For the convenience of our clients in filing there Income Tax returns, we provide reports for the current as well as the previous financial years of Speculation and short-term profit and loss. These will be very helpful in computing the tax liability for current year with carry forward profit and losses if it needs to be adjusted. You can download the reports in Excel and in PDF with the options of selecting which financial year, which segment and other options. Follow the steps below to generate these reports.
- Login to bo.rksv.in
- Click on Bill – Profit and Loss
- Select Start Date and End Date
- Click on Go
You should see comprehensive reports detailing the current (or previous) financial year, speculative PnL, and Short Term on the right hand side of the report.
References and Definitions
A speculative business is one specified under section 73 of the Income Tax Act. Trading in stock derivatives through the NSE/BSE is not considered speculative business. Any profit from a non-speculative business is taxable as business income. Day trading involves transactions in shares purchase and sale without taking delivery. Under the Income Tax Act, the transaction without delivery is called “Speculation.”
While the speculation income of Day Trading is added as Normal Income and taxed as per tax slab, however the speculation loss in day trading will only be adjusted with other speculation income.
Short Term and Long Term Capital Gain (Cash Market)
A share if sold within 1 year of buying will be taxed as Short Term Capital Gain. If you sell a share after holding it for more than a year, it will be treated as a Long Term Capital Gain.
For example if you bought 100 shares of Company “X” on 15th March 2008 and sold them on 1st March 2009 the period of your holding is less than 1 year and hence it would qualify for Short Term Capital Gain. If you sell these shares after 15th March 2009, i.e., after holding it for more than one year, it will qualify as a Long Term Capital Gain.
You are liable to pay tax on Net Short Term Capital Gains. This means that If you have earned Rs. 5,000 on trading in Company “X” and booked a loss of Rs. 3,000 on sales of shares of company “Y” (both should qualify as short term capital transaction), then your tax liability would be calculated on Rs. 2,000 i.e., 15% of Rs. 2,000. In other words, Short Term Capital Gain can be offset by Short Term Capital Loss. However , you cannot offset a Short Term Capital Gain with Long Term Capital Loss.
Bonus Shares should be considered at Nil Cost of acquisition while calculating the gains. The period of holding should be computed from date of issue of Bonus shares. You can claim cost of acquiring shares such as Brokerage charges, Demat charges while calculating capital gains.
Short Term and Long Term Capital Gain (Futures and Options)
The most common issue that arises in taxation of derivatives transactions is that of whether derivatives transactions are always to be regarded as business transactions. It is true that in most cases, derivatives transactions would be regarded as business transactions on account of the following factors:
- The purpose behind entering into most derivatives transactions is to profit from short-term fluctuations in market prices.
- The period of any derivatives transaction cannot exceed 3 months, and such transactions are invariably short-term transactions.
- Often, the sheer volume of trades in derivatives transactions entered into by a person on an ongoing basis indicates that it amounts to a business.
- Many people who trade in derivatives may be associated with the stock market in some way or the other – they may be stock brokers or their employees, or regular day traders. For such people, derivatives’ trading is an extension of their normal business activities.
So Income from Derivatives income is considered as a Short Term Capital Gain — people can adjust their Short Term Capital Loss against Short Term Capital Gain and pay the tax on the netted income.