Basic questions on taxation

Taxation
1

Hi,

I have a few very basic questions related to taxation on trading income. I mostly trade in the cash segment (short term delivery trades and intraday trades)

1/ If I show my short term delivery trades as Short term capital gains, I will not be able to claim STT as an expense - Is my understanding correct?

2/ If that is the case, can I classify all my short term capital gains as non-speculative business income and claim all the expenses?

3/ Since intraday is speculative business income, I will not be able to set off its losses with any other income apart from intraday income. - Is my understanding correct?

4/ Regarding charges that can be claimed, Zerodha’s tax PNL shows the total charges for both intraday and short term equity trades but does not give the breakup/allocation to each of these two heads. While filing taxes, how do I allocate the charges to the two?

Would be very glad if someone could help, Thanks

2

pt #4) Earlier they used to give tradewise cost breakup but in last tax pnl its not there. If you have tradewise cost, you can add up and derive the values.
I was told on forum that they are working on it. “If you still need it, raise a ticket.” ← from staff on forum

The rest of your points are ok but what you can look at from Longterm view is “short term pain for longterm gain”
What that means is instead of trying to save tax by classifying as Business income, the argument is later when the tax is big, you can show as STCG and pay 15% flat and wrap it up. Otherwise your Business income extends to highest tax slab.

Tax expert advice says once you choose something, then you have to stick to it, not flip-flop with rules as they suit you.

So in longterm if you can grow, and your business expense doesnt offset the higher tax rates, then it is wiser to stick to STCG flat at 15%. You may in future say start F&O, and that will add income + deduct valid expenses to compute tax liabilty.
Based on this, you have to decide which is better.

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Thanks a lot. So the best option is to report equity trades as STCG without claiming STT. And for the breakup, raising a ticket.

4

Hi @GaneshM1111

Here are answers to your various questions:

  1. STT cannot be claimed for STCG. It can only be claimed as a business expense.
  2. It depends upon your intent of trading. If it is your regular business, you can claim the STCG as non-speculative business income and claim all the relevant expenses.
  3. Speculative Business Loss (Intraday loss) can be set off against Speculative Business Income only. You can carry forward the remaining loss for 4 years and set off against future Speculative Business Income only.
  4. Zerodha should provide you with the charges for both. You can derive the expense from the Tax P&L Report > Tradewise Exit sheet manually yourself. Else, you can submit a ticket to Zerodha.