Expenses a trader can claim

In general for any asset, Which is more beneficial in terms of tax? Buying/subscribing?
Are there any limitations to show subscription amount as business expense?

Hello @bharath_kumar,

Depreciation is allowed on Fixed Assets owned by assessee under Income Tax Act, 1961 which is calculated based on the cost of asset as per the rates mentioned in the Income Tax Act, 1961 you can refer the method of depreciation as well as rates in the link below.

However, when you take assets on lease or hire-purchase, the entire cost of asset is not allowed as deduction in the form of depreciation but the lease rentals paid for the asset are allowed as deductible business expense. If the payments are made to a person who is relative then excess payment is disallowed under Section 40A(2).

For any general asset, you need to consider the cost, rate of depreciation vis-à-vis the lease rentals paid on the same to identify which of the option is beneficial to a particular case.

Hope it helps!

I am individual professional trader in my personal account and huf account .

If i buy a car in my personal name or huf name . Will i get expense deduction and claim depreciation decduction ?

Hi @HIREiN

Depreciation is not for individuals but for businesses, if you incur expenses/use the car for business purposes, you can claim depreciation.
Read more about Expenses a Trader Can Claim in ITR - Learn by Quicko & Depreciation under Income Tax Act - Learn by Quicko

As 40% depreciation is by WDV, how can one account for the residual value of the asset?

Hello @gdshan,

You can calculate the residual value of an asset by applying the rate of depreciation applicable to the asset and reducing it from opening WDV.

Hi

Thanks for clarifying. When does the value get extinguished so as not to claim any further depreciation? Since depreciation is on WDV, is there a provision to claim the residual value in its entirety after a certain number of years?

Hi @gdshan,

Depreciation can be claimed till the value of the asset becomes nil, however, if the WDV is nominal and you don’t wish to claim depreciation on that then you can report opening WDV as deductions during the year. You can not claim residual value in its entirety.

Hope this helps!

HI,
I had below questions

  1. My son had taken loan from bank of around 10L and gave the amount to me. I used that amount in FNO . How to claim the interest paid by him to bank as expenses in my fno trading. Any process need to be followed or directly i can claim the interest as expenses while filing ITR
  2. For FNO i need to pay subscription charges, profit sharing to third party website. To claim these charges as expenses in ITR, do i need to pay these amount from my credit card or savings account or an add on credit card of my son original credit card

Hi @lalli_Garimella

If your son had taken a loan and the amount had been utilized for trading in FnO, then the son can claim some of the expenses solely associated with the trading while filing his income tax return.

Here’s a read on Expenses a Trader Can Claim in ITR - Learn by Quicko

Hope this helps.

Hi, Am trading futures and options using my credit card swiping money from third party with interest. i need to debit that interest amount as a business expenses when i file the ITR FY 22-23. is it require to maintain any books and statements as a proof?

Hi @desa_mx123,

If you have incurred any expenses for trading purposes, you can claim those as valid business expenses while filing ITR and for which you need to maintain books of accounts in order to claim such.

Here’s you can read more about it.

Hi @desa_mx123

Adding to @Muskan_Balar point, books of accounts need not be maintained if you have opted for the presumptive taxation scheme.

Read more about Section 44AD - Presumptive Taxation for Business - Learn by Quicko.

Hope this helps.

Hi

Sorry for the delayed follow up question. I had purchased a laptop which I use for trading in FNO and other stock market related activities in the year September, 2019. I understand that as per the IT Act, depreciation on such items can be claimed over a period of 3 years which is computed based on which half of a year it was purchased. As the 3 year stipulation has ended for me, can I claim the remaining amount as depreciation for this asset?

Hello @gdshan,

There is no time limit mentioned for claiming depreciation. As per the income tax act depreciation can be claimed on an asset until the written-down value of the asset is nil after giving the effect of revaluation.

Hope this helps!

Hi

Is the depreciation, which I have been claiming till last FY, available if I choose the new tax regime. In case its not available, then all the carried forward depreciation and business losses stands excluded?