Fire your tax related queries and i would get it solved!!!

[poortrader]

GUIDANCE NOTE ON TAX
AUDIT UNDER SECTION 44AB
OF THE INCOME-TAX ACT, 1961 by ICAI states
5.12
(b) Derivatives, futures and options:
The turnover in such types of transactions is
to be determined as follows:
(i) The total of favourable and unfavourable differences shall be
taken as turnover.
(ii) Premium received on sale of options is also to be included in
turnover.
(iii) In respect of any reverse trades entered, the difference thereon,
should also form part of the turnover.

So, in terms of Options what would be the turnover,
Suppose I sold Nifty PE @ 100, and bought back @ 80, difference is 20Rs (profit); Now do I have to add 100 to turnover, or the net difference of 20 rs will be turnover?

 

[shravank30]

GUIDANCE NOTE ON TAX
AUDIT UNDER SECTION 44AB
OF THE INCOME-TAX ACT, 1961 by ICAI states
5.12
(b) Derivatives, futures and options:
The turnover in such types of transactions is
to be determined as follows:
(i) The total of favourable and unfavourable differences shall be
taken as turnover.
(ii) Premium received on sale of options is also to be included in
turnover.
(iii) In respect of any reverse trades entered, the difference thereon,
should also form part of the turnover.

So, in terms of Options what would be the turnover,
Suppose I sold Nifty PE @ 100, and bought back @ 80, difference is 20Rs (profit); Now do I have to add 100 to turnover, or the net difference of 20 rs will be turnover?

Your turnover is Rs 20 only (X the quantity)

 

[shravank30]

Hi Tax Experts,
1) Can business loss (from FnO) be set off against short term capital gains also in same financial year?
2) Can F&O carried over be set off against interest from FD in next year?
3) Books of accounts is required to be kept (mandatory) under which conditions at present?
4) If I filed returns for FY2012-13 only this month, for how long can it be revised if required?
5) If I have say 1 lakh long term capital gain this fiscal (shares bought more than 2 years ago) and also long term capital loss of 20000 (bought around 13 months ago), then my net long term capital gain will be 80000. is that right?
6) I understand that - Getting loan from father or mother, and using it for trading can be used to deduct interest paid on this loan from the income (trading) as expenses. Now if loss in trading is 1 lakh and interest is 1lakh, can this 2 lakh be carried forward as business loss to adjust for future income from trading in next fiscal/upto 8 years?

1. Business loss in FNO can be setoff against short term profit in Equity as long as you are showing the equity holdings as stock in trade and not claiming lower capital gains tax
2. Interest earned can be setoff against FNO losses
3. As you are doing equity trading & FNO business, you have to keep books of accounts under all circumstances. I would not advise any equity trader to file return under presumptive income
4. If you have not filed the return within the due date, you cannot revise the return
5. You are right. Your long term capital gain will be Rs 80,000 but you cannot get away with zero tax as you are showing the same as business income. So you will have to pay Long term capitals gain.
6. Yes you can pay interest to your parents also as long as all transactions are done through account payee cheques
Your parents will have to show the loans and interest earned in their income tax return.
The losses can be carries forward for adjustment in future years but beware that is allowed only if you file your returns in time. Late filed returns do not allow you to CF losses

 

[poortrader]

1. Business loss in FNO can be setoff against short term profit in Equity as long as you are showing the equity holdings as stock in trade and not claiming lower capital gains tax
2. Interest earned can be setoff against FNO losses
3. As you are doing equity trading & FNO business, you have to keep books of accounts under all circumstances. I would not advise any equity trader to file return under presumptive income
4. If you have not filed the return within the due date, you cannot revise the return
5. You are right. Your long term capital gain will be Rs 80,000 but you cannot get away with zero tax as you are showing the same as business income. So you will have to pay Long term capitals gain.
6. Yes you can pay interest to your parents also as long as all transactions are done through account payee cheques
Your parents will have to show the loans and interest earned in their income tax return.
The losses can be carries forward for adjustment in future years but beware that is allowed only if you file your returns in time. Late filed returns do not allow you to CF losses

Thanx for the reply,
point 5) can I maintain 2 separate demat ac, one for pure investment and one for trading purpose and show long term gain in the demat which is purely for investments
point 4) If I file in time then how long can the returns be revised

