Getting Started With Trading

Getting Started With Trading Tax Guide for Traders in India
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Traderstoday have so m uch ofcom pelling optionsto trade in

the stock m arketvarying from stocks,futures,oroptionsto
m anage theircapitalm ore w isely and achieve theirtrading
objectives.Buton the otherside,they are obligated under
incom e tax regulationsto le theirreturnsin rightm anner
and pay taxeson theirtrading prots.So,itbecom es
Em ailaddress:
im portantforany traderto understand the taxation

treatm entoftrading businessin India so thatthey can plan
theirtrading activity accordingly and achieve theirgoals.
FullN am e:
In an attem ptto m ake yourtask sim ple and easierw hile ling
yourincom e tax,w e are w riting these seriesofpoststo help
you understand how w e tradersare obligated underthe law to
take care oflling ofourtrading activities.
Sign up
H ow to Trade Bank N ifty Futures?

(2,984)
Incom e from trading orinvestm entactivity can be classied
into fourdifferentsets:-
PartVIII G etting Started W ith

Trading Tax G uide for(2,337)
1.Long Term CapitalG ain

2.ShortTerm CapitalG ain
3.Speculative BusinessIncom e
4.N on-Speculative BusinessIncom e
PartVI G etting Started W ith

Trading H ow to (979)
W hatisBankN ifty Index (CN X
Bank N ifty Index)& H ow to (742)
StartH ere (386)
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Stocks sold after holding for more than 365 days Tax
Free
Investm entsform ore than one year(365 D ays)are
considered to be long term and protsarising outfrom selling
a stock afterholding itfor12 m onthsw illbe treated asa long
term capitalgain (LTCG )w hich asperthe section 10 (38)of
the incom e tax actis exem pt from tax provided such a
transaction isdone through a recognized stock exchange for
w hich Security transaction tax (STT)ispaid.Enjoy 100% ofthe
protsyou m ade outofyourlong term investm ents.
LotSize Trading Psychology

D ouble Bottom IPO
hdfcbank StocksBankN ifty
FuturesD ayTrading N ifty
O ptionsN RIG etting started
Taxation Inspiration Investm ent
Jesse Liverm ore G etting Started
W ith Charting BankBees
N iftyBeesRulesD ay Trading
StockSplit
ETF N ifty
FuturesFuturesReversalBar
yesbank W arren Buffett
Stocks sold after holding for more than one but less than
365 days 15% Tax
Any protarising outfrom selling a stock afterholding itfor
lessthan 12 m onthsw illbe treated asa shortterm capitalgain
and w illbe taxed at 15% provided you take the delivery of
sharesin yourdem ataccount(Exchange hasa settlem enttim e
ofT+2 w orking days,so any stock thatyou boughton M onday
com esin yourdm ataccountonly on the 2nd day from date of
purchase i.e.W ednesday).
Equity Intra-Day or Non-Delivery Trading Taxed as

per Tax Slab
Any transaction w here you buy and sellthe shareson the
sam e day isa D ay Trade.Any protsand lossesarising from
any such transaction w illbe considered asSpeculative
A ctivity.
Aspersection 43(5)ofthe Incom e Tax Act,1961,prots
earned by trading equity forintraday ornon-delivery is
categorized asSpeculative B usiness Incom e and w illbe
added to yourotherincom e underthe head incom e from
business/profession and w illbe taxed according to yourtotal
incom e slab.
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Futures & Options Trading Taxed as per Tax Slab

Incom e from trading Futures& O ptions(F& O )on a recognized
exchanges(Equity,Com m odity orCurrency)w illbe considered
asN on-Speculative B usiness Incom e.These incom e m ust
be added to yourtotalincom e and taxed according to your
new respective tax slab.
Asthese incom esare considered asbusinessincom e,so you
can offsetitw ith businessexpensesyou incurto earn itlike
depreciation,internetbills,advisory fees,softw are charges,
and m ore.
The rstand forem ostdecision thatany m arketparticipant

hasto m ake before starting lling Incom e tax isto declare
w hetherhe /she isan investorora trader?Incom e tax
regulationsin India treatsthe activity ofa traderand investor
in differentw aysand have in-turn differenttaxation
treatm entand obligations.
Trading Activity as Investment

