I carry on trading in equity shares on the stock exchange on an intraday basis. I have made both profits and losses from the intraday trading activity. For the trading activity, I had also incurred expenses on telephone charges, broker’s commission and Demat charges. What will be my tax liability, and how do I report the same in my income tax return?
The profits or losses from intraday trading activity get taxed under income from business or profession. The business activity of intraday trading in shares is a speculative business, and hence you should calculate the profits or loss separately from the other business activities.
While calculating the profits from intraday trading, you can claim deductions for expenses such as telephone charges, broker’s commission, Demat charges or any other expenditure incurred for carrying out the intraday trading activity.
The gains or losses are ‘speculative income’ or ‘speculative losses’. The ‘speculative income’ gets taxed as per your regular income slab rates. In the case of ‘speculative losses’, you can reduce the losses from the ‘speculative income’. You can carry forward balance losses if any for four succeeding years for set-off against future ‘speculative income’.
I have brought forward losses in trading in shares from the last two years. In the current year, I have made gains from intraday trading. Can I set off the losses and which ITR should I file to report my income from intraday trading in shares?
You should file ITR-3 in the case of income from intraday trading in shares. You need to declare the income under speculative business. You can claim deductions for expenses incurred for the intra-day trading. Also, you can set-off the ‘speculative loss’ brought forward of earlier years. The set-off can be up to a maximum of four years from the year in which you incurred the loss. Your taxable income is the amount after the set-off of brought forward losses.
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I am a Chartered Accountant by profession. I specialise in personal taxes and corporate income tax matters. I am an avid reader and track developments in financial markets, economy and other market developments.