Income Tax on Money Earned in Stock Market

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xienes1

Member
#1
#1
How is income tax calculated for money earned in stock markets esp. in daytrading?

Suppose someone starts with Rs.100,000 money and after an year has Rs.400,000 (Rs.300,000 profit), how is this going to be taxed.

Will the taxation will be different if he keeps all the money invested in stocks or just uses them for daytrading without withdrawing.
 
M

MaxBombay

Active Member
#3
#3
xienes1 said:
How is income tax calculated for money earned in stock markets esp. in daytrading?

Suppose someone starts with Rs.100,000 money and after an year has Rs.400,000 (Rs.300,000 profit), how is this going to be taxed.

Will the taxation will be different if he keeps all the money invested in stocks or just uses them for day trading without withdrawing.
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Money earned from derivative trading / day trading (Rs. 300,000) will be treated as business income and will be added to your other income sources and you will be taxed accordingly. You can also claim expenses for share trading and deduct it from total income. For example, purchase of computer for share trading, internet connection etc. I am 100% sure about this.

Long Term Capital Gain Tax - Money earned from investment in shares is taxed differently as its excepted. Any money invested in shares for 12 months (you must hold shares for 12 months) is free from income tax.

Short Term Capital Gain Tax - As per my understanding, Money earned from investment in shares in short term is subjected to taxed at the rate of 15%. Short term is generally defined as shared bought for investment however sold in less then one year. If you are professional trader then i guess you can not claim short term capital gain however if you are investor and buy / sell shares every few months then I guess you should be fine with short term claim, however i recommend you consult your CA if you buy/sell shares frequently because then it may be considered as business income and not investment.
 
X

xienes1

Member
#4
#4
MaxBombay said:
Money earned from derivative trading / day trading (Rs. 300,000) will be treated as business income and will be added to your other income sources and you will be taxed accordingly. You can also claim expenses for share trading and deduct it from total income. For example, purchase of computer for share trading, internet connection etc. I am 100% sure about this.

Long Term Capital Gain Tax - Money earned from investment in shares is taxed differently as its excepted. Any money invested in shares for 12 months (you must hold shares for 12 months) is free from income tax.

Short Term Capital Gain Tax - As per my understanding, Money earned from investment in shares in short term is subjected to taxed at the rate of 15%. Short term is generally defined as shared bought for investment however sold in less then one year. If you are professional trader then i guess you can not claim short term capital gain however if you are investor and buy / sell shares every few months then I guess you should be fine with short term claim, however i recommend you consult your CA if you buy/sell shares frequently because then it may be considered as business income and not investment.
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Thanks MaxBombay for the reply.
:clap: :clap:
 
M

MaxBombay

Active Member
#6
#6
I just had meeting with my chartered accountant and he told me following:

1) Once you receive delivery of shares in your depositary account (CDSL, NSDL) its treated as investment, if you sell these shares even after 1 day after receiving delivery of these shares in your depositary account you can claim it as SHORT TERM CAPITAL GAIN and will pay only 15% tax. If you sell these shares after 1 year then there is NO TAX as it will be treated as long term capital gain.
2) All derivatives trading activities are considered as business and hence must be treated as business. Any profit or loss from derivative trading is treated as business income and business loss.
3) EVEN if you are professional trader (you trade in derivatives and also buy shares and receive delivery) you can claim SHORT TERM CAPITAL GAIN for money made in shares for which you receive delivery in your DP and you MUST show income/loss from derivatives trading as business income/loss. In short, if you are professional trader you can do both (investment and trading).

I hope this clarify all your queries.
 
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bridgeplayingcat

New Member
#8
#8
Hello,
Can I adjust my losses made in derivative trading against the gains? For example, if i lose Rs 200,000 in a trade and make Rs 100,000 in a trade, do I have to pay tax?
 
S

superrocker

New Member
#9
#9
bridgeplayingcat said:
Hello,
Can I adjust my losses made in derivative trading against the gains? For example, if i lose Rs 200,000 in a trade and make Rs 100,000 in a trade, do I have to pay tax?
Click to expand...
No, you need not pay tax... Tax is to be charged on net profit only, which is calculated on the basis of whole transactions during the year.
 
vibhunair

vibhunair

Member
#10
#10
Do gains from intraday trading on stocks too come under short term capital gains? Or is there some other way of taxation for them. How are intraday profits taxed?
Moreover is audit required only for derivative segments or is there a limit in turnover in cash segment too over which one needs to get audit done?
 
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