New Query: what is the maximum duration for which notices can be sent by the tax department after the FY is over, for example for FY 2012-13 till when they can send notice, same question for scrutiny

 

[poortrader]

Suppose I trade in Oct nifty futures 2013 contract, say I have traded 4 times in it on different dates
trade 1 profit 1000 (1 oct 2013)
trade 2 profit 500 (3 oct 2013)
trade 3 loss 500 (4 oct 2013)
trade 4 loss 500 (4 oct 2013)

So my turnover is a) 1000+500+500+500
or b) net settlement of the contract which is 500?

 

[shravank30]

Thanx for the reply,
point 5) can I maintain 2 separate demat ac, one for pure investment and one for trading purpose and show long term gain in the demat which is purely for investments
point 4) If I file in time then how long can the returns be revised

New Query: what is the maximum duration for which notices can be sent by the tax department after the FY is over, for example for FY 2012-13 till when they can send notice, same question for scrutiny

5. Just by maintaining 2 demat accounts, you cannot get the benefit from back date.
If you maintain 2 demat accounts, then from the date that you transfer the shares by bifurcating them, you can start claiming benefits. Even after that it is very difficult to convince the ITO in case your case comes up for scrutiny, that you have 2 separate portfolios
Is your portfolio so big that is is worth risking a scrutiny notice ?
My advise would be that in your name you should only show all income as business income
You can purchase shares you want for long term in names of your parents and wife and all those will be investment and you get all benefits of STCG & LTCG

You can revise your returns as many times you want if you have filed in time

There is no limit to picking your case for scrutiny as the department has several clauses under which it can do so if they are hell bent on grilling you.

Generally for FY 2012-13, they can issue notice till 31.03.15

 

[shravank30]

Suppose I trade in Oct nifty futures 2013 contract, say I have traded 4 times in it on different dates
trade 1 profit 1000 (1 oct 2013)
trade 2 profit 500 (3 oct 2013)
trade 3 loss 500 (4 oct 2013)
trade 4 loss 500 (4 oct 2013)

So my turnover is a) 1000+500+500+500
or b) net settlement of the contract which is 500?

Your turnover is a) 2,500

 

[nithxp]

As of now im trading in equity(intraday n delivery) so i have not opened a tax file or audited plz help in this matter

 

[blisscapital]

Hi Tax Gurus

A lengthy query

FACTS:
1) Original Buyer (husband of present owner) bought 4 Katha 10 Lecha land on 04 Sept 1981 for a consideration Amount : Rs 4000
2) On death of original buyer land transferred to his legal heirs-wife (X) & son (Y) on 21.5.2011
3) Sold part of transferred land measuring 1 Katha 5 Lecha on 1 Oct 2013 for an amount Rs 10,00000. This amount paid by cash.

QUERIES:
A) What will be the capital gain tax on this amount (10,00000). Whether it will be short term or long term capital gain tax? How is it calculated? Please give the breakup. Please note both wife (senior citizen) and son annual income is 1,50,000 each.
B) Will wife and son have to share the tax equally, as both are now joint holders of the land.
C) Can they save the tax by constructing a new house on the vacant area of existing plot of land. If yes, during construction where should the money be kept (I mean any special account or just normal savings account)? What documents are to be kept as a proof of construction of house? What is the time limit for construction of the house?

Thanx in Advance

 

[narayan78]

bhai log,

Suppose I trade in Oct nifty futures 2013 contract, say I have traded 4 times in it on different dates
trade 1 profit 1000 (1 oct 2013)
trade 2 profit 500 (3 oct 2013)
trade 3 loss 500 (4 oct 2013)
trade 4 loss 500 (4 oct 2013)

So my turnover is a) 1000+500+500+500
or b) net settlement of the contract which is 500?

Your turnover is a) 2,500

so the turnover means TOTAL profit + TOTAL loss and nothing to do with the daily buy and sell turnover. Because nifty future overtrading may lead to 1 crore transaction (in buy and sell turnover) in few weeks easily.

kindly tell me whether my understanding is oky !?

and what are the Tips/ideas for new tax filers for derivative traders.



with cheers,
narayan.