No income, but starting trading. Should I be concerned about the taxman?

#1
For the last 3yrs I have not had a job (and income) for personal reasons. I am just entering trading with some small amount (about 3lakhs). I have PAN card from some years ago when I had a job and was paying taxes, but since no income after that, I have not paid taxes or filed a return. I have some FDs (about 3-4lakhs) that I purchased 3yrs ago when I quit my job.

If I enter trading now and buy and sell shares, options etc., should I be concerned about the taxman sending me notice?
 

suri112000

Well-Known Member
#2
For the last 3yrs I have not had a job (and income) for personal reasons. I am just entering trading with some small amount (about 3lakhs). I have PAN card from some years ago when I had a job and was paying taxes, but since no income after that, I have not paid taxes or filed a return. I have some FDs (about 3-4lakhs) that I purchased 3yrs ago when I quit my job.

If I enter trading now and buy and sell shares, options etc., should I be concerned about the taxman sending me notice?
As long as your income is less than Rs.2.5 lakhs from all sources (in your case, from trading, interest from FDs) per assessment year, you need not file any tax return. But, if you make significant losses and if you need to carry forward of losses to set off in future assessment years you need to file tax return and to undergo some tax audit.

If your income crosses that limit, you have a hell a lot of tax compliances to do and better to consult a CA.
 
#3
As long as your income is less than Rs.2.5 lakhs from all sources (in your case, from trading, interest from FDs) per assessment year, you need not file any tax return. But, if you make significant losses and if you need to carry forward of losses to set off in future assessment years you need to file tax return and to undergo some tax audit.

If your income crosses that limit, you have a hell a lot of tax compliances to do and better to consult a CA.

But from what I heard, if you buy stocks of certain value, you can possibly get a notice under some code/section or some such thing. Is that true?

Also, is there any reason why I would have to face so many compliance issues? I am going to be taking up a job again in another 2-3 months. Hope I don't face any problems down the line.
 

suri112000

Well-Known Member
#4
But from what I heard, if you buy stocks of certain value, you can possibly get a notice under some code/section or some such thing. Is that true?
As a general practice, taxman can do that. But you can submit a simple reply to the notice that your annual income is less than Rs.2.5 lakh from all sources including trading....so not required to file tax return.

Also, is there any reason why I would have to face so many compliance issues? I am going to be taking up a job again in another 2-3 months. Hope I don't face any problems down the line.
I clearly said that if your annual income is less than Rs.2.5 lakhs per annum, no issues whatsoever. When you take up a job again, i am sure you will cross that limit, and you will attract lot of compliance tax rules. Even after taking up job, if your annual income is still less than Rs.2.5 lakhs per annum from all sources, then there are no issues. If you want to escaple tax compliances, your only way is to have income less than Rs.2.5 lakhs per annum from all sources.

As a rule of thumb, any person who is drawing a monthly salary of Rs.21,000 (gross) per month if he indulges in trading or not, is required to file a tax return provided his gross yearly salary exceeds Rs.2.5 lakhs.

So,
if your income level crosses Rs.2.5 lakhs per annum from salary, you need to file tax return. or
if your income level crosses Rs.2.5 lakhs per annum from salary or interest from FDs, you need to file tax return, or
if your income level crosses Rs.2.5 lakhs per annum from trading alone, you need to file tax return, or
if your income level crosses Rs.2.5 lakhs per annum from salary, interest from FDs, you need to file tax return, or
if your income level crosses Rs.2.5 lakhs per annum from salary, interest from FDs, and trading you need to file tax return or
if your income level crosses Rs.2.5 lakhs per annum from salary, interest from FDs alone, but you made losses in trading, you need to file tax return.

Hope this helps.
 
Last edited:

nac

Well-Known Member
#5
It may seem like a lot at first. Once you file it, you won't feel that way. You have filed ITR1 before, now it's gonna be ITR4. Just few more pages, nothing to worry.
 
#6
As a general practice, taxman can do that. But you can submit a simple reply to the notice that your annual income is less than Rs.2.5 lakh from all sources including trading....so not required to file tax return.