An investorissom eone w ho participatesin Equity segm ent
and buy sharesofcom paniesand sellitafterholding itfor
som e period oftim e.So,ifyou buy sharesand sellitafter
taking the delivery in yourdm ataccount,do nottrade in F& O
segm ent,ordo nottrade stocksforintraday orBTST then you
can declare selfas an Investor and enjoy the benetsofan
investorasperincom e tax rules.So,taxation forinvestorlies
only forlong and shortterm trading in stocksand ifyou trade
stocksintraday orBTST ortrade F& O ,then you cannot
declare yourselfasan Investor.
An im portantconsideration here isthatifyourshortterm
trading ism ore frequent(i.e.m any tim esw ithin a w eek)then
you have to callyou shortterm trading asBusinessIncom e
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ratherShortTerm CapitalG ain.

Anotherthing w hich isrequired to be considered here isthat,
ifyou are a fulltim e trader(i.e.trading orinvestm entisyour
only source ofincom e)then itisbetterto consideryour
incom e asincom e from business.
A llthe taxation rules for an investor is illustrated and
detailed in Section I.
Trading Activity asBusiness

A traderissom eone w ho actively tradesin the stocks,future
& options,currency and com m oditiesm arket.So,ifyou day
trade orBTST in stocks(w ithouttaking delivery in yourdm at),
ortrade in F& O segm ent(w hetherpositionalorintraday),
then you have to declare selfasa traderand yourtrading w ill
be considered to be asbusinessactivity and w illbe taxed as
perBusinessIncom e.
Read Tax Benets& Im plicationsofD eclaring Trading asa
BusinessActivity.
A llthe taxation rules for an investor is illustrated and
detailed in Section II.
Apartfrom the above,there are som e otherconsiderations

required to be taken into accountw hile classifying their
trading activity asBusinessorInvestm ent.
The rulesabove are very m uch clearforthose w ho trades

actively in Futures& O ptions(N on-Speculaitve Business
Incom e)and do Intraday trading (Speculative Trading).So
those tradershave to considertheirtrading asa business
activity.
The taxation rulesare clearforspeculative day trading and
non-speculative futurestrading,asany incom e from these tw o
sourcesw illsurely hasto be declared asbusinessincom e.Even
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forthe salaried,such activity hasto be considered asbusiness

and w illbe taxed asthe BusinessIncom e.
The above criteria are very m uch applicable to those w hose
only source ofincom e istrading businessbutifyou are
salaried oryou have som e otherbusinessincom e asyour
prim ary orcore incom e source then itbecom eseasierto show
yourequity protsascapitalgains.
Forlong term investm ents,allthe stocksthatyou have sold
afterholding form ore than one yearcan be declared aslong
term capitalgain and thusexem ptfrom tax w hile ifyou are
trading stocksfrequently then allthese incom e should be
declare asspeculative ratherthan capitalgain.
Butanotherview on thisliesw ith thatifyou are trading f& o
and doing frequentshortterm equity then you have to declare
selfasa traderbuteven then you can declare yourlong term
protsaslong term capitalgainsand be exem ptfrom taxes.
So,you can be a traderasw ellasan investoratthe sam e tim e.
Therefore,itbecom esim portantto stay consistentw ith w hat
you are declaring selfw hile doing tax returns.So,consulta CA
to determ ine w hatto declare selfw hile ling tax returnsto
achieve yourtrading objectivesin futures.
Incom e from Equity Trading BusinessIncom e orCapital

G ain? C om ing Soon
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Stock hold for more than 12 months Long Term Capital

