Calculating short term, speculative and f/o income tax.

[agarwal29ster]

Hello,

A person has a source of professional income.

He makes some money in short term and speculative trading, but looses money in Futures and Options.

Charges incurred during the process:
a) Brokerage on sale and purchase.
b) Service Tax on brokerage.
c) STT.
d) Stamp Duty
e) Other charges( Sebi turnover charges etc)
f) Demat Charges.
g) Interest on margin trading.

My questions are:
1)which items from the above can be deducted from the trading income. I understand STT is not deductible, what about others. Specially the interest paid is a huge amount which turns all the trades into a loss.
2) Can the F/Q loss be carried forward? If not, can it be crossed with some other income?

Please provide relevant sections if you know them.

Thank you.

 

[MewarLion]

Income or losses from Equity and Currency Derivatives are treated as Business Income per Income tax regulation . Expenses mentioned in (a) to (g) are fully deductible to the extent used for doing above said derivative business.

Income or losses from speculation ( which may be is intra day trade in your case from Equity ). Expenses mentioned in (a) to (g) are fully deductible to the extent used for doing above said speculation business.

Profit and losses from Business Income ( derivative trading ) and can be set off from speculation loss of profit of same year and remaining amount if any can be carried forward for 4 years in case of speculation loss and 7 years in case of business loss.

Income from Delivery based trades is either Short term capital gain or long term capital gain. You cannot deduction of all expenses as mentioned except interest paid from short term capital gain. However if shown as business income than interest paid can be claimed as deduction however trading delivery based trades as business income to again short term and long term would be difficult in subsequent year. You need to be consistent.

Hello,

A person has a source of professional income.

He makes some money in short term and speculative trading, but looses money in Futures and Options.

Charges incurred during the process:
a) Brokerage on sale and purchase.
b) Service Tax on brokerage.
c) STT.
d) Stamp Duty
e) Other charges( Sebi turnover charges etc)
f) Demat Charges.
g) Interest on margin trading.

My questions are:
1)which items from the above can be deducted from the trading income. I understand STT is not deductible, what about others. Specially the interest paid is a huge amount which turns all the trades into a loss.
2) Can the F/Q loss be carried forward? If not, can it be crossed with some other income?

Please provide relevant sections if you know them.

Thank you.

 

[agarwal29ster]

Thank you for your response.

So F/O loss can be deducted with the professional income. That is good to know. What about the interest incurred here?

How can we separate F/O Interest and interest on delivered equity. If interest on STCL is dead loss, can we just deduct the F/O Interest like any other expense?

 

[canikhil]

Thank you for your response.

So F/O loss can be deducted with the professional income. That is good to know. What about the interest incurred here?

How can we separate F/O Interest and interest on delivered equity. If interest on STCL is dead loss, can we just deduct the F/O Interest like any other expense?

you can claim deduction for interest too. You can split the interest on the basis of capital employed under each segment. interest on STCL would be a dead-loss.

 

[agarwal29ster]

Thanks so much for your response.