If a salaried professional has substantial income from short term deliver trade (non-speculative business income), can he as a business income tax payer offset this by expensing out depreciation on capital expenditures amortized like car, furniture, clothes, phones, laptops which were bought from the income (and savings) from the salary ?
shares when held for less than 12 months will fall under short term capital assets and the gain there by is termed as short term capital gain and are taxed under the head capital gains and not business. when these stocks are traded through recognized stock exchange they will be taxed at a flat rate of 15%. no expenses or 80C deductions can not be claimed ( to be specific Chapter VIA deductions).
if your intention is to hold stocks for short period and you want to claim expenses then you can trade Futures or options… they will be treated as non speculative business income and you can claim expenses which are directly attributable to business like STT, brokerage , dep. on laptops, furniture., office rent, internet expenses, telephone charges etc. which are directly attributable to business.
This is contrary to http://zerodha.com/varsity/chapter/taxation-for-traders/ where it says “Income from shorter term equity delivery based trades (held for between 1 day to 1 year) are also best to be considered as non-speculative business income if frequency of such trades executed by you is high or if investing/trading in the markets is your main source of income.” Which is different from what you are saying “when these stocks are traded through recognized stock exchange they will be taxed at a flat rate of 15%. no expenses or 80C deductions can not be claimed ( to be specific Chapter VIA deductions).”
Can you clarify which one is correct ?
both are correct… but what i said is according to sec 111A. according to this you dont need to give any clarifications or submit proofs to department that your intention is trading and not investing. ur are clearly going following the rules laid down under that section… but the other way is you should give answers to dept that ur intention is trading and not investment. both are correct