Intraday buying and selling of shares.

This query is : Open

anoop bhatia (Querist)
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29 March 2012 Sir/Madam,

I have three question on relating to intraday buying and selling of shares.

Q1. If assessee is engaged in buyin and selling of equity shares itra-day in nature whether it will be treated speculative business transation or other source income?

Q2 If it is a speculative business whether assessee is required tax audit ?

Q3. What will be considered (i.e 60 Lakh) for applying for tax audit, gross purchase value of shares, gross sell value of shares, or gross receipts from doing such business.

N.J.R

N.J.R (Expert)
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30 March 2012 Dear Sir,

A1 : Speculative Business. Transaction without delivery will always be regarded as SPECULATION which pls note.

A2 & A3 : Tax Audit will be applicable under following circumstances -

Share Trading Profit Rs. 42 lacs (+) Share Trading Loss Rs. 19 Lacs = Aggregate Rs. 61 Lacs (exceeds limit of Rs. 60 Lacs) hence Tax Audit provisions will apply otherwise not.

anoop bhatia

anoop bhatia (Querist)
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30 March 2012 Sir,

I am satisfied with your first answers. But in second one I want to clarify some thing:

In tax audit there will always considered gross sell value (turnover), or receipts not the profit or loss which you had mentioned 42L+19L.
Second, even the share are sold without delivery there will be gross purchase of share or sell of share for each short buy or for short sell of shares respectively.

Hence I have asked that what will be considered for determining 60 lakh, gross purchase value, gross sell value or receipts.

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ABHISEK TOSNIWAL

ABHISEK TOSNIWAL (Expert)
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30 March 2012 Dear Anoop,

Tax Audit is required to be done when sales, turnover or gross receips from business exceeds 60lacs.

Now in case of intraday transactions, only the profit element will be considerd for determing whether tax audit is required to be done or not because intraday transactions are not considered as purchase -sale transactions ( bacause no delivery is taken).

conclusion: You need to consider only the profit from speculative business. i.e. if the profit from speculative business exceeds the specified limit then only tax audit is required to be done.