Financial Planner - Answered on May 31, 2023

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I have income of INR 13 Lacs.. I have lost close to 5 Lacs in INTRADAY TRADING AND F & O Trading from 2020-2023 ..How can i save on Tax in current year ..Is it possible to show capital Loss during investment declaration..
Ans: You have raised the point whether your past losses in F&O and Intraday trading can be used to save tax now? There are some points to note here:-

1. F&O is classified as a non-speculative business while Intraday Trading is classified as speculative business.
2. Both speculative and non-speculative business incomes are added to your overall income including salary, other business income, interest on deposits, income from rentals, etc and taxed according to the applicable tax for you.
3. Losses arising from speculative transactions are called speculative losses. These losses can be carried forward for a period of up to four consecutive financial years. Also, they can be set-off only against speculative business income made during that period.
4. On the other hand, losses arising from non-speculative transactions (non-speculative losses) can be carried forward for a period of up to eight consecutive financial years. You can set-off non-speculative losses against any other business income except salary in the same year.
5. Usually, trading in futures & options must be reported as a business unless you have only a few trades (say if only 2-3 trades) in the financial year. Remember this also applies to individuals. You don’t have to be formally incorporated as a company or some legal entity to earn business income. Individuals can have business income too.

From your statement it seems that you have not reported your past losses. If you have not done so, then you would not be able to set them off in the manner given above. However, if you have any such losses in the last financial year whose Income Tax Return (ITR) is yet to be filed, you can use the set-off rules as given above.

For more clarity, do discuss it in more details with your tax filing person.

..Read more

Ramalingam

Ramalingam Kalirajan  |3744 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 09, 2024

Asked by Anonymous - Mar 08, 2024Hindi
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Hello Vivek, first of all thanks for sharing your valuable inputs in this column. I am a salaried person & my income tax on salary income gets deducted automatically. But i am planning to do share trading ( buying equity shares on dips & selling in 5-6 months with some profit & continue), so i guess i will be liable for 15% tax as it will be STCG, so where i need to pay this tax. If I declare it only in ITR, will that be sufficient or have to select some option in Demat Account as well? I am in old tax regime, my Salary income (in hand) is around 12 lacs, FD Interest around 2 lacs p/a & i take all tax exemptions like 80c, 80CCD (1B), 80 G etc. Also advise shall i avoid this profit booking in shares & hold for long term considering i am on threshold of higher tax slab. Thanks again for your valuable guidance.
Ans: Here's a breakdown of your tax situation and some advice:

Tax on Share Trading Profits (STCG):

You're correct. Since you plan to sell the shares within 5-6 months (short-term), the profits will be considered Short-Term Capital Gains (STCG).
STCG on equity shares is taxed at a flat rate of 15% in the old tax regime.
Paying STCG Tax:

You don't need to pay STCG tax directly while filing your Demat account.
However, you are responsible for reporting the STCG income and paying the tax when you file your Income Tax Return (ITR) for the relevant financial year.
ITR Filing:

While filing your ITR, you'll need to declare the sale of shares, the profits earned (STCG), and the tax liability (15%).
The ITR itself doesn't involve direct tax payment. You might need to pay any tax due through challan or other methods specified by the Income Tax department.
Profit Booking vs. Long-Term Investment:

Here's a consideration for your strategy:

Tax Benefit of Long-Term Capital Gains (LTCG): If you hold the shares for more than 1 year, any profits become Long-Term Capital Gains (LTCG). LTCG exceeding Rs. 1 lakh attracts a 10% tax with indexation benefit (reducing impact of inflation). This can be a tax advantage compared to the flat 15% on STCG.
Market Volatility: Short-term trading involves higher risk due to market volatility. Consider your risk tolerance and investment goals.
Recommendation:

It might be beneficial to hold the shares for the long term to potentially benefit from LTCG tax advantages and potentially higher returns over time. However, the decision depends on your individual circumstances, risk tolerance, and investment goals.
Additional Tips:

Consult a qualified tax advisor for personalized advice on your specific tax situation, considering your income sources, deductions, and tax regime.
Research and understand the risks involved in share trading before investing.

I hope this clarifies your queries!

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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