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.
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.