Personal Loan used for Trading F&O

I have taken a personal loan and using it completely for F&O trading, can i claim interest paid on such personal loan as incidental expenses in trading.

You can claim the deduction if you are using it only to trade, and not any part of it for personal expenses. Some people when there is shortage of funds funds in F&O, introduce money from personal loan. This shouldn’t happen. The loan should have been taken for the sole purpose of trading and nothing else. If you just showed lower profit in your tax return to save money and are going to say that difference is the interest paid then you may come into a problem. Hence maintain accounts and you can claim the deduction.

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Thanks for the reply. I have specifically taken personal loan for trading F&O and used the whole money only for F&O trading.

Overheard that personal loan does contain some terms and conditions for not to invest or use the money in stock market. Does it has got anything to do with claim interest as deduction, any idea on this please.

I think that shouldn’t come as a problem in Income Tax as long as the sole purpose of using the loan in Business (F&O Trading) is being fulfilled.
Make sure that you don’t utilize the loan for something else. You can’t use it to take delivery of shares too because that trade will come under STCG/LTCG given the time factor. So income tax officer will say that you have not used the loan taken for business purpose.
The only problem you’ll have is with your banker because majority of them don’t lend money to trade in Stock market however credit worthy you are. So if they came to know that you are using this money for stock trading they may want to suspend the loan.

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Thanks for the clear insight. This really helped me to get clear view.

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I would really suggest you to get a business loan so you won’t get into some problem neither from Income Tax Dept nor from Bankers.

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Thanks…Will go for business loan henceforth.

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This month I took Loan against securities because I was short on funds and wanted to trade in the commodities segment. Although it was a short term demand loan and the interest is probably just a few hundred rupees, I do think it can be treated as an expense.

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Is pleading of shares for margin is different from loan against securities.

taking loan that too for trading derivatives might not be good decision! after all my views are worth peanuts

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Yes it can be treated as an expense.

Pledging you do with broker. But loan you take from other financial institutions.

100% true

Trading is a risky business and I won’t recommend taking a personal loan for it. You may end up adding big stress to your life. Always use your own money to trade.

You are taking a big risk. I don’t think anyone would recommend using your loan for trading. As you can never be sure about the direction of the market, you may return empty-handed.

Trading is a risky business, and I would not advise taking out a personal loan to do it. You can simply end up causing a lot of stress in your life. Always trade with your own money.

Never take any loan for trading because it is quite dangerous and you could end up with serious debts.

3 Ls ie Ladies, Liquor and Leverage may make a man go BROKE

  • Warren Buffett

So be careful while taking a loan for Trading

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thats why I call them women not ladies. :rofl:

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And I call Loan as Borrowing and Liquor as Alcohol :sweat_smile:
Problem solved

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If I were in your place, I would have never taken a loan to trade. Trading is a risky activity and since you have fair chances of losing your money, it’s better to use your money only.

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My CA has told me that taking loan for trading purposes is not allowed. But the posts here suggest otherwise. Can you please clarify what is the correct rule.