Tax
Investm entsform ore than one yearare considered to be long
term and attractno tax on prots.Protsarising outfrom
selling a stock afterholding itfor12 m onthsw illbe treated as
a long term capitalgain (LTCG )w hich asperthe section 10
(38)ofthe incom e tax actisexem ptfrom tax (provided such a
transaction isdone through a recognized stock exchange for
w hich Security transaction tax (STT)ispaid).Enjoy 100% of
the protsyou m ade outofyourlong term investm ents.
W hile on the otherhand,any lossarising from selling the stock
after12 m onthsw illnotbe adjusted againstany shortorlong
term capitalgain from any source.
Suppose,M r.Shrinivasan hasbought1000 sharesofTata
M otorsatRs.260 on April9th 2013 and he sold itatRs.500
on Sept17th 2014,then the totallong term protofRs.2.4
Lacsarising from thisinvestm entw illbe exem ptfrom tax and
he can enjoy the 100% protsand don`thave to pay any
incom e tax on it.
W hile on the otherhand,ifhe hasbought1000 sharesofD LF
atRs.230 on April9th 2014 and sold itatRs.167 on Sept17th
2014,then the totalshortterm lossofRs.63,000 arising from
thisinvestm entw illnotbe adjusted againstthe protm ade
from Tata M otorsorany othersource.
Ifthe investm entand the consequentsale w ere done via an

off-m arkettransaction (transferring from one D P to another
personsD P),then the Long Term CapitalG ain Tax on:Listed stocksis10%
N on listed stocksis20%
Short Note for Taxation for Long Term Investing

In India
#1.ProtsorLossesfrom long term investm entsw illbe
treated asLong Term CapitalG ain orLoss.
#2.Protsfrom Long term investm entsw illbe tax free
(Provided they are done through an exchange and sold after
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holding form ore than one year,i.e.365 days)

#3.Lossesfrom Long term investm entscannotbe adjusted
againstany shortterm and long term prots.
#4.STT paid to the G ovtcannotbe claim ed asexpense for
Investing.
Stocks hold for less than 12 months Short Term

Capital Tax
Any protarising outfrom selling a stock afterholding itfor
lessthan 12 m onthsw illbe treated asa shortterm capitalgain
and w illbe taxed at15% provided you take the delivery of
sharesin yourdem ataccount(Exchange hasa settlem enttim e
ofT+2 w orking days,so any stock thatyou boughton M onday
com esin yourdm ataccountonly on the 2nd day from date of
purchase i.e.W ednesday).
W hile on the otherhand,any lossarising outofthe shortterm
trading can be carry forw arded to a period of8 yearsagainst
any shortterm capitalgain orlong term capitalgain,ifthese
losesare declared w hile lling the incom e tax returns.
Suppose,M r.Shrinivasan hasbought1000 sharesofTata
M otorsatRs.260 on April9th 2013 and sold them atRs.420
on M ar04th 2014,then he hasto pay a shortterm capitalgain
tax of15% (i.e.Rs.24,000)on hisprotofRs.1.6 Lacs.
W hile on the otherhand,ifhe hasbought1000 sharesofD LF
atRs.230 on April9th,2013 and sold them atRs.140 on M ar
04th 2014,then the totallossofRs.90,000 arising from this
investm entcan be netted againstthe protsm ade from Tata
M otorsorany capitalgain arising w ithin the period of8 years.
Short Note for Taxation for Short Term Investing

In India
#1.ProtsorLossesfrom shortterm investm entsw illbe
treated asshortterm capitalgain orloss.
#2.Protsfrom shortterm investm ents(w ithin one year)w ill
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be treated asshortterm capitalgain and taxed at15% .

#3.Lossfrom shortterm investm entscan be carry forw arded
to a period of8 yearsagainstany shortterm capitalgain or
long term capitalgain,ifthese losesare declared w hile lling
the incom e tax returnsin respective years.
Investorsshould take a good note ofthe totalholding period of

any stock they are planning to sell,asany stock sold after
holding itforeven 364 daysw illbe considered asshortTerm
and notLong Term .So,to take the benetofthe long term
capitalgain keep a fairnote on the holding period ofthe stock.
Anotherim portantpointto considerhere isthatifyou have
boughtand sold the sam e sharesm any tim es,then you w ill
have to use FIFO m ethod to calculate the holding period and
in-turn yourCapitalG ains.
Equity Delivery and F&O Trading Taxed as per

Income Tax Slab
Ifyou are trading futures& optionsorday trading stockson a
recognized stock exchange,then you have to declare yourself
asa Trader.So,equity trading forshortterm orlong term w ill
be considered asBusinessTrading and w illbe taxed just
sim ilarto taxation ofFutures& O ptions
.
Protsarising outfrom selling a stock afterholding itfor12
m onthsorlessthan 12 m onths(excluding equity day trade or
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BTST) orfrom trading derivativesw illbe treated asa

