Future & Option Taxation and Claiming GST ITC credit

1.Does trading done from company account has any benefits of taxes like low percentage taxes or any other benefits.

2.Also how GST ITC different from expenses deducted from profits

Hi @Saurabh_Ghosh

  1. The treatment of income from the trading activity will remain the same irrespective of company account or individual account. They are classified under the same income heads such as capital gains or business/profession and taxes are calculated accordingly.
    If your turnover is less INR 400 cr then the Income Tax slab rate is 25% for companies. For Individuals, the income tax liability is taxed at the applicable slab rates.
  1. To claim GST ITC, you need to have a GST registration and need to file a GST return. However, when filing your Income Tax Return, you can claim expenses directly related to your trading activity like electricity bills, internet expenses, etc.
    Keep in mind, if you are claiming GST ITC you cannot claim the GST amount in your expense.
    For eg: if the electricity bill is INR 1180 (180 being GST), and you are claiming the ITC on INR 180, you claim only INR 1000 as an expense when filing your ITR. In case you do not have GST registration, you can claim the total of INR 1180 when filing the ITR.

Thanks for the reply!
So what i understood file gst for gst itc and remaining file itr for 100% benefit of expenses.

So which is better practice to do,

Have gst and file both gst and itr or just simply file itr no need of gst.

I mean which gives complete benefit for expenses.

@Saurabh_Ghosh,

The GST Act specifically excludes Securities from the definition of Goods. So there is no requirement for traders to have GST registration.
The GST paid on trading expenses such as brokerage, transaction costs, turnover fees, etc can still be claimed as an expense when filing the ITR.

Thanks for that article it clearly solved most of my doubt!

Last query to ask!:pray:
Assume I’m GST Registered Security Trader

If I buy computers, other consumer Durable expenses for my new trading desk office does getting GST ITC + Remaining Amount as ITR is the best policy to manage expenses ? (since I get gst ITC return + Remaining amount as expenses return in ITR)

(I know GST not required just asking is it a better way to manage taxes)

@Saurabh_Ghosh

Since GST ITC claimed can only be used when you have GST liability. So it might make sense for a trader to claim ITC along with other expenses when filing the ITR.

However, if you have GST payable then you can claim the ITC credit against that liability.

What i get now is getting all expenses subtracted from ITR is better than GST ITC+ITR since all expenses are 100% waived of relating to business in ITR.

Am I right my in my last reply?

@Saurabh_Ghosh,

Right.
Also, since Capital Market traders are not required to have GST registration.

hello Ma’am. I need a specific tax consultancy regarding in profit and turnover from F&O Transaction. How can we reach out to you.

Regards,
Nishant Khemani
9910118347

Hi @nishant_khemani,

You can drop your contact details on our contact us page so our team can get in touch with you to understand your requirements, tell you more about the process, pricing and discounts :slight_smile:

Does stocks buy and sell for short term and long term holding attract any tax incentive like f&o.

I mean what benefits one gets from longterm capital /short term capital gain tax to waive of any expenses.

Hi @Saurabh_Ghosh,

Unlike, F&O and intraday trading which are classified as business activity for income tax purposes, you cannot claim expenses like brokerage, internet expenses, legal and professional fees, etc for short-term and long-term capital gains. But an investor can claim, any transfer expenses except STT like brokerage, stamp duty, etc for capital gains, when filing ITR.

However, the Income Tax Act has defined the particular sections under which exemptions can be claimed on capital gains earned. The intention of the exemption is to allow the taxpayer to invest in a new Capital Asset within a specified time limit without any tax burden.

So as per 54f,54e,ea,eb,ee if i have to pay stcg/ltcg but I reinvest the capital within 6 month of selling the assets, i can be exempt from paying any taxes, right?

@Saurabh_Ghosh,

The duration within which you have to invest the realized capital gains and the deduction amount differs based on sections.

You can find all the details in this article :slight_smile:

Yeah, investment made within 6 months from the sale of an asset.

Just saying, why such kind of bias against equity stock trading compared to fno in terms of business incentives.

Fno activities gets all business expenses benefits whereas stock trading are just another salary type income tax treatment.

@Saurabh_Ghosh,

There has always been this question and a debate around the treatment of gains from equity shares as business income or capital gains.
The answer is derived from the taxpayer’s intent of the transaction. Here’s an article discussing when to treat the sale of shares as Capital Gains or Business Income

Still a lot ambiguity in referring to business income, after filing itr3 still i have to wait will they accept it as business income or investment income.
Do I have to give written letter confirmation or and documents to show that my short term trading is a business income treatment of tax?

Hi @Saurabh_Ghosh

As per the clarification issued by CBDT, it is at the discretion of the assessee to treat Equity share trading as Business Income or Capital Gains.
The only condition is to follow the same method continuously in subsequent years as well. The taxpayer shall not be allowed to adopt a contrary approach in subsequent years.

After filing of ITR, you just need to wait for IT Department to process your ITR. You don’t need to give any confirmation letters or documents. However, if the IT Department asks for any clarifications, in that case, you need to submit a response by mentioning your intent and reasoning for the treatment.

Hope this helps :slightly_smiling_face: