Retail investments in stocks market have increase substantially in India in last ten years and many salaried employees are now trading in shares, but they are unsure of how income from these shares are taxed ?
So this blog is about the Tax implications of trading in shares.
We all usually do three types of trading, these are:
F & O i.e. trading in futures and options
Income from theses sector is always treated as business income/loss. So these come under “Profits and gains from business or profession” head.
Now how to calculate your income?
First take a print out of your transaction statement for the whole year (April – March), now sum it (remember receipt may be negative or positive) you have to simply add it and you will be getting your gross profit. Further you can deduct some more expenditure like brokerage (if not included in transaction statement), telephone bill (data pack), Depreciation on laptop etc to arrive at your net profit, now tax will be calculated on this income depending upon the slab it falls.
It should be added with other heads of income to know that in which slab it fall
Intraday i.e. sale/purchase within a day with margin money
Income under this category also comes under “Profit ir gains from business or profession, but this comes under speculative business category. However tax treatment is same as shown in the case of F & O.
Purchase/ sale of shares by actual delivery
Income under this category comes in “Capital Gains” head, which is taxed @ 15% separately only if the shares are sold within 12 months from the date of its purchase. This is taxed under short term capital gain.
Further if shares are sold after 12 months then it is termed as long term capital gain which is exempt from Tax.
To have a more clear understanding let’s take an example :
Income from salary Rs 800000.00
Short term capital gain Rs 100000.00
Long term Capital gain Rs 200000.00
Profits from F&O trading Rs 100000.00
Intraday Trading Rs 100000.00
First we will calculate Capital Gain separately
Short Term capital Gain @15% = Rs 15000.00 (15% on Rs 100000.00)
Long Term Capital Gain = NIL (Exempted)
Now tax on other income
Income from salary Rs 800000.00
Profits from F&O trading Rs 100000.00
Intraday Trading Rs 100000.00
Total Rs 1000000.00
Tax will be calculated as follows
0-250000 – NIL
250000-500000 – 12500 (@ 5%)
500000-1000000 – 100000(@ 20%)
Total - 112500
Total Tax = 112500+15000 = 127500.
Hope, this will give you general idea of taxation on share, if you have any specific query, please comment.
So this blog is about the Tax implications of trading in shares.
We all usually do three types of trading, these are:
- F & O i.e. trading in futures and options
- Intraday i.e. sale/purchase within a day with margin money
- Purchase/ sale of shares by actual delivery.
F & O i.e. trading in futures and options
Income from theses sector is always treated as business income/loss. So these come under “Profits and gains from business or profession” head.
Now how to calculate your income?
First take a print out of your transaction statement for the whole year (April – March), now sum it (remember receipt may be negative or positive) you have to simply add it and you will be getting your gross profit. Further you can deduct some more expenditure like brokerage (if not included in transaction statement), telephone bill (data pack), Depreciation on laptop etc to arrive at your net profit, now tax will be calculated on this income depending upon the slab it falls.
It should be added with other heads of income to know that in which slab it fall
Intraday i.e. sale/purchase within a day with margin money
Income under this category also comes under “Profit ir gains from business or profession, but this comes under speculative business category. However tax treatment is same as shown in the case of F & O.
Purchase/ sale of shares by actual delivery
Income under this category comes in “Capital Gains” head, which is taxed @ 15% separately only if the shares are sold within 12 months from the date of its purchase. This is taxed under short term capital gain.
Further if shares are sold after 12 months then it is termed as long term capital gain which is exempt from Tax.
To have a more clear understanding let’s take an example :
Income from salary Rs 800000.00
Short term capital gain Rs 100000.00
Long term Capital gain Rs 200000.00
Profits from F&O trading Rs 100000.00
Intraday Trading Rs 100000.00
First we will calculate Capital Gain separately
Short Term capital Gain @15% = Rs 15000.00 (15% on Rs 100000.00)
Long Term Capital Gain = NIL (Exempted)
Now tax on other income
Income from salary Rs 800000.00
Profits from F&O trading Rs 100000.00
Intraday Trading Rs 100000.00
Total Rs 1000000.00
Tax will be calculated as follows
0-250000 – NIL
250000-500000 – 12500 (@ 5%)
500000-1000000 – 100000(@ 20%)
Total - 112500
Total Tax = 112500+15000 = 127500.
Hope, this will give you general idea of taxation on share, if you have any specific query, please comment.
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