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Speculative Income

Sunder (Business) (165 Points)

27 March 2011

ABC is a Sole Proprietary Firm providing Consultany Services. For illustration, Income from Consultancy is 2,00,000. Speculative Income (Intraday Trading done in the name of the Proprietor) is 1,00,000. Short Term Capital Gain (Shares) is 50,000. What is the total taxable income ? Can Speculative Income be treated as Business Income ? What is the income tax ? What happens to STT, Stamp Duty paid as part of trading ?

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5 Replies

Scavanger007 (student) (73 Points)
Replied 27 March 2011

Since my question is similar to the above post, i would like to ask few additional things.
Can we set off loss from intraday trading with LTCG/STCG?
If not, then upto how many years can we carry forward this loss so that it can be set off against intraday profits?
And if speculative income is chargeable under IFOS, is there any special tax rate for such?

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U S Sharma (glidor@gmail.com) (21063 Points)
Replied 27 March 2011

Originally posted by : Sunder
	ABC is a Sole Proprietary Firm providing Consultany Services. For illustration, Income from Consultancy is 2,00,000. Speculative Income (Intraday Trading done in the name of the Proprietor) is 1,00,000. Short Term Capital Gain (Shares) is 50,000. What is the total taxable income ? Can Speculative Income be treated as Business Income ? What is the income tax ? What happens to STT, Stamp Duty paid as part of trading ?

for tax purpose only the "business income" is added to proprietor's computation.

1) intraday trading is speculation, net income after deduction of all charges including stamp duty, transaction fees, stt, brokerage etc is to bbe taken as speculation income, and to be added in income from other sources.

2) stcg is the transaction which is routed through demat channel, i e the shares have been transaction through delivery basis, and were in holding for less than 365 days, and tbe during the sales "security transaction tax is paid"

in this case everything is deductible except the STT, rate of tax is 15% ( sec 111A)

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 27 March 2011

Originally posted by : Scavanger007
	Since my question is similar to the above post, i would like to ask few additional things. Can we set off loss from intraday trading with LTCG/STCG? If not, then upto how many years can we carry forward this loss so that it can be set off against intraday profits? And if speculative income is chargeable under IFOS, is there any special tax rate for such?

intradfay trading can not be set off aginast anything except intraday, it can not be carried forward either.

no there is no special tax rate for intraday / speculative trading,

special rates prevail for stcg 15% and zero for LTCG

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Sunder (Business) (165 Points)
Replied 28 March 2011

Quote:

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for tax purpose only the "business income" is added to proprietor's computation.

in this case everything is deductible except the STT, rate of tax is 15% ( sec 111A)

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- Intraday trading is done with Proprietor's money which is nothing but Proprietary Firm's money. So why Speculative income is not added to business income ?

- Why is STT not deductible from STCG ?

- Can STT be treated as Advance Tax Paid ?

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 29 March 2011

1)incometax does not ask anybody to speculate and make loss, if somebody does it then its his own loss, no tax deduction is available for such acts. However income from F&O trading is now business income.

2) in exchange of STT govt is offering special rate of tax 15%, so its not deductible.

3) STT is not neither advance tax nor any set off available in capital gain, but for traders whose main business is trading is securities, and who does not avail benefit of capital gain , STT is deductible expense for them.