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Querist : Anonymous

Querist : Anonymous (Querist)

10 January 2010 In case of trading of shares, when is the income considered as speculation income, short term capital gains, long term capital gains and business income?

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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10 January 2010 1. Day trading is known as speculation. Day trading means squarring off the transaction without taking delivery. Same day first purchase and then sell or vice versa. It means no stock retained of that particular shares at the end of the day.

2. When shares are held for some period for the purpose of earning profits. The period of holding will range from day 1 upto one year. This is short term capital gains.

3. When shares are held for more than one year and thenafter sold on profits then these are known as long termcapital gains.

4. When frequent trading is made in the shares the holding period of which may range from day 1 to less than one year or more; then it is known as business income from shares.

When there are a series of the transactions during a year; then it will depend upon the circumstances whether these will fall under business income or not.

For example; if total capital invested in shares is Rs.25 lacs and the turnover from these shares is Rs. 100 Lacs it means the person is engaged in share trading.

However; there is no hard and fast rule to say whether a particular series of transactions would fall under short term capital gains or business income.

So many factors like amount of capital gains earned, losses booked during the period, number of shares traded, number of scrips hold and sold etc. are to be analysed to decide the above categories.

A good planning may save tax to a great extent.

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