BusinessIncom e and added to yourtotalincom e and taxed
according to yournew respective tax slab.
Asthese incom esare considered asbusinessincom e,so you
can offsetitw ith businessexpensesyou incurto earn itlike
depreciation,internetbills,advisory fees,softw are charges,
and m ore.
W hile on the otherhand,any lossarising from trading
derivativesw illbe considered asN on Speculative Business
Lossand can be offsetagainstany otherbusinessincom e
including speculative businessincom e (Incom e from D ay
Trading)exceptsalary in the sam e year.So you can set-off
againstbank interestincom e,rentalincom e,capitalgains,but
only in the sam e year.
The balance,ifany,can be carried forw ard and setoffonly
againstnon-speculative businessincom e w ithin eight
assessm entyearsim m ediately succeeding the assessm ent
yearin w hich the lossw asrstcom puted.
ForExam ple,In the year2013-14,M r.Shrinivasan hasa
annualsalary ofRs.6 lacsand he hasincurred a totallossfrom
derivativesofRs.1 lac and hisincom e from day trading isRs.
25000 and otherbusinessincom e (apartfrom salary)isRs.1.5
lacsthen hislossfrom derivatives(1 Lacs)can offsetfrom day
trading incom e (25000)and othersources(75,000).
Therefore,histaxable incom e w illbe Rs.6 lacs+ [25000 + 1.5
lacs 1 lac]isRs.6.75 Lacsand w illbe taxed according to his
tax slab of20% .
The above criteria are very m uch applicable to those w hose

only source ofincom e istrading businessbutifyou are
salaried oryou have som e otherbusinessincom e asyour
prim ary orcore incom e source then itbecom eseasierto show
yourequity protsascapitalgains.
Ifyou are trading F& O and doing frequentshortterm equity
then you have to declare selfasa traderbuteven then you can
declare yourlong term protsaslong term capitalgainsand
be exem ptfrom taxes.So,you can be a traderasw ellasan
investoratthe sam e tim e.
So,taxation rulesare clearforspeculative day trading and
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sourcesw illsurely hasto be declared asbusinessincom e.

Butforlong term investm ents,allthe stocksthatyou have
sold afterholding form ore than one yearcan be declared as
long term capitalgain and thusexem ptfrom tax w hile ifyou
are trading stocksfrequently then allthese incom e should be
declare asspeculative ratherthan capitalgain.
Therefore,itbecom esim portantto stay consistentw ith w hat
you are declaring selfw hile doing tax returns.So,consulta CA
to determ ine w hatto declare selfw hile ling tax returnsto
achieve yourtrading objectivesin futures.
Short Note:
#1.Speculative Trading in StocksorF& O trading requiresyou
to declare yourselfasa Trader.
#2.ProtsorLossesfrom equity trading forlong term orshort
term and derivativestrading w illbe taxed asIncom e from
Business/Profession,iftrading isyouronly source ofIncom e.
#3.Protsw illbe added to yourtotalincom e and taxed
according to yourrespective tax slabs.
#4.Lossesfrom derivativestrading cannotbe deducted from
salary incom e butcan be offsetagainstany otherincom e
(including day trading incom e)in sam e year.
#5.Lossescan be carried forw ard and setoffonly against
non-speculative businessincom e w ithin eightassessm ent
yearsim m ediately succeeding the assessm entyearin w hich
the lossw asrstcom puted.
#6.Businessexpensesincluding depreciation,internetbills,
advisory fees,softw are charges,and m ore.can be offset
againstyourprotsincom e.
#7.ITR 4 should be used w hile lling taxation forindividuals
trading derivatives.
#8.The only thing thatyoullhave to know isw hetherto get
yourbooksaudited ornot.So,Ifyou turnoverforthe nancial
yearis> 1 crore and yourprotsare lessthan 8% ofthe
turnover,you have to com pulsorily getyourbooksaudited.
Butifyou totalincom e isbelow the taxable lim it,then there is
no need to undergo tax audit.
#9.Taxation rulesare clearforspeculative day trading and

