Taxation on Dual Income Source ( Trading + Investment)

Income Tax
1

If I have two different Demat/Trading Account - One exclusively For Investments only & Other one only For Trading activities including mainly Short-term positional/swing trades,…Can I file ITR claiming Income from Capital Gian/Loss for investment account & also claiming Income from Business for 2nd Trading Demat account ? Can someone please clarify if I can show income from both sources simultaneously while filling ITR ? Is it legally allowed ?

Regards

2

Hello @Sandip

As per Income Tax rules, income from F&O trading, commodity trading, and intraday equity trading is considered business income. On the other hand, any investment where you take delivery of shares in your Demat account is treated as capital gains.

In your case, you can report both types of income under different heads in your ITR:

Business Income – For trading activities, including F&O, intraday, and short-term trades done for business purposes.
Capital Gains – For investments where shares are held long-term.

However, if you have short-term capital gains (STCG) from stocks traded as a business activity, you should report them as business income instead of capital gains. In that case, all STCG from both Demat accounts should be classified as business income, while LTCG (long-term capital gains) held for more than 12 months can still be reported separately under capital gains.

It is important to maintain clear records and follow the same reporting method consistently.

Hope this helps!

1 Like
3

Thanks for the reply. I want to know more regarding following :-

  1. Can the profits from short-term positional trades other than F&o trade & intraday trade, be report it as Business Income, instead of STCG ? Or is it applicable only if one have income from F&O or intraday trading to treat it as business income?
  2. Is there any criterion in terms of total number of trades done in any FY or any minimum trading capital turnover, to qualify it to be under Business Income?

It would be more helpful if you can clarify these doubts.

4

Hello @Sandip

  1. Yes, You can report your profit from STCG as Business Income. You can read more about it here.
  2. There is no minimum threshold in terms of turnover or number of trades for this. The determination is based on your intention. Short-term equity trades can be treated as business income if you actively trade with the intent of earning profits rather than capital appreciation over a period of time.

You can continue to classify long-term holdings as Capital Gains (LTCG), as they are held for investment purposes. Additionally, income from bonds and mutual funds must be reported as Capital Gains, not Business Income.