Ravin (Equity trader) (33 Points)
13 April 2014Do you pay capital gains tax on your income from derivatives or do you treat it as business income and pay tax accordingly. Is it ok to treat gains from derivatives as capital gains?
Just wished to add more detail. In this case the tax would be slabwise or flat 30% on profits.
In derivatives trading people generally close their positions in 1 day or maximum hold position for few days. Thanks
JAINENDRA JAIN
(ACS/CA)
(1668 Points)
Replied 13 April 2014
this is genrally treated as speculation business...it should not be charged under capital gain .
wait for othersto reply..
Madav
(Senior Consultant)
(172 Points)
Replied 13 April 2014
Income from Derivative will be treated as normal business income subject to section 43(5) of Income tax act , that means you can take the benefit of all the expenses which you incurred under this category (related to derivative). Considering this is considered as normal business income that's why normal tax rate slab will be applied based on your classification in Income tax.
Please note that as per latest ruling given by honorable Delhi high court in CIT v DLF commercial developers ltd(2013) , iterates that explanation provided in section 43(5) regarding classification of derivative income into normal business income does not applicable for section 73 (set off and carried forward losses) of income tax act i.e. Loss on derivative income can not be offsetted by other normal business income.
Rgds,
Madav
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