Tax return woes won't spare even loss making traders

N

newtrader101

Well-Known Member
#1
#1
Traders,

  • Did you know that if you trade, the govt. gets to know of your trading activities from the broker?
  • That IT dept considers trading a business, and that you're supposed to report as such? (ITR-1?2?3?4?5? :confused:)
  • That Equity trading is speculative and F&O trading is not? :confused::eek:)
  • That if your income from trading is less than (6% ? or 8% ?of your turnover, you have to get your tax returns audited by a CA to claim exemption for your losses?
  • That a CA charges 20000-30000 for an audit?
  • That, if your losses are less than 30000, it is better to swallow your losses and don't try to claim exemption them? (for the reason above)
  • That you can claim exemption for up to 2 years from 31 March for each loss making year?
  • That the definition of turnover is different for speculative (intraday) and short-term (delivery) trading?
  • Many more intriguing intricacies that make IT returns a nightmare for traders. If you're salaried, its worse. If you trade more than one segment, it's more worse.
Ref:
 
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C

canikhil

Well-Known Member
#2
#2
  • Did you know that if you trade, the govt. gets to know of your trading activities from the broker?

    Yes. Everyone knows that. It is covered under Annual Information Report. Many such reportings happen for other businesses too. Even your TDS deduction is a form of reporting.

  • That IT dept considers trading a business, and that you're supposed to report as such? (ITR-1?2?3?4?5? :confused:)
    ITR-3 or ITR-4 depending upon facts of each case.

  • That Equity trading is speculative and F&O trading is not? :):eek:)

    Again a known fact. Smilies used are interesting though!

  • That if your income from trading is less than (6% ? or 8% ?of your turnover, you have to get your tax returns audited by a CA to claim exemption for your losses?

    Not in all cases.

  • That a CA charges 20000-30000 for an audit?

    Depends on the work involved. fees can be higher or lower. But what are u expecting here? CA to do it for free?

  • That, if your losses are less than 30000, it is better to swallow your losses and don't try to claim exemption them? (for the reason above)

    Audit compliance is not linked to whether you claim losses or not. Even if you do not wish to claim losses, if the audit is applicable as per 44AB, then you still have to get the audit done in time?

  • That you can claim exemption for up to 2 years from 31 March for each loss making year?

    Non-speculative losses are carried forward for 8 years.

  • That the definition of turnover is different for speculative (intraday) and short-term (delivery) trading?

    Yes. But turnover for delivery trades is not a relevant figure as you cover it under Capital gains/loss

  • Many more intriguing intricacies that make IT returns a nightmare for traders. If you're salaried, its worse. If you trade more than one segment, it's more worse.

    It is same for every business. Trading is not some special case. It is just that traders as well CAs are not aware of how to deal with derivative trading accounting/audit etc.

    You are trading because you want to make profit. Why play the victim card. Business compliance is always more complicated than salary return.
 
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Subhadip

Subhadip

Well-Known Member
#3
#3
canikhil said:
  • Did you know that if you trade, the govt. gets to know of your trading activities from the broker?

    Yes. Everyone knows that. It is covered under Annual Information Report. Many such reportings happen for other businesses too. Even your TDS deduction is a form of reporting.

  • That IT dept considers trading a business, and that you're supposed to report as such? (ITR-1?2?3?4?5? :confused:)
    ITR-3 or ITR-4 depending upon facts of each case.

  • That Equity trading is speculative and F&O trading is not? :):eek:)

    Again a known fact. Smilies used are interesting though!

  • That if your income from trading is less than (6% ? or 8% ?of your turnover, you have to get your tax returns audited by a CA to claim exemption for your losses?

    Not in all cases.

  • That a CA charges 20000-30000 for an audit?

    Depends on the work involved. fees can be higher or lower. But what are u expecting here? CA to do it for free?

  • That, if your losses are less than 30000, it is better to swallow your losses and don't try to claim exemption them? (for the reason above)

    Audit compliance is not linked to whether you claim losses or not. Even if you do not wish to claim losses, if the audit is applicable as per 44AB, then you still have to get the audit done in time?

  • That you can claim exemption for up to 2 years from 31 March for each loss making year?

    Non-speculative losses are carried forward for 8 years.

  • That the definition of turnover is different for speculative (intraday) and short-term (delivery) trading?

    Yes. But turnover for delivery trades is not a relevant figure as you cover it under Capital gains/loss

  • Many more intriguing intricacies that make IT returns a nightmare for traders. If you're salaried, its worse. If you trade more than one segment, it's more worse.

    It is same for every business. Trading is not some special case. It is just that traders as well CAs are not aware of how to deal with derivative trading accounting/audit etc.
Click to expand...
Excellent reply sir ji..
 
N

newtrader101

Well-Known Member
#4
#4
Who would relish the prospect of suffering losses in trading and then having to spend a large amount to get it audited so that the trader's claim of exemption for losses would be authorized?

Not me. Not the majority of esteemed Traderji members either, I believe. Aren't the broker's capital gains records sufficient instead of audit? (if the trader is not claiming unduly large expenses).

This rule will only discourage the inexperienced traders' claims for exemption.

Again, what is the logic behind creating different definitions of turnover for intraday and delivery? For the first, it is the sum of gains and losses, for the latter it is the sell price....

The members who responded must be senior and experienced...This post is probably appropriate for newbie traders who are in the process of learning..
 
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C

canikhil

Well-Known Member
#5
#5
Again.

You actually benefit from having a method for intraday turnover which gives you a much lower turnover compared to delivery based. This way you can actually benefit more under presumptive taxation as well as audit applicability. Given that delivery based transactions can be reported under Capital gains, not sure why are you worried about the difference in turnover computation.

Anytime you start a new business, compliance environment is often overwhelming. It is same for every business. If you want to manufacture, you have to take tens of registrations, maintain loads of records, inspections etc and what not. The point is to not crib and focus on developing your business strategies that help you make profit in long term.
 
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S

sadiq

Active Member
#6
#6
where to get the original rules pages from IT dept where the tax related for trade in fand o defined ? will any one please help ..
 
vivektrader

vivektrader

In persuit of financial independence.
#9
#9
canikhil said:
they are carried forward for 4 years.
Click to expand...
Nikhil ji, in the first year of trading (2015) I suffered significant losses, but didn't file them in my ITR, is there any way to book them now in profits? Suppose not.


Vivek
 
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