Business Income from Trading

Income Tax Income from Business or Profession
1

I have swing trading income and not other sources of income on Trading. I want to declare it as my legal business and primary source of income. So what is the taxation requirement and which ITR do I file?

2

Hey @dhruvi16 ,

Income or loss from Swing Trading will be taxable under the head Income From Business and Profession. You need to prepare and maintain books of accounts for your trading activities. You can claim all the trading related expenses while preparing your books of accounts. Hence keep the invoices and supporting of all the expenses with you. For example, keep the invoices of fees paid to an advisor, software purchased for trading analysis, online subscriptions paid etc.

You need to file ITR-3.

3

I am a full time share market investor. Do I need to have a current bank account?

4

Hi Aayushi,

Investors and traders are usually required to have trading accounts to participate in capital markets. The preference between savings and current bank account may vary depending on the individual.

5

In case of individuals if turnover doesnot exceed Rs 25 lacs and/or income doesnot exceed Rs 2.50 lacs and option of Presumptive income not availed then books of accounts are not mandatory.However,for reporting loss in F and O you have to fill up data on PAnd L account inITR 3.However,PAnd L in ITR3 Is for those who maintain books of accounts.So will this lead to problems in validation?

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7
  1. While filling itr -3 under asset head in quicko it’s asking about bank balance on 31st march 2021.
    So my doubt was whether to include only savings account balance on that date or to also to include fixed deposit account? I also have an fd overdraft account that too be included?
  2. under asset head also asking for demat account balance on 31st march -…in demat account balance What to include holdings on the date 31st March or zerodha fund balance on that date
8

Hey,

  1. In this case, you need to include only savings and current account balance and not Fixed deposits
  2. And in this case, it will be your fund balance with Zerodha.

Hope this helps

10

Hi,

I started trading in FY 20, and has filed trading income as business income (rather than STCG). Till FY 21, I never had sold any stock after holding it longer than 1 yr. In FY 22, I sold shares both with holding period less than 1 yr and more than 1 yr (first time ever). Can I continue to classify former (less than 1 yr) as business income but LTCG for those held for more than 1 yr.

All these transaction are done from same zerodha account.

11

Dear team,

I want to start a new business of managing my and my relatives stocks portfolios from respective accounts. I will be the only one who will be doing stock trading (intraday) on behalf of other 2 clients. For this planning to buy following assets. can I claim the depreciation of the same in ITR?

Assets -

  • laptop - for all the trading activities
  • 2 monitors - for trading
  • rented office - room at parents House.
  • Car - for visiting clients place almost 2 times a week.
  • Office setup - Furniture setup

Please let me know if I can claim all these assets for my business. Also Please help me understand what is the best type of company (business) I should go for.

  • sole proprietorship
  • One Person Company
  • LLC
  • PVT. LTD
  • Partnership - Where I can ask my brother to help me out with the same.

Also is there any minimum balance I have to maintain for this business (like account turnover) ?
Is there any minimum tax bracket I should have so that I can claim all the above expenses.

Thanks a lot in Advance.

#AskMeAnything #stockTrading

12

Hi @psv,

Yes, you can claim depreciation on the assets that have been used for your business.
However, there are different rates of depreciation for different classes of assets. Here’s an article for your reference. Click here > Depreciation Rates

The type of business, it depends upon the individual to individual. These mentioned businesses have different tax slab rates. You can opt for any of the types of business that is most economical for you.

No, there is no minimum balance required to be maintained for this business. You are just required to report the income earned for the relevant assessment year.

There is no such minimum tax bracket requirement for claiming the expenses.

13

1 Query - In case of an option buyer opting for presumptive taxation, what should be the turnover for the purpose of tax calculation-Is it the absolute Value of Profit/Loss or is sales value also added to it. I could hear there was some update on it. Could you please throw some light?

14

Hey @varun

Turnover for Futures & Options Trading = Absolute Profit.

The turnover calculation for options has been updated based on the eighth edition of the guidance note dated 14/08/2022 (w.e.f A.Y 2022-23). Previously, turnover for options trading was calculated as “Absolute Profit + Premium on Sale of Options.”

Hope this helps.

15

My minor child .
is helping me in earning and making profit . in my sharemarket business .
So . I give her the salary/commission / fees from my profit / net earnings .

Can i deduct this payment as expenses from my earnings . From my net taxable income and save some tax thereby ?
@Sakshi_Shah1