I am a salaried individual & file ITR1 return. I also invest in shares, so wanted to know as to how do I show my income from shares at the time of IT return filling? And also if the income from shares are taxable?
Ans: Yes, gains on shares is taxable under the head Capital Gains. You may also have dividend income, which will come under income from other sources.
Capital gain is classified as long term (If held for over a year for shares listed in India) or short-term capital gain. Short term gains on listed equity shares are taxable at 15 per cent.
Long term capital gain on equity shares listed on a stock exchange is not taxable up to the limit of Rs 1 lakh, above which they are taxed at 10 per cent. There is a grandfathering rule where the cost of acquisition is based on the value of the share as on 31st January 2018 for shares purchased prior to this date.
If you are an active trader with a high frequency of trades (especially day trading), the income is classified as income from business.
In such a case you are required to file an ITR-3 and your income from share trading is shown under ‘Profit and Gains from business or profession.’
The expenses incurred relating to one’s business or profession can be reduced and profits will be added to your total income for the financial year. Consequently, the total income will be charged at tax slab rates.
If this income from shares is treated as capital gain, then, expenses incurred on transfer are deductible from the capital gain on the shares.
