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

## Are you able to understand the replies and act accordingly to this thread ??

• ### Not able to understand any of the replies !!!

• Total voters
4
• Poll closed .

#### lvgandhi

##### Well-Known Member
Hello Diosys,
I'd like to state a couple of points. Correct me if I'm wrong.
1) Treating trading income under the head "Income from business" allows you to deduct trading related expenses such as purchase of books, depreciation on software purchased etc which isn't applicable to those who treat the income as capital gains.
2) Securities transaction tax rebate under sec.88 E is applicable for those who treat trading as a business income. The rebate is calculated as
(Average rate of income tax * Income from trading of shares) (or) (STT Paid) whichever is less. This benefit again cannot be made use of by those who treat trading income as CG.

Sincerely yours.
Can you Please Clarify how to arrive at Average rate of income tax for calculating (Average rate of income tax * Income from trading of shares)

#### diosys

##### Well-Known Member
Can you Please Clarify how to arrive at Average rate of income tax for calculating (Average rate of income tax * Income from trading of shares)

Hi,

Suppose you earn 1,20,000 ... then basic tax is 2000.... avg tax means 2000/120000 = .0166....

One more example....If you have taxable income of 2,00,000 then your tax is 15,000....so your average rate of tax is .075 (15000/200000)....

#### hometypist

##### Member
Thanks for the help to solve our issues pertaining to tax.

Please let me know the following:

1. If a person is earning gross salary of Rs.180,000/- how much tax does he or she need to pay.
2. If the person does not want to pay any tax, how can the breakup be made since the company has given the person freedom to break up and give the net salary + allowance so if the person wants to he can save on tax.
3. If the salary of the person is transferred to an account holder of ICICIDirect, what are the implications, the account holder does not earn any salary but deal in stock market, has PAN number.

Regards,

Hi all....

I thought a lot of our traderji members would be having taxing issues...Hence i am launching this thread for people who wish to seek some advice on issues pertaining to Income Tax or Service Tax....

I would try to solve them to the best of my ability and knowledge....

See Ya all....

#### diosys

##### Well-Known Member
Hello Diosys,
Please, call me "oxy" or "oxymoron".

If a stock position is unprofitable, a prudent tax payer would and should book his loss, and repurchase the same lot of shares before 31st march.
Say a person has a capital gain of 400,000Rs and a book loss of 100,000Rs incurred from Holding 1000 shares of Infosys which is down by 100Rs (He had purchased it at Rs2,000/share say). Selling the 100 shares of Infy at 1,900 on 28th of March and repurchasing them by the afternoon would reduce his capital gains from shares to Rs 300,000 + would allow him to hold infy, thereby shifting his tax liability to the next assessment year. This process, ignoring the transaction cost, would be very similar to valuing closing stock on "lower of cost and market value" basis. Thus, this cannot be called a serious advantage, from my understanding.

Also, by treating trading income as capital gains, the trader would be allowed to carry forward his losses for 8 assessment years. Treating it as business income would make it speculative business in nature, thus reducing the carry forward of losses to 4 assessment years, from my understanding.

From my point of view, unless the trader has extremely low net profit margin or incurs huge research and development overheads, treating trading income as income from business would increase his tax liability, other things remaining constant.

Sincerely yours.
Hi Oxy....

I have never said that it is desirable to get taxed under Business income as there is higher tax...What i have said that a person might want to change his taxing head depending upon the least tax outgo....I have in myself have shifted from Capital gain to Business income so as to avail this benefit....

Moreover i would beg to differ that share trading loss is a speculative loss and allowed to be carried forward only for 4 years...Speculative business is that business wherein the actual delivery does not take place....i.e. intra day trading.....Where you take delivery and then sell then it is not speculative loss but normal trading profit....

#### oxusmorouz

##### Well-Known Member
Can you Please Clarify how to arrive at Average rate of income tax for calculating (Average rate of income tax * Income from trading of shares)
Average Rate of Tax = 100*Income tax before surcharge and cess/Total Income

Sincerely yours.

Last edited:

#### diosys

##### Well-Known Member
Thanks for the help to solve our issues pertaining to tax.

Please let me know the following:

1. If a person is earning gross salary of Rs.180,000/- how much tax does he or she need to pay.
2. If the person does not want to pay any tax, how can the breakup be made since the company has given the person freedom to break up and give the net salary + allowance so if the person wants to he can save on tax.
3. If the salary of the person is transferred to an account holder of ICICIDirect, what are the implications, the account holder does not earn any salary but deal in stock market, has PAN number.

Regards,

Good morning...

I will answer one by one...

1.) At Rs. 1,80,000 (presuming it is of a non senior citizen male with no savings under Sec 80C) the total tax outgo would be Rs. 11,330.00

2.) There can be various methods to save tax by tweaking your salary...Ask for conveyance allowance of upto 800 p.m.. Entire would be taxfree....Ask for HRA if you live in a rented place, a portion of it would be tax free...Ask for tax free perquisties....there can be ten's of ways...

3.) Implications could be that person would be required to show the amount transferred to his account as an unsecured loan from the person giving it...Secondly please bear in mind that there is no cash transactions between such loan seeker and giver as it is debarred in IT Act and warrants a huge penalty....It would be advisable that you give an account payee cheque to the person whom you transfer and then if you want back then also take a account payee cheque only !!!

#### oxusmorouz

##### Well-Known Member
Speculative business is that business wherein the actual delivery does not take place....i.e. intra day trading.....Where you take delivery and then sell then it is not speculative loss but normal trading profit....
Hello Diosys,
Ah! Thanks for clarifying that point

Sincerely yours.

#### srisrini

##### New Member
Sir,

Tks for clarifying my doubts regarding the method of calculating turnover for tax audit purposes for traders in F& O.

With regards.

Srisrini

#### diosys

##### Well-Known Member
Sir,

Tks for clarifying my doubts regarding the method of calculating turnover for tax audit purposes for traders in F& O.

With regards.

Srisrini
My Pleasure !!!

#### jraj

##### Member
My Pleasure !!!

Diosys,my parents held iob shares for last few years from its ipo rate of Rs24,and gifted it to me in Dec last year.At that time rate was Rs100.I sold them in Feb this year at 120(needed the cash!

1.Does this qualify as short term capital gains or long term gains?
2.If short term,is it from the time it came to my demat acct,or paying from ipo rate which was from many years ago.