TaxTMI 
TaxTMI 
Equity trading as Business Income
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....quity trading as Business Income<br> Query (Issue) Started By: - Amar Gandhi Dated:- 1-3-2025 Last Reply Date:- 22-4-2025 Income Tax<br>Got 1 Reply<br>Income Tax<br>I was earlier filing share trading activities as STCG or LTCG as applicable. But since last two years I am doing share trading as full time activity and have frequent transactions (Intraday/FnO/cash positional/long term). As per my kno....
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....wledge. I have to show FnO trading as Business income. But Can I show my cash trading activities as Business income and not as STCG/LTCG? I have read somewhere that if I shown cash segment trading as STCG/LTCG earlier, I cannot change it to Business income. Please guide Reply By YAGAY andSUN: The Reply: Yes, you can show cash segment trading activities as Business Income even if you were earlier....
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.... reporting them as Short-Term or Long-Term Capital Gains, provided you are consistent going forward and the intention behind trading supports it. Here's a detailed breakdown to clarify your situation and the flexibility available: ✅ What the Income Tax Department Says: The CBDT Circular No. 6/2016 clearly allows the taxpayer the option to treat share trading as either Capital Gains or Bus....
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....iness Income, based on intention and consistency. In fact, it states: "A taxpayer may have two portfolios-one for investment and the other for trading. Income from investments would be capital gains, and income from trading would be business income." 🧾 Can You Switch from STCG to Business Income for Cash Segment? Yes, you can switch, even if you previously showed gains from the cash seg....
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....ment (delivery-based) as capital gains. The key is: * 🔁 Once you switch, be consistent going forward. * 📉 If trading is frequent, involves substantial volume, and is your main source of income, reporting under Business Income is more appropriate (and safer in case of scrutiny). * ✅ F&O and Intraday trading must always be shown as Business Income (as per Income Tax rules....
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....), so clubbing positional or delivery trades under the same head can simplify taxation and compliance. ⚠️ When It's Not Advised to Switch: If your cash segment is largely long-term investment-oriented, and you hold for >12 months, switching to business income may not benefit you due to: * Loss of LTCG tax benefits (10% beyond Rs.1 lakh) * Complication in exemptions under Section....
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.... 54, etc. But in your case, since you said: "I am doing share trading as full-time activity with frequent transactions..." That gives enough basis to treat entire activity as Business Income, including: * Delivery-based trading (Cash Segment) * Intraday * F&O 🧮 Tax Implications if You Treat All as Business Income: Parameter Business Income Tax Rate Slab Rate (based on total i....
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....ncome) Setoff of losses Can be set off against other business income (F&O, intraday) Books of Accounts Mandatory if income > Rs.2.5 lakh (presumptive not opted) Audit requirement If turnover > Rs.10 crore (non-cash), or > Rs.1 crore with profit < 6% Presumptive Tax Can be opted under 44AD for small traders (not F&O) 📌 Practical Tip: Maintain a Trading Note * Create two clear por....
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....tfolios if needed: * Investment Portfolio (rare trades, >12 months holding) * Trading Portfolio (frequent, short-term, intraday, F&O) * Declare Business Income for the trading portfolio consistently from this year onwards. * File using ITR-3. 🧾 Documentation to Keep: * Broker's contract notes * Trading summary * Ledger from demat account * Profit & Loss report (includi....
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....ng intraday, F&O, cash trades) ✅ Conclusion: Yes, you can treat cash segment trading as Business Income, even if shown earlier as STCG/LTCG. The key is: * Clearly justify your intention * Be consistent in reporting from this year forward * Keep supporting documents to defend your stance if queried ***<br> Discussion Forum - Knowledge Sharing ....