Can share transactions be presented as business income?


I have filed my RTI showing the income from shares as capital gains. This source of income includes profits from investments in stocks, including intraday transactions and transactions in futures and options. Now I want to show this income under “Business Profits and Gains”. Can I do it? If feasible, are there any implications for past returns filed showing this income under Capital Gains? As I understand it Securities Transaction Tax (STT) is only deductible if I report it as business income. Is it correct ? Can I claim the deduction for STT if I continue to display this income under capital gains? If I decide to show this income under the title business, can I even report delivery-based transactions under the business title or should it be shown only under capital gains?

Intraday trading transactions and those under futures and options are commercial transactions and in my opinion cannot be presented under the heading “Capital gains. As far as delivery-based transactions are concerned, they are prima facie taxable under the heading “capital gains”. Whether delivery-based transactions become taxable as business income or capital gain depends on various factors such as the volume of transactions, the source of the money for the investment, the average length of time the assets are held. investments and taxpayer intent. Thus, whether these transactions are to be taxed as capital gains or as business income would depend on the facts of each case and a ready-made answer cannot be given.

Since Futures and Options (F&O) and intraday trades are business transactions and the profit / loss on such trades should have been offered as trading income in the past. It is never too late to correct a mistake. So start showing these transactions as business transactions for the RTI to be deposited. It is very difficult to say whether changing the treatment of these transactions from capital gains to business income will affect your past tax returns. In my opinion, the chances of reopening your past ITR are minimal, unless the tax return being filed is selected for detailed review.

You cannot deduct the STT paid on your capital gains. However, you can claim STT as a business expense for transactions treated as business. Please note that for intraday and F&O trades, you will need to show a minimum profit of 6% on the turnover for the year. In case you claim that your bottom line profits are lower, you will need to have your accounts audited regardless of the amount of turnover. In the event that your turnover exceeds the specified limits, you should have your accounts audited regardless of the percentage of turnover as net profit that you report.

Balwant Jain is a tax and investment expert and can be contacted at [email protected] and @jainbalwant on Twitter

To subscribe to Mint newsletters

* Enter a valid email address

* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our app now !!


About Author

Comments are closed.