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sourcesw illsurely hasto be declared asbusinessincom e.If

you are trading F& O and doing frequentshortterm equity
then you have to declare selfasa traderbuteven then you can
declare yourlong term protsaslong term capitalgainsand
be exem ptfrom taxes.So,you can be a traderasw ellasan
investoratthe sam e tim e.
Equity Day Trading (Intraday Trading) or Non-Delivery

Trading Taxed as per Income Tax Slab
Any transaction w here you buy and sellthe shareson the
sam e day isa D ay Trade.A ny prots and losses arising from
any such transaction w illbe considered as speculative
and w illbe added or netted ofagainst your incom e from
business/profession.
So,any protfrom day trading (equities)w illbe considered as
a speculative incom e and w illbe added to yourotherincom e
underthe head incom e from business/profession and w illbe
taxed according to yourtotalincom e slab.
Suppose,M r.Srinivasan`stotalsalary incom e isRs.6 lacsand
hisday trading protsforthe yearis1.5 lacs,then histotal
incom e w illbe 7.5 lacsand w illbe taxed asper20% slab.
W hile on the otherhand,any lossfrom the day trading w illbe
considered asa speculative lossand can be carried forw ard
againstonly speculative protw ithin the period ofnext4
yearsand notagainstlong term orshortterm capitalgainsor
non speculative incom e (F& O Incom e)asperSection 73(1)of
the Incom e Tax Act,1961.
Suppose,M r.Srinivasan had incurred a day trading lossof1 lac
and booked a shortterm protof2 lacsduring the sam e year,
then the 1 lac losscannotbe netted offagainst2 lacsprot.
So,he hasto pay shortterm tax on 2 lacsprotand 1 lac loss
can offsetagainstany speculative protsw ithin nextfour
years.
Short Note:
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#1.ProtsorLossesfrom day trading equity w illbe

considered asSpeculative ProtorLoss.
#2.Protsfrom day trading equitiesw illbe considered as
speculative incom e and w illbe added to otherincom e and
taxed asperyourtax slab.
#3.Any lossfrom speculative (day trading equities)cannotbe
adjusted againstshortorlong term prots ornon speculative
incom e (F& O Incom e)butcan be offsetagainstspeculative
protsw ithin the nextfouryears.
To carry forw ard the lossesin the subsequentyears,the

perquisite isthatthey should be led in the sam e yearthe
lossesw ere incurred,else you cannotcarry forw ard them in
the subsequentyears.
Speculative business losses (Equity Intraday Trading
Losses)can be carry forw ard fora period of4 yearsand can
be set-offonly againstany speculative gainsand notagainst
non-speculative (F& O )gains,
N on-Speculative B usiness Losses (F& O Trading Losses)
can be set-offagainstany otherbusinessincom e (bank
interestincom e,rentalincom e,capitalgains)exceptsalary
incom e in the sam e year and balance ifany can be carry
forw ard forthe next8 yearsand can set-offonly againstany
non-speculative gainsm ade in thatperiod.
Any traderw illhave to undergo the auditofaccountsifthe

Turnoverforthe nancialyearisgreaterthan Rs.1 crore
(provided hisannualincom e ism ore than 2.5 lacs).So,ifyour
totalincom e (trading + Salary orotherbusiness)islesserthan
Rs2.5 lacs,you dontneed an auditeven ifthe turnoverforthe
yearisgreaterthan 1 crore.
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Turnoverisbeing calculated to determ ine ifyou need a tax

auditornot?
ForIntraday equity absolute sum ofsettlem ent
protsand lossesperscrip
ForD elivery equity sellside value ofthe stock
ForF& O (Equity,Currency,Com m odity) absolute
sum ofsettlem entprots& lossesforF& O )per
scrip and the sellside value ofoption contracts
Suppose,you bought1 lot(25 units)BankN ifty futuresatRs.
17700 and sold itat17800,then you m ade a protofRs.
2500 and say on som e otherday,you had a lossofRs.1500,
then the totalturnoverw illbe sum m ed up as2500+1500 =
Rs.4000.So,allsuch settlem entprots& lossesadded
together(absolute)sum m ed togetherform sup asturnover.
In case ofO ptions,
Suppose you boughtBankN ifty 19,000 CA @ 100 and sold it@
300,then turnoverw illbe 25 x (300-100)= 5000.
In anothercase,suppose you boughtBankN ifty 19,000 CA @
100 and sold it@ 50,then totalturnoverw illbe 25 x (100-50)
= 1250.
Lastly.suppose you boughtBankN ifty 19,000 CA @ 100 and it
expiresw orthless,then the totalturnoverw illbe 25 x (100-0)
= 2500.
To understand the difference betw een the trading and

