Ask Me Anything about Taxation on Trading & Investing #TaxSeason2020

Hi,
@Quicko

Please allow me to allow me to ask a few basic things.

  1. I have my F&O data with me but I cannot seem to find any non-speculative section in my ITR3 where should I fill this data in?

  2. My income is below 1lkh but I’ve had 50k STCG. I don’t think I qualify for tax @15% but when I show this 50k STCG in schedule CG in A3 later on in sch. CYLA it shows me 50k in the taxed @15%. How can I escape this taxation?

Thanks.

Dear @Quicko

How capital gain calculated on physical settlement of stock. I got different opinion on different platforms and experts. So I just little bit confused. Please brief:

For e.g.:
I sold 1 lot of SBIN PE @ strike price of Rs 500 at Rs 20 and the same is deep in the money and the position is physically settled(Closing price of SBIN on expiry day is Rs 430).
Now my question is acquisition cost( for capital gain purpose) of SBIN would be Rs 500(i.e. strike price)
Or Rs 480( Rs 500- premium received)
Or Rs 430 (closing price of underlying).

Thanks

@Quicko

Do we show the depreciation expenses on laptop under Other Expenses manually?
Or
Do we show it under “Fixed Assets” which i assume Quicko platform will pick the depreciation expense automatically (upon providing the book value, and the depreciation rate)?

I am a FnO trader only. The objective is not to double count the depreciation expense.
Any help will be appreciated

@quicko - I think your understanding and your tool is not correct, it is misleading about audit in case of loss from FNO -
If you opt for presumptive scheme 44ad then only audit is needed, if your income is less then 1cr and does not opt for 44AD then audit is not required, read below -

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@Quicko

I had a question regarding ESOP perquisite gain and taxation.

The company is deducting perquisite gain tax when I exercise my stock options (which is correct)
But when will I get the perquisite gain amount? They are saying only when you sell your stocks will get the gain after IPO.

Example: Stock exercise price 2$
FMV when I exercised the option = 10$
Share price when sold after IPO = 15$
No of shares = 100

  1. Why can’t the company pay the perquisite gain (10$-2$X100) in my salary if they are deducting tax on it? Why do I need to wait till it is sold in the IPO?

  2. I am paying the tax in this financial year, IPO will happen say next FY year and I will get the gain amount next year while its tax was paid in this FY. How will the income tax department know that I have already paid some tax last FY year (10$-2$X100)? I know I need to pay the capital gain on the gain that I will get (15$-10$X100) but how will the income tax depart know that I already have paid tax in the last FY year?

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Hi @Jack_R,

  1. The company will show the perquisite gain amount in the salary under the head 17(ii) in the year in which they are deducting the tax. You will receive the gain when you realize (sell) the stocks.
  2. The capital gains will be taxable only on the additional amount (i.e. 15$-10$) because in the last year’s return the stock options will be shown under 17(ii) at an amount of (10$-2$). Hence the Income Tax department will have the information that you have paid the tax.

But when I sell my shares in the secondary market, I will get 15$-2$ profit correct? and the same will be displayed in the capital gain statement. How will the ITR calculator know I have already paid tax last FY in this case?

Do I manually need to modify the capital gain statement from ($15-$2) to ($15-$10) while showing it in the ITR? (i.e. 15$-10$) If I import the statement using any tool, it will consider $15-$2 as my capital gain…

Hi @Jack_R, Generally the stocks are shown in DEMAT are at cost basis (i.e. 10$) but in case if they are shown at exercise price (i.e.$2), then you have to manually update it while filing the Income Tax Return.

@Quicko

Broker1: charges Rs20 per trade as brokerage
Broker2: charges Rs0 per trade but has a monthly subscription plan

Even if i stick with broker1, the brokerage incurred + the GST on the brokerage of 18% are all claimable as expense during ITR right? And the nett income we take home will be same be in either wise??

If yes - then what is the logical reasoning why people would want to move for a lower brokerage plan - am i missing anything here?

US stocks are not stored in Demat. They don’t have Demat concept

Hi @Jack_R, could you please let us know what brokerage firm’s facility are you using?

Hi @viswaram, Yes, you are right, brokerage and GST on brokerage shall all be claimable expenses when you file your ITR. And the net income shall generally remain the same in both the cases.
When a brokerage as a subscription is charged, it allows you to carry out any number of transactions you like. Suppose, there are two scenarios:

  1. Number of trades are high like 20-30 daily, then subscription plan is better in which a fixed price is paid and no variable cost has to be incurred for high number of trades
  2. Number of trades are low like 2-3 daily, then brokerage per trade plan is better since subscription plan starts from 900 per month and hence brokerage per trade is reasonable for you.

Hence the choices are generally decided by volume of trades a trader does.

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ETRADE

Etrade is the account where the ESPOs are stored

What about the interest charged by broker at 9% per year for not maintaining margin - are these also tax deductible ??

Hi @Jack_R, you can fetch your statement by going through the following route.

ETrade login → My Account ->Gains & losses → Download ->Download Expanded

Once you download your statement, you can get the FMV on the date of exercise of stock for the purpose of capital gain in that there are three columns which will help you do the same (i.e. Adjusted cost basis, Adjusted Cost basis per share and Adjusted Gains/Losses)
Please let me know if you continue to face any problem. :blush:

Hi @viswaram, yes the interest charged at 9% by the broker for not maintaining margin is tax deductible but penalty charged by broker will not be tax deductible.

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Thanks. Does Quicko have the option to import statement from Etrade and fetch the values automatically?

@Jack_R, currently we don’t have an integration to import statement from ETrade but we are working actively to integrate it. We would recommend to use the Quicko Excel Template for importing your trades.