I was showing equity trading as Capital Gains earlier when my trading frequency was low. Since last couple of years I am doing equity trading as full time profession.
Can I now switch from showing equity trading(especially short term equity trades) as Business Income instead of Capital Gains?
I do both frequent trading (short term ) and also have portfolio for long term. Can I show short term trades as business income and Long term holdings under LTCG?
Hello @Amar2 ,
The classification of trading income depends on your intent and trading pattern. If you previously reported equity trading as Capital Gains due to low trading frequency but have now transitioned to full-time trading, you can report short-term equity trades as Business Income .
However, once classified as business income, it’s advisable to maintain consistency in subsequent years to avoid scrutiny. Frequent changes in reporting methods may lead to tax disputes.
You can continue to classify long-term holdings as Capital Gains (LTCG) , as they are held for investment purposes. Additionally, income from bonds and mutual funds must be reported as Capital Gains, not Business Income, as these are considered investments rather than trading activities.
Can you share an official document to verify this, that we can claim short term equity trades as Business income, i’m asking for it bcoz if IT dept sends demand notice in future then we can provide a proof.
@Quicko the circular mentioned in the link is about LTCG or equity trades held for more than 12 months, do you have any official document which mentioned about short term equity trades held for less than 12 months?
@Quicko If I trade with very high frequency and declare my profits under capital gains instead of business income.
Does the income tax department has the power to tax me in “business income” category, against my wish?