Stock trading expenses and Tax deductions

#1
Contract note shows several expenses associated with every trade

Brokerage
Regulatory charges
Security Transactions Tax
Service Tax
Stamp Duty

Which out of the above can be deducted while filing tax return? Do any of the above expenses reduce tax?
 

jamit_05

Well-Known Member
#2
Security Transactions Tax is deductible in tax.

For ex. say in your contract note you have paid a total of Rs.174 for one lot 75 units of Futures in buy and sell, then Rs.174 includes STT of Rs.83, which you can adjust against tax paid.
 
#3
Contract note shows several expenses associated with every trade

Brokerage
Regulatory charges
Security Transactions Tax
Service Tax
Stamp Duty

Which out of the above can be deducted while filing tax return? Do any of the above expenses reduce tax?
All the above charges are deducted by our broker while giving net credit/debit to us....so these charges are already deducted...you cannot deduct it second time from your taxable income.....these charges are not tax credits.

In addition, we can claim internet charges,telephone charges,data charges,demat charges etc are deducted as expenses and they eill reduce your tax liability.

Smart_trade
 

jamit_05

Well-Known Member
#4
https://www.businesstoday.in/moneyt...-as-tax-paid-or-as-an-expense/story/7613.html

My understanding of this is...

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This is Zerodhas.

Although I sold 2.31 higher, I still only broke even, because "Points to breakeven" is 2.31. Because total taxes and charges I have paid is 173.57, which includes a STT of 83

My understanding of the above link is that, this STT 83 which I have already paid as tax, will be credited back during my income tax calculation.

Using an example:
Assuming at year end I have a total income of Rs.Ten Lakhs as a derivatives trader, which attracts Income Tax of 30%, which comes to Rs.Three lakhs. While trading derivatives throughout the year, I have paid STT of Rs.85000 in total, for which the broker provides a certificate (or ledger).... this Rs.85000 gets deducted from Rs.Three lakhs, and I end up having to pay Rs.Two Lakhs Fifteen thousand only as Income Tax.
 

jamit_05

Well-Known Member
#5
This rule is only for STT, no other charges are tax deductible. Furthermore, STT being tax deductible is only for derivatives trader. If the person is filing these gains as capital gains then he is an investor, hence this is not a business income, therefore this relief is not applicable.
 
#6
https://www.businesstoday.in/moneyt...-as-tax-paid-or-as-an-expense/story/7613.html

My understanding of this is...

View attachment 32925

This is Zerodhas.

Although I sold 2.31 higher, I still only broke even, because "Points to breakeven" is 2.31. Because total taxes and charges I have paid is 173.57, which includes a STT of 83

My understanding of the above link is that, this STT 83 which I have already paid as tax, will be credited back during my income tax calculation.

Using an example:
Assuming at year end I have a total income of Rs.Ten Lakhs as a derivatives trader, which attracts Income Tax of 30%, which comes to Rs.Three lakhs. While trading derivatives throughout the year, I have paid STT of Rs.85000 in total, for which the broker provides a certificate (or ledger).... this Rs.85000 gets deducted from Rs.Three lakhs, and I end up having to pay Rs.Two Lakhs Fifteen thousand only as Income Tax.
Not correct...in calculating Rs 10 Lakhs as your income your broker has deducted all charges including STT.....so if you have to deduct STT again, you will have to add back Rs 85,000 to arrive at profit without deducting STT and then deduct STT as expense....so STT cannot be deducted twice...
STT is allowed as a deductible expense...NOT as a tax credit like advance tax,TDS etc......there is a big difference between the two ,so the assumption in your example that you pay 3L -0.85 L =2.15 L tax payment is totally wrong.....few years ago when STT was introduced,STT was allowed as tax credit but last few years it has been changed and instead of tax credit, it is allowed as deductible epense....

In Zerodha example, your net loss is 0.32.....this is arrived after deducting STT of Rs 83 ...so you wont get this STT deduction again....

Smart_trade
 
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#7
@jamit,

You are quoting 2008 article....the position that time was that STT was considered as a tax credit but Mr P Chidambaram in subsequent butget removed it and kept it as tax deductible expense.....that is the correct position as of now...

ST
 
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