INCOME/LOSS FROM SHARE TRANSACTIONS

[GANAPATHY PADMANABHA SARMA]

Asseessee doing day trading trhough registered share brokers, investing some margin money in thousands or lacks,  but the share broker transacting in crores in equities, nifty etc.  Whether the gain or loss from the above transactions is be treated under the head capital gain or business or profession?  How to calculate the profit or loss from the transactions.  All the transactions are suferred STT.?

[CA Rachit Agarwal]

Whether the margin was utilized for the purpose of takings "Futures/Options"?

If so then, the income from such transactions could be classified under "Income from other Business/Profession".

Even if the investments are not in derivative products such as "Futures/Options", then also income could be classifed under Income from Business/Profession provided the acquisitions of the shares is niether for earning dividend/interest nor for capital appreciations.

[Darshan Jain]

I would advise you to go through Circular No. 04/2007 in order to decide whether the transactions relating to securities would be taxable under capital gain or PBGP. The method of calculation of profit / loss from such security would depend on the head under which such income is taxable. The query is very general in nature and therefore could not be answered with precision.

AI Summary

Classification of share trading income: margin or derivatives trading indicates business income; purpose determines tax treatment. Gains or losses from active share trading are classified by reference to transaction purpose: use of margin for futures/options or acquisitions not made for dividends/capital appreciation point to Income from Business/Profession, whereas holdings for capital appreciation fall under capital gains; computation of profit or loss follows the tax head under which the income is taxed, and Circular No. 04/2007 provides guidance. Securities Transaction Tax was paid on the transactions.