The COVID 19 saw the rise in COVID cases as well as Demat account . Many people while sitting idle at their home developed the interest in the shares dealing . Though it’s a good income generating tool , but people are unaware of the tax affect on the share transactions.

This unawareness among the investors are the major reason of difficulty for the ITR preparer. The Income Tax consultant when asked the client about their share information , many of them don’t disclose it.

The government of India has launched the AIS/TIS form in Income Tax portal which clearly depicts any share transaction incurred by the assessee in the current year. Any purchase or sales of equity shares/ listed shares/ debentures/ mutual funds etc is shown under the form. Thus hiding the information from the Income Tax Consultant will be unfair.

There are confusion among the place to shown income for the transaction in  share, Mutual fund transaction . Below mention table show under which head to show the income.

Particulars ITR Head Narration
Income from Intra Day to be shown under business income (speculative) Amount would be net of profit and loss
Loss from intra day to be shown under business income (speculative) Amount would be net of profit and loss
Income from Long term gain To be shown under capital gain scripwise detail need to be mention
Income from short term gain To be shown under capital gain Scripwise Detail NOT required
Income from F & O To be shown under business head (non speculative) Net turnover to be shown
Loss from F & O To be shown under business head (non speculative) Audit required for claiming such loss

Thus the selection of income under the below mentioned head respectively put the assessee to file in ITR form no ITR 4, ITR 3, ITR 2.

Hiding the material information about transaction related to dealing in shares would lead to the notices from the department since such are easily accessed from the AIS form.

It is advisable to be aware of the tax affect on the income / loss generating from the share transactions and provide information to the ITR preparer as when required.

Author Bio

Qualification: CA in Practice
Company: CA Ayushi Garg
Location: Raipur, Chhattisgarh, India
Member Since: 23 Apr 2022 | Total Posts: 4
I am practicing Chartered Accountant from past two years and have experience in GST, Income tax , Auditing , Book keeping , Finance , loan , Import Export etc matters. Currently situated in Raipur and is working in Garhi Chowk. View Full Profile

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2 Comments

  1. CA RISHABH JAIN says:

    Why loss under F&O requires Tax audit ?
    There is no such requirement now in section 44AB clause e to file tax audit in case of loss if turnover is under Rs 1 cr.
    such previous clause is omitted and new clause is based upon 44AD(4)

    1. CA Ayushi Garg says:

      As per sec 44AD(1) assessee has to compulsory show profit at 6% and as per sec 44AD(4) An assesse opted for a presumptive tax scheme under sec 44AD(4) cannot opt-out from the scheme for subsequent five years. In case, he wants to opt-out and declares losses or income at less than the presumptive rate in the current year, the audit is required to be done under section 44AB (e )

      Thus if you have loss and wants to carry forward such loss in next AY you have to show it in ITR 3 which required audit.

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