Profits and Expenses

Which expenses can I deduct to calculate Profits in Equities and F&O

  1. I believe that except STT, I can claim all expenses for both LTCG & STCG (Equity)
  2. For F&O, I can claim all expenses including STT to calculate Profit / Loss

Please confirm

@Quicko

Hey @Ddude

Yes, a trader can claim all the transfer expenses directly connected to the trading income as a deductible for both LTCG (expenses related to transfer) and STCG, except STT

In the case of F&O, one can claim all expenses (related to trading) including STT.

Hope this helps!

Thanks @Quicko

Just one more follow-up question.

If I make 10,000 in Capital Gains with 2,000 expense. do I show 8000 as Capital Gains or show full 10,000 as capital gains and list 2000 expenses separately

@Quicko I have a quick question.

Can I claim the expenses below;

  1. I purchased an Iphone for 60000 (which I use daily for trading). Can i legally charge 12,500 depreciation for the 2020-21 Financial year assuming a 4 year usable life and 10,000 salvage value

Depreciation - (60,000 - 10,000)/4 = 12,500

  1. Home broadband charges

  2. Mobile Phone data expenses

Thank You so much !
!

@Ddude,

An investor can claim, any transfer expenses except STT like brokerage, stamp duty, etc for capital gains, when filing ITR.

@Rajat2805,

As per the IT Act, you cannot claim the cost of the asset as an expense. However, you can claim the depreciation on the asset as an expense. For example, You have purchased a high-end computer for INR 10 lakhs. The depreciation rate is 60%. Hence, you can claim INR 6 lakhs as depreciation in the 1st year (10,00,000*60%). And can carry forward the remaining amount to next year.

@nithin
@Quicko

scenario 1 :

i am making profit of 1 lakh in my intraday trading account per month .

i have hired a person who is helping me to trade in my account with all his talent expertise efforts knowledge etc .
so , i pay him 90,000 as commission salary profit sharing etc after deducting the TDS . We have also made the stamp paper legal MOU agreement for this kind of provisional understanding between both of us .

my question is : do i have to pay tax on 1 lakh or do i have to pay tax on 10,000 only , because 90,000 is my expense in terms of salary and commission profit sharing to that person ?

scenario 2 :

i have made a person as the 2nd holder partner in my trading account .
i am making profit of 1 lakh in my joint intraday trading account per month .

that person is helping me to trade in that account with all his talent expertise efforts knowledge etc .

so , i pay him 90,000 as commission salary profit sharing etc after deducting the TDS . We have also made the stamp paper legal MOU agreement for this kind of provisional understanding between both of us .

my question is : do i have to pay tax on 1 lakh or do i have to pay tax on 10,000 only , because 90,000 is my expense in terms of salary and commission profit sharing to that person ?


since , this is my business intraday income ; can i deduct the above expenses in both the scenarios (as explained above) from the earning ?

You should pay on Rs. 10,000/-. However make sure that you can justify Rs. 90,000 expense rightfully & legally. Many do this, do almost every transaction online, there should not be any loophole. try to be as transparent as possible in your transactions so that income tax guys can’t question you on your reply.

You might be in the clear, but the other person might be in trouble, per Nithin’s response in this thread…

u r talking about both the scenarios or only the 1st scenario ?

BUT , this is in form of salary , commission , incentive on profit sharing , then how come it become illegal ?

Only on 10,000. Btw, that MOU isn’t really legal. It won’t hold good in any case and by having this MOU you are bringing that person into SEBI regulated territory.

There is no concept of a joint trading account. The trading account is always in the name of 1 holder. You can have a joint demat account.

When you show trading as a business income, you can of course show the expense and pay taxes on the net profit. But if this is just a tax planning exercise and is not a genuine expense, you expose yourself to a risk of penalty in case of IT scrutiny.

1 Like

Sir if not an MOU on a stamp paper, then what is the legal agreement one should do which holds good in a court of law ?

Can you please eleborate this, what does it mean and how come the said person comes under SEBI ?

Only first scenario. Second scenario can’t exist in reality. There is no concept of joint account as mentioned by @nithin in this thread.

Keep it simple, like give salary to a person because he works with you. You pay him salary. That’s it. Why bring MOU/legal agreement in between. SEBI doesn’t allow this stuff.

1 Like

Hi @HSL,

In the 1st scenario, 10000 will only be taxable since you have paid professional fees of Rs. 90000 as expense and deduction from TDS.

In 2nd scenario, the taxability will remain the same.

@Quicko

If i have a website use to maintain the trading journal, are the server fees & google adwords expenses claimable during ITR 3 filing?

If you are declaring trading income as Income from Business (either Speculative or NonSpeculative) you can claim that expenses fully, as the expense is the nature of business expenditure.

1 Like

Hey @viswaram,

Just like @GoutamHebbar mentioned, you can claim all expenses related to the business activities as an expense when filing your ITR 3.

If you have does intraday and F&O trading, you can claim expenses related to trading.

1 Like

Noted with thanks, Yes my income is from FnO trading only.

Last year filed itr-3 via Quicko. ( Ready as a busy)
@Quicko waiting for itr-3 fily thro Quicko!

No future or options. Cash stocks/ETF intraday 65%+ stcg.balance

Quicko deducted stt etc on intraday trades.
Claimed partial rent for home office (300012) + internet 50012. Went through.