Pls help me.
If the income generated from day trading is treated as Businees income, then
1. Can we deduct expenses such as
Rent on premises ?
Electricity?
Phone?
broadband?
Fee paid to Stock technical analysts?
fee paid to CA?
Investments made for Hardware and software?
2. If the day trading is done as a SOHO (Small Office/Home Office) set up
how are the above expenses treated.
3. Will there be double taxation on the income? (once a s a business income and again as a Income tax as an Individual)
Hi Muttusagara & Ratan Jain!
With reference to yr query i have found a relevant answer to a similar question answered By the Tax Guru Mr.Subhash Lakhotia :
: Sir, I am basically a trader in equity. I do normally settle the transaction on intra-day basis. Some time I take delivery for short term gain. I do have investment in share also which have holding period more than 12 months. Do I need to seperate three activities as (a) Business income (b) Short-Term Capital gain (c) Long term gain which is not taxable. I do these online from home. What expenses could be deductible (internet charges/Demat charge/brokerage etc) to calculate such income and in what porpotion. I have strong doubt because demat charges includes for all the three activities and so can not be propotionised. Can that be adjusted fully against the income from business. What about the other charges such as society maintenance, electricity bill etc. Thanks
SunandSingh
A: A person may have three activities namely a Business Income, a Long-term capital gain and a Short-term capital gain. The computation of income will have to be done separately for each item of income. The long-term capital gains on listed securities will, however, be fully exempted from income-tax. The short-term capital gains would be subject to tax @ 10% only. The business income from trading in shares will, however, be calculated by reference to income and loss from different transactions during the year and the tax liability will arise based on the tax slab as is applicable to an individual. The expenses incurred by you on earning all the above income will be deductible pro-rata to the income earned by you in each separate activity. However, no expenses will be deductible in respect of long-term capital gains because in any case the income from long-term capital gains is fully exempt from tax. If you are maintaining a separate office for carrying out your business activities of stock market then the expenses incurred on society maintenance, electricity bills and telephone bills and all other expenses in connection with the earning of the income from business will be allowed as a deduction. If, however, you are not maintaining separate office then also you can claim pro-rata deduction of the expenses.
Subhash Lakhotia
Rgds