Tax for Traders

Taxation
#1

Hi
I am a Trader and will be buying and selling the stocks every day. I have a capital of 1 lac. I will buy shares/options for 1 lac. Then I will square off all the positions in a week.
My overall capital is : 1 lac.
But my Buying and selling turnover will be approx: 2 lac. (Buying 1 lac, selling 1 lac)

If I do this continuously for 12 months on every trading day, my overall turn over may cross 5 crores(for example) or even more. But my overall capital is 1 lac only.

  1. Given this situation, when it comes to taxation, will I get any issue from Tax department. Will they send any IT notice.
  2. Whether SEBI will send any notice because I am doing this trading very often and not holding the positions for long.

FYI, I am investing from my Salaried income only. I am planning to do this full time may be after a year, hence I would like to understand the implications better.

Please provide your valuable thoughts.

Thanks

2 Likes
#2

My question is also same

#3

Trading is business. See this

#4

What I know is When your Capital gains will Cross the taxable slab you have to pay taxes.
You already paying all the taxes in your contract notes so, not to worry untill you Cross the taxable slab.
(2 years of trading )Till date now I have not received any notice from state income tax department and not paid any tax beside mention in contract notes.
I have crossed above mention capital.
I am a Student.
(It’s my view)

1 Like
#5

As per my knowledge In Trading “Turnover” is defined as Sum of all Profits and Losses you booked. For example

Assume You buy a 1000 shares @ 100 ₹ of “Company X” worth 100000 ₹ and you sold them all @ 105 ₹ You made a profit of 5000 ₹ and Turnover here is 5000 ₹ in this trade and Brokerage and taxes you paid are expenses.

Assume You sold the same shares @ 95 â‚ą you made a loss of 5000 â‚ą and your turnover is still 5000 â‚ą.

The sum of all the profits and losses you made in that year is Turnover of that year.

Chances are more to get the notice from Tax department if you not showing these transactions in your IT returns. You said your an salaried person if you are income is above 2.5 lacs and you are filling IT returns better to file wilth ITR 4 form and show the profit or loss you made in trading.

if your income is below 2.5 lacs in financial year you don’t need to file the returns still there is a chance to get notice from tax deparment for your trading activity but you can simply show supporting documents and prove yourself that your income is below limit.

Hope your doubts got clear.

#6

Mr, Kamath’s take on this

#7

Given this situation, when it comes to taxation, will I get any issue from Tax department. Will they send any IT notice.

Income Tax Notice are system selected and if you have filed correct Income Tax disclosing all your Income , You need not worry.

Whether SEBI will send any notice because I am doing this trading very often and not holding the positions for long.

Sebi wont be involved in this unless they are petty stocks or debarred stocks

#8

Thank You Sir.!!

#10

Is there any fixed taxation scheme for the stock market professional traders ?
@Quicko
@TAXIQ.IN

#11

There is no such fixed taxation scheme for traders - an individual trader need to pay tax as per his applicable tax slab rates.

#12

Hey @RLM

There are no fixed taxation scheme specifically for traders. However, you can check out the presumptive taxation scheme where business and professionals report their income at the predefined rate or actual income whichever is higher and let go the hassle of maintaining books of accounts.

Also, capital gains are considered as a special rate income, and are taxed at:

  • LTCG above 1 lakh at 10%
  • STCG at 15%