let’s Say I’m earning 15 lakhs per annum through equity trading only. There’s no other income. So someone kindly help me understand which tax filing is beneficial either showing this income as STCG for flat 15% or showing it as business income?
If you are doing intraday stock trading you cannot show this as STCG. This would be speculative business income. You will have to pay tax as per your income tax slab.
If you are taking delivery and holding for a while then you can show it as STCG.
Yeah I know that kindly assume I’m taking delivery and selling after T+2 days. Now please advice me which one is better for me…showing my income as STCG or business income?
No harm in showing as STCG then. You will need to pay lesser tax if it’s STCG.
So if my understanding is right. I will pay less tax by showing my income as STCG?
With STCG, as i understand you will not be able to deduct STT as expense and that can be a large expense for Short term trading in stocks. So you may want to check against that.
It depends how much you are involved in the market.
You could classify your activity STCG because you take delivery. But that is not guranteed. The income tax assessing officer can point out the very short term holding nature and high number of transactions and demand that these are actually business income; and disallow lesser capital gains tax.
If it is a business income, you can claim expenses like rent for office, electricity, broadband, interest on loans, salary for employees and advisory/data services etc. You can also claim depreciation for your laptop, computer and other capital items.
As said, it depends on how much you are involved. If you have done many txns and you are going to do the same in future … better choose business … then delivery trades are non-speculative and non-delivery is speculative.
15L per annum is good and enough to retain services from an auditor. You should do that first.
We have certain taxation rules (option to choose in some cases) by govt regulatory bodies then what you are saying is not suppose to happen right?
Not sure what happened to the pending litigation for “1 year or less” holding.
See this discussion. My takeaway was that the law is not yet settled on this, and if you are willing to fight the AO, then you can take this path.
Thank you all for responding to my post.