QUERY - Liquid bees for collateral taxation

I read someone saying that liquidbees have different taxation when you collateral to a broker?

Care to explain please…

@Quicko Can you.

When ETFs like Liquid Bees are kept as collateral security with the broker, you can use it as a margin and do F&O trading. Here are the tax implications:

  • Dividend Income - As per Budget 2020, 1st April 2020 onwards, dividend income is taxable in the hands of the investor at slab rates. Dividend Income in excess of Rs.5000 is subject to TDS under section 194K at 10%.
  • Capital Gains on Sale - taxable in the hands of the investor as per specific rates

When Liquidbees are used as collateral security for F&O Trading:

  • It is considered as business income. Profits are taxable at slab rates. Losses can be carried forward for 8 years to be set off against future profits. If Tax Audit as per Income Tax Act is applicable, Tax Audit Report should be filed by a Chartered Accountant
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@Quicko CONFUSION –

When you say “It” is considered as business income, you are talking about F&O and not liquidbees right?

Also, Liquidbees provide us dividends as bonus units and not rupees. So, as long as we do not sell the units, do we still have to pay dividend tax?

  1. Yes. F&O Trading Income is considered as Business Income
  2. Dividend Income on mutual funds is different from income from the sale of units of mutual funds. IncomeTax should be paid at slab rates on Dividend Income. When you sell the units, it is considered as income from capital gains and is liable to tax as per special rates