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Query - intra-day gain in stock markets - tax liability

Pacer (C) (86 Points)

23 February 2012

Dear Experts,

Can you please advise on how should one treat the intra-day gains from the stock markets?

I have carried out a few (less than 10) transactions with total turnover (less than 5 Lakh).

Can I adjust the intra-day gains by booking the short term losses? or do I have to treat them separately?

Please advise.

Thank you.

Regards,

Anand

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9 Replies

Sonam Bidasaria (CA) (770 Points)
Replied 28 February 2012

Such speculation can be adjusted against with any business profit (both speculative and non-speculative). There is no need to book any intra day business loss.

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Pacer (C) (86 Points)
Replied 14 March 2012

Dear Sonam,

Thanks for your reply.

Being a salaried person, I donot have any business.

In such a case, can the short term loss in equities be offset against the intraday gains?

If the intraday gains cannot be offset - how much tax do I have to pay on the same? and where do I show this income while filing the return?

Please advise.

Thank you.

Sonam Bidasaria (CA) (770 Points)
Replied 14 March 2012

A salaried person can also do its own business and there is no bar in doing so. Hence, my answer remained same.

Pacer (C) (86 Points)
Replied 14 March 2012

I understand that a salaried person can do business.

Just to reconfirm my understanding -

can the intraday gains be offset against short term losses in equity markets?

if no, how should one account for such intrada gains while filing the incometax return?

how much tax does one need to pay in such a case?

thanks

Sonam Bidasaria (CA) (770 Points)
Replied 14 March 2012

Please confirm first you, want to hold stock as Capital Assets or Stock-in-Trade?

I mean whether the shares on which u have suffered loss is capital asset or stock-in-trade?

If this is a capital asset, then such loss cannot be set off against speculation profit and then such profit will be chargeable at marginal rate.

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Pacer (C) (86 Points)
Replied 14 March 2012

I am sorry, I don't think if I understood the question correctly.

I have invested in capital markets with the hope of capital appreciation over a period of time.

But due to the inherent nature of the stock markets - the stocks did not perform well and I had to sell them while accpeting the losses.

At the same time, I tried my hand at doing intraday transactions (less than 10) to gain something. And gained little in that.

Now, while I file my return adn calculate my tax liability for the entire FY - I am not sure how should the intraday gains be treated? As I have some short losses in the Capital markets - can I offset my gains with these losses and carry forward teh remaining losses for the future years?

Coming back to your question on Capital Assets or Stock-in-Trade?

Can you please help me understand these? And how will the tax treatment defer in each of the cases?

Appreciate your help.

Sonam Bidasaria (CA) (770 Points)
Replied 14 March 2012

I presume, your objective is to minimse tax and utilize the profit eraned in intra day transaction with the loss on shares.

If you will treat the shares on which your have suufered loss

Case - 1 : As Capital Asset

Then you cannot adhust STCL against speculation profit (Intra-day profit) and same shall be carried forward for next8 Asst Years.Moreover, on speculation profit, tax at Marginal rate has to be paid.

Case - 2: Stock-in-trade

Such loss (Being Non-speculative) can be addjusted with speculation profit and tax can be minimised.

Pacer (C) (86 Points)
Replied 14 March 2012

Thanks for your reply.

If I have understood it correctly -

to minimise the tax, I will have to consider the shares sold withing a year as ''Stock-in-trade'' and then only I can offset the intraday gains with the losses. Is this correct?

And for considering my investments as ''stock-in-trade'' - is there any criteria? Are there any other things that come into picture? e.g. using some different tax return form or audit or business detailes etc..