settlem entturnovercalculation foraudit,Referto the
illustration.
Suppose,M r.Srinivasan bought100 sharesofTata M otorsat
400 and sold 100 sharesat380 then histrading volum e w illbe
Rs78000 buthissettlem entturnoverw illbe justRs10020=
Rs.2000.So,Allsuch settlem entprotsand lossessum m ed up
togetherifexceedsRs1 crore,only then isthe auditrequired.
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Ifyou are a salaried person,then protsfrom derivativesw ill

be added to yoursalary incom e and w illbe taxed according to
yourtax slabs.W hile on the otherhand,lossesfrom
derivativestrading cannotbe offsetagainstthe salary incom e
butcan be offsetagainstany businessincom e in next8 years.
#1.Prot& LossStatem ent

#2.ContractN otes
#3.D epository Statem ents
#4.Bank Statem ents
Any individualtradercarrying outtrading activity be itlong,

shortorday term are obligated underthe incom e tax law to
le theirreturnsbefore July 31 (This year the date is
extended to Septem ber 7,2015)and itisSeptem ber30th
forcom panies.
In case yourturnoverexceedsRs.1 crore in a nancialyear,
then the book ofaccountsneedsto be audited and the due
date forlling returnsisSeptem ber30.U ndersection 271 B,
failure to subm itthe tax auditin tim e hasa penalty of0.5% of
turnoverorRs1.5 lakhs,w hicheverislesser.
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Businessexpensesincluding Brokerage Charges,Internet

Charges,Advisory Fees,Research Reports,Com puter&
electronicsD epreciation,Electricity Bill,Telephone,Softw are
& D ata Feed Charges,N ew spaper,Books,STT and rent,etc
can be used to reduce the taxable incom e from
Speculative/BusinessIncom e.You can m ention any other
expensesthatisincurred forundertaking yourtrading activity
underthe section O therExpenses.So,forany expensesyou
m ention m aintain the supporting docum entsforany future
reference.
STT,or Securities Transaction Tax,isa tax levied on
securitiestrades(excluding com m oditiesorcurrency trades).
D ifferentSTT ratesare applicable forEquity (cash)and
Futuresand O ptions(F& O )transactions.STT islevied on
tradeson the N ationalStock Exchange (N SE),Bom bay Stock
Exchange (BSE),and otherrecognized stock exchanges.For
com m odities,CTT (Com m oditiesTransaction Tax)islevied.
Ifthe trade isa equity delivery trade,than a tax of0.1% on the
turnoverislevied on both the buy side and sellsidesofeach
trade.H ow ever,ifthe trade issquared off(closed)w ithin the
sam e trading day,m eaning itisa intra-day transaction,then
the STT rate applicable is0.025% on the sell-side trade(s)only.
For Investors
ITR 1 Individualshaving incom e from Salary and Interest
ITR 2 Individualshaving incom e from salary,Interestand
Rental
For Traders
ITR 4 orITR4(S) Individualsand H U Fshaving incom e from a
proprietorbusinessorprofession
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For C om panies
ITR 6
For
M en/W om en
below 60 years
ofage
For Senior
C itizens (A ge 60
years or m ore
but less than 80
years)
For Senior
C itizens (A ge 80
years or m ore)
Incom e
Level
Tax
Rate
Incom e
Level
Tax
Rate
Incom e
Level
Tax
Rate
Rs.
2,50,000
N il
U pto Rs.
3,00,000
N il
U pto Rs.
5,00,000
N il
Rs.
2,50,001
Rs.
500,000
10%
Rs.
3,00,001
Rs.
500,000
10%
Rs.
5,00,001
Rs.
10,00,000
20%
Rs.
500,001
Rs.
10,00,000
20%
Rs.
500,001
Rs.
10,00,000
20%
Above Rs.
10,00,000
30%
Above Rs.
10,00,000
30%
Above Rs.
10,00,000
30%
In case ofcom panies,incom e tax is a at 30% and no tax

slabs exist.
# Is there any loss w e can net offagainst salary?

