Clarification - Stock broker - Stock exchange

[DEV KUMAR KOTHARI]

Share Broker is a member of stock exchange. activities relating to brokerage is regulated by the stock exchange, as he is a member of S/E. Share broker, as such is not a share trader. As broker, he purchase and sell shares on behalf of his cleints. Therefore, any share purchased by him on his own account should be onsidered as 'capital asset' becasuse he is not a share trader.However, if share broker himself treat or conver shares purchased by him as his stock-in-trade acccount and enter purchase, sale and stocks in trading and P & l account, then only such shares can be considered as his stock-in-trade and those shall be subject to income as business.All other shares, held as investment will result into capital gain on their sale irrespective of vouleme and frequency.An investor while selling and buying shares is not acting as a share trader, he is not known as a share trader in commercial world of share and securities. Brain storming and feedback based on experience is desirable.

[rishi mohan]

As stock broker is a member of a stock exchange, he can present himself as a stock trader as well as a stock broker. But being a stock broker, he cannot represent as a stock trader at the same time. Identity of the person will be only one at a time. If he is trading shares on behalf of his clients from his own a/c, the gain is taxable in the hands of his clients only.

AI Summary

Classification of shares: investment holdings taxed as capital gains while trading stock is taxable as business income.
Shares kept by a stock broker for investment are capital assets taxable as capital gains on sale; shares treated in accounts as purchases, sales and stocks-in-trade are stock-in-trade and taxable as business income. The broker's tax characterization depends on the capacity in which he acts for each transaction, and trades made on behalf of clients are taxable in the clients' hands.