In the past few years, Share market has given tremendous return to its investors and traders if they have invested their hard earned money with some logics. Many of them have earned profits, on the other side there are also peoples who have incurred losses due to Future & Options trading, Intraday Trading, investment in company that has weak fundamentals, or entry at wrong timings in the market. In the past, it is being seen that many people who have done trading or investments in Share market has not disclosed these facts in their ITR and not paid taxes on earned profits. From income tax point of few, each person who has done share market transaction has to report these transactions in his ITR, even if they have incurred losses. In today’s article, we will discuss some FAQ’s that are generally asked by person, who has invested in share market.
1. What is the difference between Intraday trading and Delivery based transactions for tax reporting purposes?
Intraday trading involves buying and selling shares within the same trading day, while delivery-based transactions refer to buying shares and holding them for more than one trading day. The tax treatment differs for both types of transactions. Intraday Share trading transactions are considered as speculative business and profits are taxable at slab rates, whereas delivery based transactions are categorized as long term capital gain and short term capital gain.
2. How do I report losses from Intraday trading in my Income Tax Return?
Losses from Intraday trading can be reported as “Speculative Business Loss” under the head of “Income from Business or Profession” while filing your Income Tax Return, however, if huge Intraday transactions are done during the year then Income tax Audit may be required in this case.
3. Can I set off losses from Intraday trading against profits from Delivery based transactions?
No, losses from Intraday trading cannot be set off against profits from Delivery based transactions. They can only be set off against other speculative income.
4. Do I need to pay taxes on profits earned from Delivery based transactions?
Yes, profits earned from Delivery based transactions are subject to Capital Gains Tax. Long-term capital gains (holding period more than one year) are taxed at a lower rate (10%) compared to short-term capital gains (holding period one year or less) (15%). Further, long term capital gain upto 1 Lakh is tax free per annum.
5. What documents do I need to maintain for tax reporting of my share market transactions? Which documents help me, if my case is selected for Scrutiny Assessment?
You should maintain records of contract notes, bank statements showing fund transfers for share purchases, transaction statements from your demat account, and any other relevant documents related to your share market activities. Must keep Capital Gain report generated from Broker Portal. If possible, we should maintain our own Capital gain report for more accuracy.
6. Is there any tax benefit available for losses incurred in delivery based share market transactions?
Yes, you can carry forward losses up to eight years to set them off against any future capital gains.
7. Do I need to file my Income Tax Return if my share market transactions resulted in a loss?
Yes, even if your share market transactions resulted in a loss, you are required to file your Income Tax Return if your total income exceeds the basic exemption limit or if you want to carry forward the loss for future set-off. Further, as share market transactions are reported in AIS/ TIS reports, wrong reporting or non reporting of Share market transactions may invite income tax notices.
8. Last year I have incurred Short Term Capital Loss of Rs.50000/- in delivery based transaction, however, not filed my ITR. In Current year, I have earned profit of Rs.80000/-, can I adjusted last year capital loss with this year profit?
As per Income Tax provision, to carry forward losses you have to file your ITR and has to report these transactions in your ITR. If you have not filed your ITR in last year then you are not allowed to set off this loss with current year profit.
9. I have done share market transactions during the year but transactions as shown in my AIS/ TIS report are not matching with capital gain reports available with me, what should I do in this situation?
Normally this situation does not occur but sometimes due to wrong reporting by reporting entity it may occur. In this situation, you can raise your query with Income Tax department and reporting entity.
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Disclaimer: This article is for the purpose of information and shall not be treated as solicitation in any manner and for any other purpose whatsoever. It shall not be used as legal opinion and not to be used for rendering any professional advice. The author will not be held responsible for any loss, if occur after using above information. Kindly consult your professionals before taking any action. This article is written on the basis of author’s personal experience and provision applicable as on date of writing of this article. Adequate attention has been given to avoid any clerical/arithmetical error, however; if it still persists kindly intimate us to avoid such error for the benefits of others readers. The Author “CA Shiv Kumar Sharma” can be reached at Mobile/WhatsApp–9911303737.
Author Bio
for earning in share market , we spend on books , subscribe to web site , pay interest and demate charges . are they are deductible from profit