N o,w e cannotoffsetany trading lossesagainstsalary incom e.
# C an w e deduct long term capitalloss from stocks w ith
business incom e for com puting incom e tax?
19/Sep/2015 17:32
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N o,w e cannotnetoffthe long term lossesagainstany incom e

orgains.
# C an w e carry forw ard the losses ifnot led in the
nancialyear?
To getthe benetofcarry forw arding the losses,ithasto be
led in yourincom e tax before the due datesforthe nancial
yearto getany benet.O therw ise,you cannotclaim the
benet.
ForCom plete listofQ & As,Please Visit

Q & A :Taxation for Traders in India
Please note thatthe postseriesare ourpersonalview and w e

advise you to consultw ith yourprofessionalnance and tax
advisersorchartered accountantbefore taking any
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19/Sep/2015 17:32
18 of 24
Q &A :Tax G uide for
Tax Benets &
Traders in India
Im plications ofD eclaring

Trading as a Business
Activity
PartVI G etting Started
H ow to use H U F Account
W ith Trading H ow to
to Save M ore Tax?
Trade Futures M arket?
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JustTrading
JustTrading.in isa private com m unity oftraders
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theirtrading skillsand know ledge in a supportive
environm entto m ake Trading A Successful
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Tagged on: D ay Trading
JustTrading
7 Com m ents
Taxation
Trading
N ovem ber16,2014
Taxation
H ow to Trade Bank N ifty Futures?
19/Sep/2015 17:32
19 of 24
BiggestW inners& D raggersofthe Bank N ifty Index in

2013-14 BullRun
SudhakarJ
August6,2015 at3:33 PM
Perm alink
Thisvery neatand thanksforthe info.Im ostly take

delivery and have done som e 10 tim esIntraday
m ade aboutnotm ore than Rs.2000 .Can Ideclare
m yselfInvestor.
Reply
JustTrading
Perm alink
D earSudhakar
Incom e tax regulationshad w ide aspectsto
classify yourtrading activity asBusinessor
Investm ent.
Intraday trading (i.e.non delivery trading)is
considered asSpeculative Businessactivity w hich
requiresyou to declare selfasa trader.So any
incom e from equity day trading isspeculative
businessincom e needsto show n underthe head
incom e from business/profession and w illbe
added to yourotherincom e and taxed asperyour
Tax Slab.
There are othercriteria`sto classify selfasa
traderorinvestorlike ifyou are buying and selling
stocksfrequently w ithin w eeksforshortterm or
19/Sep/2015 17:32
20 of 24
engaged in equity day trading orfuturestrading

oryourprim ary source ofincom e is
trading/investm entoryou are declaring selfasa
Traderin previoustax returnsthen you have to
declare yourtrading activity asBusiness.
Reply
G aurav
Perm alink
H i,
M y m ain source ofincom e isFD sand Intraday +
BTST + shortterm .Incom e below taxable lim it.StillI
received noticesasking w hy Ihave notsubm itted
returnsforpast2 years.They are referring to m y
above tradesunderSTT-01,STT-02 and STT-03.
So Ihave decided to le thisyearsreturn and Iknow
Ineed to le ITR 4.Please help in providing som e
ITR4 specim en forstock m arkettraders..
Suppose asperportfolio position from backofce I
have:
D elivery purchases= 500000
D elivery sales= 492000
Speculation purchases= 6200000
Speculation sales= 6215000
Totalofpositive and negative valuesofspeculation
entries= 50000
Costprice ofStocksw ith m e on 1 Apr2014 = 56000
(Calculated m y be from lastyearreportsand not
available directly)
Costprice ofStocksw ith m e on 31 M ar2015 =
110000 (Calculated m y be from thisyearreports
and notavailable directly)
M arketvalue ofstocks(available from backofce)
held on 1 Apr2014 and sam e day value = 67000.I
dontnow w hy itisrequired.So Ithink thisisto be
ignored and 56000 isto be taken asopening stock.
19/Sep/2015 17:32
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M arketvalue ofstocks(available from backofce)

