Us trading futures and options speculative
Income tax has recently started issuing notices to the non-filers as well as mis-filers of income tax return who trade on recognized stock exchanges. Assesses are also not clear on accounting as well as tax treatment of transactions done on the exchanges.
This article may help you to do proper tax treatment whenever we have transactions related to stock, currency or commodity exchanges. But before going into the taxation part, first it is important to understand what type of share trading activity one is indulged in:. Income tax department clarifies that these transactions are to be separately assessed under different heads: Income Derived from intraday trading is regarded as speculative business transaction.
Loss from intraday trading can only be settled from other speculative income only. If the purpose of the trades was to invest in the securities then it will be assessed under the head capital gains. Guidelines for business income are as follows:. Is set off available in case there is a loss from sale of shares!! As the nature of loss is Business income hence it is available for setoff first from any other business income intra head setoff.
If after that unabsorbed loss is there it can be set off through other heads except income from salaries. If After us trading futures and options speculative too any loss remains unabsorbed then the loss can be carried forward us trading futures and options speculative next 8 years if the return is filed before due date.
Is set off available in case there is a loss from derivative trading!! The answer to the setoff is NO as section 43 5 which exempts derivative trading from speculative business but is not covered by section 73 which allows setoff. So not even intra head setoff as allowed. Only loss can be carried forward which can be settled only against derivative income in subsequent 8 years. As turnover in derivative can easily cross Rs. So Mechanism us trading futures and options speculative calculating turnover is different as in calculation of normal business.
But before going into the taxation part, first it is important to understand what type of share trading activity one is indulged in: Investing, Trading - It can be further classified into: If one do not frequently buy and sell shares than all the gains from share trading is to be assessed as capital gains and the dividend received shall be assessed as Income from other sources [currently exempt under section 10 34 ].
Tax on long term capital gains: Income tax on sale of long term equity shares is exempt. Guidelines for business income are as follows: If the total turnover of trading of shares exceeds Rs. If the total turnover of trading does not exceeds Rs. Turnover in case of cash market transactions is the total monetary value of shares sold during the financial year.
So it is now clear that if trading is done through recognized stock exchange then it is treated as normal business income. In that case too ITR 4 will be filed. In the case of profit from derivative transactions, tax audit will be applicable if the turnover from such trading exceeds Rs.
So whether there is profit or loss it has to be treated us trading futures and options speculative turnover. Suppose there is a loss of ITC futures is Rs. Turnover in case of Options is aggregate sum of premium received from sale of options. Turnover will be Us trading futures and options speculative. Delivery of shares can be treated both ways either in capital gains or business income as the case us trading futures and options speculative and relevant provisions and tax will be applicable depending upon its nature.
In case of turnover less than Rs. Quick Connect info professionalowls.