I clearly said that if your annual income is less than Rs.2.5 lakhs per annum, no issues whatsoever. When you take up a job again, i am sure you will cross that limit, and you will attract lot of compliance tax rules. Even after taking up job, if your annual income is still less than Rs.2.5 lakhs per annum from all sources, then there are no issues. If you want to escaple tax compliances, your only way is to have income less than Rs.2.5 lakhs per annum from all sources.

As a rule of thumb, any person who is drawing a monthly salary of Rs.21,000 (gross) per month if he indulges in trading or not, is required to file a tax return provided his gross yearly salary exceeds Rs.2.5 lakhs.

So,
if your income level crosses Rs.2.5 lakhs per annum from salary, you need to file tax return. or
if your income level crosses Rs.2.5 lakhs per annum from salary or interest from FDs, you need to file tax return, or
if your income level crosses Rs.2.5 lakhs per annum from trading alone, you need to file tax return, or
if your income level crosses Rs.2.5 lakhs per annum from salary, interest from FDs, you need to file tax return, or
if your income level crosses Rs.2.5 lakhs per annum from salary, interest from FDs, and trading you need to file tax return or
if your income level crosses Rs.2.5 lakhs per annum from salary, interest from FDs alone, but you made losses in trading, you need to file tax return.

Hope this helps.
Thanks for a detailed reply. What about, if income level is below Rs.2.5 lakhs per annum from salary, interest from FDs etc etc (from all sources), but made losses in trading, and does not want to carry forward of losses to set off in future years, does one need to file tax return.
 

nac

Well-Known Member
#7
Thanks for a detailed reply. What about, if income level is below Rs.2.5 lakhs per annum from salary, interest from FDs etc etc (from all sources), but made losses in trading, and does not want to carry forward of losses to set off in future years, does one need to file tax return.
If that's what you want, yeah don't have to file. But you may be sent notice from IT. Just reply them that you're not liable to file and state the reason.
 
#8
As a general practice, taxman can do that. But you can submit a simple reply to the notice that your annual income is less than Rs.2.5 lakh from all sources including trading....so not required to file tax return.



I clearly said that if your annual income is less than Rs.2.5 lakhs per annum, no issues whatsoever. When you take up a job again, i am sure you will cross that limit, and you will attract lot of compliance tax rules. Even after taking up job, if your annual income is still less than Rs.2.5 lakhs per annum from all sources, then there are no issues. If you want to escaple tax compliances, your only way is to have income less than Rs.2.5 lakhs per annum from all sources.

As a rule of thumb, any person who is drawing a monthly salary of Rs.21,000 (gross) per month if he indulges in trading or not, is required to file a tax return provided his gross yearly salary exceeds Rs.2.5 lakhs.

So,
if your income level crosses Rs.2.5 lakhs per annum from salary, you need to file tax return. or
if your income level crosses Rs.2.5 lakhs per annum from salary or interest from FDs, you need to file tax return, or
if your income level crosses Rs.2.5 lakhs per annum from trading alone, you need to file tax return, or
if your income level crosses Rs.2.5 lakhs per annum from salary, interest from FDs, you need to file tax return, or
if your income level crosses Rs.2.5 lakhs per annum from salary, interest from FDs, and trading you need to file tax return or
if your income level crosses Rs.2.5 lakhs per annum from salary, interest from FDs alone, but you made losses in trading, you need to file tax return.

Hope this helps.
Tremendously helpful, thanks a lot.
 
#9
Tremendously helpful, thanks a lot.
Tax returns are always a plus point, the taxman keeps knowing how much your making and you get a solid income proof for bank loans, foreign visa, etc.

Even if your not making income above 2.5lakh you should file a return if your trading in stocks and want to show it as your profession or that your a regular investor. (if you make a loss your loss deduction may be disallowed, read on speculative loss and profit for further information on this.)

You will never go wrong if you file a properly made return. As my learned friend stated ITR4 is required.
 
#10
Tax returns are always a plus point, the taxman keeps knowing how much your making and you get a solid income proof for bank loans, foreign visa, etc.
That's a good point, not sure if your income touches the required threshold for paying income taxes but you must keep in contact with your tax consultant and file your tax return at least with whatever tax you have paid.
 

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