held on 31 M ar2015 and sam e day value = 95000.I
dontnow w hy itisrequired.So Ithink thisisto be
ignored and 110000 isto be taken asclosing stock.
M argin m oney in trading accounton 1 Apr2014 =
9000
M argin m oney in trading accounton 31 M ar2015 =
10000
Please help m e w ith sam ple ITR 4 forthisdata.
Assum ing thatFD + above data islessthan taxable
lim itand m y protislessthan 8 percent,am I
required to getm yselfaudited?
Thanks
Reply
JustTrading
Perm alink
D earG aurav
The rstthing w e need to evaluate isthe protor
lossyou had on yourtrading activity separately
forlong term ,shortterm and speculative.So,
considerallthe delivery stocksthatyou sold this
nancialyear(asthere m ustbe som e stocksthat
you purchased lastyearand sold thisFY orsom e
you boughtthisFY butnotsold off)forcalculating
the protorlossand yourspeculative prot&
lossalso.
Asyourturnoverislessthan 1 croresand your
totalincom e isbelow the taxable lim itofRs.2.5
lacs,you are notrequired to undergo the tax
audit.
Allthe intraday protsshould be show n under
speculative businessincom e w hile allshortterm
equity delivery protsundercapitalgainshead.
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AsforITR 4,you are required to prepare your

balance sheetdeclaring yourassets(Cash in hand,
depositsw ith Bank,investm ents,Property,
Autom obilesand O therassetsand liabilities
(loans,creditcard balances,m ortgage loansetc)
and prot& lossstatem entsum m arizing your
incom e and expensesjustlike a business.
So,itisadvisable to le the sam e w ith the help of
a CA so thatyou rem ain consistentw ith your
future tax returns.
Reply
Jitendra
Perm alink
Sir,M y m ain source ofincom e isfarm er+ fd + btst

and intraday trading.M y incom e below taxable lim it.
StillIreceived notice asking w hy Ihave not
subm itted returnspast3years.Because m y incom e
laserthan one lack allsources.
M y incom e source
farm er40000/-peryear
Fd interest10000/O ther10000/And share trading Iam loss20000/-som e thing.
M y portfolio about2lakh 70thousand.
Ihave lossin 20y4-15 in day trading about20000.
M y day volum e buy and selltotalis50lack.M y
incom e notm ore than one lack so Iam notle
incom e tax pastyears.Can ile incom e tax this
year?Please give m e advice.
Thanks.
Reply
JustTrading
Perm alink
19/Sep/2015 17:32
23 of 24
D earjitendra
Incom e tax com pliance isgetting very strictthese
days.
So allthe tradersorinvestorsparticipating in the
m arketare required to le theirtax returnseven
ifthe totalincom e isbelow tax lim it.
M any tradersare getting noticesfrom IT
departm entfornon lling orw rong lling of
returnsspecially those day trading,shortterm
trading and,trading f& o asallthe traderstrading
the m arketshave to considertheirprotsor
lossesasbusinessincom e orlosses,so they are
required to le ITR 4 or4S.
Asperlaw ,Electronic ling ofincom e tax return is
m andatory forthe taxpayerifthe totalincom e is
m ore than Rs.5 lakh orifthere isa claim of
refund exceptforsuperseniorcitizen (Age above
80 years)orifITRs3,4,5,6 or7 have to be led
(Rule 12 (3)ofthe Incom e Tax Rules,1962 as
am ended)
Reply
JustTrading
Perm alink
Even m any ofthe tradersw e are connected

w ith are getting noticesfornon-lling of
incom e tax returns.
IT departm entare ltering outthe accounts
w ho are participating in the capitalm arketbut
notlling theirtax returnsunderSTT-01,
STT-02,STT-03,STT-04,STT-05 and asking
them to subm ittheirresponse electronically
underCom plaince m odule.
Reply
19/Sep/2015 17:32
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Getting Started With Trading Tax Guide for Traders in India

Traderstoday have so m uch ofcom pelling optionsto trade in

im portantforany traderto understand the taxation

H ow to Trade Bank N ifty Futures?

PartVIII G etting Started W ith

1.Long Term CapitalG ain

PartVI G etting Started W ith