Is there any meaningful difference between speculative and non speculative business income?
2 key points that differentiate speculative and non speculative businesses:
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Carry forward of losses will be only for 4 years for speculative as compared to 8 years for non speculative business.
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One can set off non speculative losses against all other income sources except salary whereas speculative losses can be set off only against speculative income.
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Okay understood. Thankyou for the reply, Really appreciate it.
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hi intraday F&O trading will come under business income or specualtive income pl clarify
intraday or positional F&O trading - business
intraday Equity - speculative
Hi i also think like you.
But recently PR Sundhar said intraday f&o comes under specualtive business income, cleartax also says like that, but zerodha varsity says intraday f&o is business income, dont know who is correct
can you share the link, where the cleartax says that?
Income Tax On Intraday Trading - How Profits From Intraday Trading Are Taxed?
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Updated on: Jun 21st, 2024
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18 min read
Have income from shares? Identifying yourself as a trader or investor is the first step in filing your income tax return. Investors benefit from lower tax rates on capital gains, while traders have the advantage of claiming business expenses that reduce their income.
It is essential to understand the tax implications of your investment strategy to optimise your returns and minimise your tax liability. Here’s a rundown of how profits from shares are taxed.
Understanding Capital Assets and Trading Assets
A share can be called a ‘Capital Asset’ or ‘Trading Asset or Stock-in-Trade’ depending on whether you are identified as an investor or trader.
Investors are those who invest in stocks or other securities for the long term with the intention of holding them for a considerable period. They aim to earn returns through capital appreciation(income on sale of shares) and dividends. The income generated from the sale of shares is taxed as ‘capital gains’. It is further classified as long-term and short-term capital gains based on how long the shares are held.
Traders are those who buy and sell stocks or other securities frequently with the intention of making a profit through short-term price movement. Their income from trading is treated as business income, and they are required to file their returns under the head “Profits and gains from business or profession.” Their profits are taxed as per the applicable slab rates, which can go up to 30% depending on their income level.
In short, investors are taxed on their capital gains, while traders are taxed on their business income.
Based on this classification, your income will be divided into the following types:
Capital Assets
- Long Term Capital Gain (LTCG) or Loss
- Short Term Capital Gain (STCG) or Loss
Trading Assets
- Speculative Business Income: Intraday transactions are speculative in nature, and hence, the income from these trades is called speculative business income. Income tax on intraday trading profit in India falls under this category.
- Non-Speculative Business Income: All share transactions that are not speculative in nature fall under the category of non-speculative transactions. These include delivery-based equity trades, equity futures and options, commodity trades (both delivery and futures/options), and currency trades (both delivery and futures/options). Hence, the income from these transactions is called non-speculative business income.
A detailed explanation of this is available here.
in the article you shared, i couldnt find “intraday F&O will taxed as speculative”. As per my knowledge, In the case of futures and options, even if you buy and sell on the same day, it will be treated as a non-speculative business.
they say intraday transactions, they should have said intraday equity
Intraday equity is speculative and intraday F&O is non speculative atleast until this budget.
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ok thanks
what about positional equity trading of holding time around 6months ? we can show it as business income , but is it speculative or non-speculative?