Tax Audit on trading in Equity Shares - Rs 1 Crore plus turnover

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  1. Neha Sharma

    Neha Sharma Active Member

    @Dilbert : The Income Tax Dept has not announced any rules regarding when income from shares would be treated as business income and when as capital gains.

    It all depends on a case to case basis.
  2. Neha Sharma

    Neha Sharma Active Member

    If a major part of your total income is from trading in shares - there is a strong case for it to be regarded as business income and therefore taxed as per the income tax slab rates and not at tax rate of 15%
  3. Dilbert

    Dilbert New Member

    @Neha, thanks for your answer. My income from salary is almost the same as I made in stocks this year. So trading income is a major part of my income for this year only. In no other years have I made any profits in stocks. And the profit is also long-term which is normally taxed at 0%, not even 15%. What happens in this case?
  4. Neha Sharma

    Neha Sharma Active Member

    If this is a one off case and in previous years - this was not your main source of income - then you have a strong case for it to be considered as Capital Gains.

    Moreover, the fact that you are already salaried also makes it a strong ground for it to be considered as Capital Gains.

    What I have seen and observed is that trading history is also taken into account while deciding whether to tax this as business income or capital gains. It is usually in the case of full time traders that the share trading income is being treated as Business Income.

    Chances are less that trading income of a salaried employee would be treated as your Business Income.

    @Sumit Agarwal : Whats your take on this?
  5. Dilbert

    Dilbert New Member

    So all in all, its upto the assessing officer. Which means another way to fleece honest taxpayers and extort money from them.
  6. pavan vulli

    pavan vulli New Member

    Dear Sir, This is Pavan Vulli, I work in the private sector as a Flight Attendant. I have been trading in F&O for the last half a decade. Last year my total turnover was 28 Crores and and I incurred a loss of 2.4 Lakhs approx. But according to the calculations after going through your website I must have crossed the 1 crore turnover meaning 30K profit and 20K loss would have resulted in 50K turnover so by this calculations I am sure I crossed 1 crore in the last financial year. My CA has already filed the returns and has shown the loss which I have incurred and has told me I don't need to do an Audit for my transactions. He mentioned these losses as capital gains/Losses. I always lost money never made money in last 5 years. I am really confounded as to what to do now. I basically trade in F&O. I have some investments in cash but I don't trade there. Sir if I make a profit in trading in F&O how much percentage should I pay in the form of taxes? My total gross salary last year was approx 8.8 lakhs. Could you please elucidate further. If I failed to do an audit what are the consequences and if I get a notice will I be in trouble? Hope to hear from you at the earliest.
  7. Yatin Gandhi

    Yatin Gandhi Active Member

    @pavan vulli : The Income/Loss from F&O would be treated as Business Income/Loss.

    Moreover, Tax Audit would also be applicable if the turnover is more than Rs. 1 Crore.

    You should revise your income tax return and make proper filings.
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