Taxation query related to equity based delivery trading

Hi everyone

I am a salaried person who also does delivery based equity trading. I do around 8 trades a month. Also, I don’t do derivative trading i.e FNO or intraday trading.

I would like to understand the procedure for filing it return for delivery based equity trading considering I will have a F- 16 from my employer.

Any suggestions would be highly appreciated. Please shade light on whether to treat the above transaction as short term capital gains or business income. Also should the turnover(for audit purpose) be considered for equity based delivery trades(where profit should be greater than 8% to avoid audit)
Any help would be highly appreciated

This depends on the tax slab you fall into. Short-term capital gains are taxed at 15% if you declare yourself as an investor and they fall under the tax slab if you declare yourself as a trader for business income.

If you are in the 20% tax slab or above, then declare yourself as an investor, pay only 15% tax on your short-term gains, use ITR 2 while filing and no audit required.

If you are in the 5% tax slab, then declare yourself as a trader for business income, pay tax on short-term gains as per tax slab, use ITR 3 while filing, audit required if turnover > 2cr

1 Like

Hi Srinivas,
Thank you for the quick response.
I fall in 20% slab as per my salary.
Could you please let me know the below:

  1. my profit is less than 8% of turnover (only delivery based equity trades), so do I need to go for audit and can audit report be filed in itr-2.
    2)is audit applicable for short term capital gains as well

I have read at many places that audit is required if profit is less than 8 percent of the turnover, so a little confused.


Firstly, its not 8% now, it’s 6%. Secondly, this doesn’t apply here. If turnover < 2cr and profit < 6% of turnover and if your tax liability is zero, that is (salary+business income+capital gain) < 2.5lacs, then no audit is required which is not the case here as you fall under the 20% bracket.

ITR2 is for investors, STCG taxed at 15%, no audit required regardless of profit and turnover value. You should do this.

1 Like

Should we have to pay 15% stcg for the profit earned even if my tax liability is zero? I.e. salary+stcg is less than 2.5 lac.

If you declare yourself as an investor, then yes. But if STCG+Salary+Other incomes < 2.5 lacs(below tax slab), then you should declare yourself as a trader and no tax on STCG. Even if STCG+Salary+Other incomes < 5 lacs(at 5% tax slab), then you should still declare yourself as a trader and tax on STCG is 5%.

1 Like

Sorry to make a comment but kindly do not go by using TAX brackets approach…if you do frequent trading and do not keep your investment for earning dividends as such then please declare it as business income …while decalaring business income you may claim all such expenses that are directly related to these trading activities…there is no such limit to claim expenses unless they are not related to this trading…as far as limit to go for AUDIT then pls make a note on >>>>>if you are taking PRESUMPTIVE tax scheme where one has to pay 6%/8% of total turnover then the limit to go for audit is 2 crore …otherwise it is 1 crore…please take care about the requirement to calculate turnover to compare these limits…

If you declare as trading for business income, then the short term gains fall under the tax bracket right?

yes, normal slab rates applicable to an assessee

Then this would imply that it is the tax brackets approach, isn’t it?