Tax on derivatives share transactions ? Loss set-up ?



Can U clarify please that share F&O or derivatives transactions profit is a business come like anyother business income & clubbing loss or profit like any other business ? or it’s purely speculative business ? what expenditure we can exempt ? like brokerage, service tax, phone bill, stamp duty, sebi fee, STT from the total profit from it ? can we make set-up of capital gain & speculative share income
each other ? and how many years we can carry forward loss if any ? what is my tax liabilty if i have an income of Rs. 1 lakh from delivery profit ( within year,& paid STT ) & 2 lakh from derivatives profit , brokerage & other exp. is 30, 000 , & I have invested profit Rs., 10,000 in my PPF ?.
Thank You.

Tax on derivatives share transactions ? Loss set-up ?
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2 Replies to “Tax on derivatives share transactions ? Loss set-up ?”

  1. After reading your question ,i assumed/think that you have a good knowledge of income tax.

    As per CBDT circular Income From f&o transaction is to be treated as normal business income.

    profit/loss from FO will be covered under head income from business & profession and will be treated as business income not speculative income.

    yes ,after this circular you can treat Fo Income as any other business and all provision of set off/carry forward ,clubbing will be applicable on F&O income like any other business.

    but like any other business you should have maintained a proper Books of ACCOUNTS

    one more thing keep in mind like other other business tax audit u/s 44AB is also applicable on these trades.means if you trade more than 40 lacs means Fo sale +call& put premium is more than 40 lacs ,you books should be audited by a CA.

    you can book almost any expenditure which you have made to earn this income(there are some limitation but this forum is not to discuss all of those)like brokerage,interest on loan taken for F&O Business,telephone,service tax,stamp duty,sebi fees,salary to accountant,computer exp.car/scooter exp., shop exp,etc etc.

    if you have a profit from F&O than STT can be adjusted as something like advance tax(not exactly),AS much avg tax you have to pay due to f&o transaction ,you can adjust it with stt ,but stt can not be refunded.

    loses from speculative or non speculative business can not be set off with capital gain or vice-versa

    you can carry forward loss from business for 8 year.but return should be filled within due date if you want to c/f except losses due to unabsorbed depreciation

    if you have 1 lakh income from delivery ,than first you should clarify that whether you r doing the business of share trading or your share are held as investment.in both cases treatment is different.

    i suppose that you have make a investment in shares not doing business of shares.
    than your total income will be

    1. income from short term capital gain=100000
    (i assume that stt & other exp . has already been deducted as this is usual practice in share broking that you will receive net entries in your account after all exp.)

    2.income from business & profession=170000+stt on F&O)
    (derivative profit-30000exp-
    +stt)
    note:exp attributable to income shown under short term capital gain should be ducted from above stgc ,do not deduct STT relating to F&O)

    your total income will be=270000+stt fo

    less :investment in ppf u/s 80 c=10000
    net income=260000+stt fo

    in this ay 2007-2008 tax exemption limit is 100000(from ay 2008-09 is 110000)
    100000-150000=10%=5000 tax
    150000-250000=20%=20000
    250000-260000=30%=3000
    total tax=5000+20000+3000=28000

    if suppose you have paid 20000 stt on derivative than you can take rebate of tax as under

    tax attributable to fo income=tax due x fo income/total income

    =28000 *170000/260000

    =18308
    so you can take maximum rebate of upto 18308 evan you have paid 20000 stt

    so after assumption your net tax due will be

    =28000-18308=9602

    as the question is tough one ,you should consult with proper details.






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