Disclosing Profit from Day Trading in ITR 1

Share
Share This Thread
  1. R.Venkataramani

    R.Venkataramani New Member

    I am an retired banker with no salary income. Interest earned on
    FDs is found in 26 AS. I have also deductions under 80C 80D 80DD
    etc. My net taxable income is less than 5 lacs. I have income from
    1. House property one 2.Share income. 3. I am both a investor and
    trader about 90 transactions with 15 to 20 day trade transactions.
    My net profit in shares is a low Rs.8000/=. Though filing is not
    mandatory I want to file to keep continuity.
    The query:
    1. Can I file my return in ITR 1 and the share income in Other income
    since some websites say it is ok as far as the income is shown instead
    of paying heavy auditors fee which would wipe out the profit.
    OR
    2. File in ITR 2 ( the alignment has changed when posted)
     
  2. Parul_Gupta

    Parul_Gupta Active Member

    Yes, you can file ITR 1
     
  3. R.Venkataramani

    R.Venkataramani New Member

  4. ZED

    ZED Well-Known Member

    (Ms. @Parul_Gupta , kindly rectify me if wrong)

    If an assessee has intra day transactions then as per S.43(5), they are considered as speculative business and hence ITR-1 can not be filed.
    Further you have mentioned that you are both an investor and a trader and this further indicate your intent to gain income from trading of securities and not merely from dividends etc.
    Filing ITR-4 or 4S does not necessarily means that audit is required.

    If its the first time and you decide to opt S.44AD i.e treating profit as 8% of the turnover , then audit may not be required (unless S.44AB is applicable)
    Further, if in past S.44AD was claimed and profit claimed is less than 8% then only audit is required. If you do not want to get accounts audited, then you may treat income as 8% of the turnover.





    S.43(5) "speculative transaction" means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips:

    Provided that for the purposes of this clause—

    (a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or

    (b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or

    (c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member; or

    (d) an eligible transaction in respect of trading in derivatives referred to in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange; or

    (e) an eligible transaction in respect of trading in commodity derivatives carried out in a recognised association 6a[, which is chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 (17 of 2013),]

    shall not be deemed to be a speculative transaction.

    Explanation 1.—For the purposes of clause (d), the expressions—

    (i) "eligible transaction" means any transaction,—

    (A) carried out electronically on screen-based systems through a stock broker or sub-broker or such other intermediary registered under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts or by banks or mutual funds on a recognised stock exchange; and

    (B) which is supported by a time stamped contract note issued by such stock broker or sub-broker or such other intermediary to every client indicating in the contract note the unique client identity number allotted under any Act referred to in sub-clause (A) and permanent account number allotted under this Act;

    (ii) "recognised stock exchange" means a recognised stock exchange as referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and which fulfils such conditions as may be prescribed and notified7 by the Central Government for this purpose;

    Explanation 2.—For the purposes of clause (e), the expressions—

    (i) "commodity derivative" shall have the meaning as assigned to it in Chapter VII of the Finance Act, 2013;

    (ii) "eligible transaction" means any transaction,—

    (A) carried out electronically on screen-based systems through member or an intermediary, registered under the bye-laws, rules and regulations of the recognised association for trading in commodity derivative in accordance with the provisions of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and the rules, regulations or bye-laws made or directions issued under that Act on a recognised association; and

    (B) which is supported by a time stamped contract note issued by such member or intermediary to every client indicating in the contract note, the unique client identity number allotted under the Act, rules, regulations or bye-laws referred to in sub-clause (A), unique trade number and permanent account number allotted under this Act;

    (iii) "recognised association" means a recognised association as referred to in clause (j) of section 2 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and which fulfils such conditions as may be prescribed and is notified by the Central Government for this purpose;
     
  5. R.Venkataramani

    R.Venkataramani New Member

    Ms @Parul Gupta - You are not wrong. In such cases we have to use ITR1 or ITR 2 OR ITR 4 OR itr4S. But I do not fit exactly
    into any category and moreover my profit is a meagre 7000/=. I furnish below the main article in Business standard
    regarding this issue.
    Tax experts say if a salaried person does not trade regularly in F&O and has losses below Rs 30,000, it's best not to claim losses and fill ITR-2. The compliance cost can be high since the chartered accountant who audits the books will change at least Rs 20,000-30,000, wiping out any gains you have made. In case of small gains, the person can declare them under income from other sources. "At the end of the day, if a person's tax rate is 30 per cent, he will end up paying the same amount of tax, no matter which form he fills," says a tax expert. I am not also a salaried person and it is not a business.

    Business standard. com.
     
  6. ZED

    ZED Well-Known Member

    @R.Venkataramani , Sir kindly share your views on the following. I wish to know more about the subject matter and your views are important for me. I also request Ms. @Parul_Gupta to share the views.

    (The article you mentioned also gives reference of ITR-2 and not ITR-1.)
    Kindly explain to me why ITR-1 is an appropriate form in this case?
    The head of income from other sources is the residual head and the income is chargeable to this head if the same is not chargeable to any other head


    S.56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.

    S14. Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of income :—

    A.—Salaries.

    B.—[***] (deleted)

    C.—Income from house property.

    D.Profits and gains of business or profession.

    E.Capital gains.

    F.—Income from other sources.


    S.43(5) specifically covers speculative transactions.
    S.45 (Capital gain) can also be applicable.

    Therefore we have to see which head is more appropriate.

    In any case, I fail to understand why such an income can be treated as Income from other sources when income is specifically being covered.
     
Draft saved Draft deleted
Loading...
Similar Threads Forum Date
Disclosing Salary of Partner in Partnership Firm Income Tax Aug 1, 2016
ITR 1 for disclosing Income under Section 194J Income Tax Jul 25, 2016
Disclosing Foreign Income in ITR for Indian Resident Income Tax Aug 30, 2015
Disclosing Conveyance Allowance in ITR 1 Income Tax Aug 27, 2015
Disclosing Joint Bank Accounts in IT Return Income Tax Aug 12, 2015