Fire your tax related queries and i would get it solved!!!

[Janu]

Diosys,

I am a NRI since 2007. I am buying/selling stocks in cash market for the last 2 years. I have demat/trading account with ICICI Direct.

But it is not a NRI demat account. It is a domestic account linked with my ICICI S/B account.

I have not filed my tax return for the last 2 years. In another few months I will be returing to India permaently.

Please clarify my below doubts..

Is it ncessary to file a tax return druing my NRI period..?

If yes, Is it possible to file for 3 years at a time..?

Is it possible to show the profit I got through trading using domestic account while filing tax for my NRI period..?

Thanks,
Janu,

 

[diosys]

Diosys,

I am a NRI since 2007. I am buying/selling stocks in cash market for the last 2 years. I have demat/trading account with ICICI Direct.

But it is not a NRI demat account. It is a domestic account linked with my ICICI S/B account.

I have not filed my tax return for the last 2 years. In another few months I will be returing to India permaently.

Please clarify my below doubts..

Is it ncessary to file a tax return druing my NRI period..?

If yes, Is it possible to file for 3 years at a time..?

Is it possible to show the profit I got through trading using domestic account while filing tax for my NRI period..?

Thanks,
Janu,

My answer to all your three queries is yes !!!

 

[manish733]

hi diosys, i am in need of help. my salary is 10 lakhs and been filing itr-1. this year i have done fno trading and lost around 25000 in jan- march. however, i was not aware of the rules and filed in itr-1 only. can this be rectified/ revised.

 

[magnet]

I-T Dept gearing up to tax bonus stripping

After taxing investors for dividend stripping, the Income Tax (I-T) Department is gearing up to tax bonus stripping.

Official sources say scrutiny of returns filed by companies, brokers and individuals active in the stock markets and in possession of shares revealed wide use of this mechanism to evade tax.

According to data compiled by Business Standard Research Bureau, 314 companies have announced bonus shares since 2005-06. While assessments are on for 2008-09, in most cases the department is checking returns filed for the last four years under the scrutiny assessment, sources add.

To explain how bonus stripping works, a source said: "Say, someone is in possession of 1,000 shares of company XYZ, priced at Rs 1,000 each. Following a bonus issue announced by XYZ in the ratio of 1:1, the shareholder gets 1,000 stocks more for free. By the end of the issue, the investor owns 2,000 shares, each priced at Rs 500. He now sells the initial 1,000 shares at Rs 500 each, incurring a short-term capital loss. He uses the loss to reduce gains made in other market transactions. Later, he sells the remaining 1,000 shares, at a profit since they were acquired free and reaps the benefit of tax exemption on long-term capital gains."

The I-T Department recommends an amendment to Section 94(8) of the Income Tax Act to bring such proceeds within the tax ambit.

While Section 94 of Indian Income Tax Act 1961 refers to tax avoidance by certain transactions in securities, Section 94(8) covers taxation of bonus shares held under the mutual fund units. Thus, bonus equity shares held by individual investors or companies are completely out of the tax net. The department now proposes to extend the coverage to securities, too, say sources.

Under Section 94(8), for tax purposes, the loss arising from the sale of shares held prior to the bonus issue is treated as the cost of acquisition for the bonus shares. If the amendment is made, the profit earned by the ordinary investor or the company will be subdued, since it has to be reduced from the loss incurred by selling the earlier lot which acts as the acquisition cost. At present, the profit has no upper limit, since there is no acquisition cost for bonus shares and, over and above this, there is exemption on long-term capital gains.
Taxation of dividend stripping was introduced in the Budget of 2002-03. Dividend stripping is purchasing of shares before a dividend is paid and later selling them when they go ex-dividend or, dividend payment does not apply to the shares after a certain date fixed by the company.

http://business.rediff.com/report/2010/jan/12/it-dept-gearing-up-to-tax-bonus-stripping.htm

 

[diosys]

hi diosys, i am in need of help. my salary is 10 lakhs and been filing itr-1. this year i have done fno trading and lost around 25000 in jan- march. however, i was not aware of the rules and filed in itr-1 only. can this be rectified/ revised.

Revise your return without doubt.

 

[vikaspanwar]

Hi Diosys,

Can you explain me ...
The difference of a full time trader (working Independent / Professional) & a trading firm (opens a LLP as a director and work as a salaried person for that LLP) on Tax prespective and which will be better.
And the Deductions, which he can make from trading income.
OR what are expenditures can be deduct from the income (Internet, magazine, Software Charges, Computer and electricity, rent etc.) on each case. How much will be the tax and can a full time trader is elligible for the savings on the tax....as NSC, Insurance, Medical etc as a Salaried person.

Please clear me on the following on each case......
,,,,,,,,,,,,,,,,,,,,,,,,,,,,Prof/FT(Full time),,,,,,,,,,,,,,,,,,,,,, LLP
1.Income: ,,,,,,,,,,,,,,,,,Intraday+FO+ST,,,,,,,,,,,,,,,,,,,,Intraday+FO+ST
2.Expences,,,,,,,,,,,ST+STT+Exghfee+Brokerage,,,,,,,,,ST+STT+Exghfee+Brokerage
3.Net Income ,,,,,,,,,,,,,,,,,,,,,1-3 ,,,,,,,,,,,,,,,,,,,,,,,,,,, 1 - 3
4. Deduction,,,,,,,,,,,,,,,,(?????????????),,,,,,,,,,,,,,,,,,,,,,All to run LLP
5.Taxable income,,,,,,,,,,,,(3 - ?????????),,,,,,,,,,,,,,,,,,,, (3 - 4)
6 Head,,,,,,,,,,,,,,,,,,,Profession (Is slabs are applicable),,,,,,,,,Business
7. Tax rate,,,,,,,,,,,,according to slabs or as under,,,,,,,,,,,,,,30%
7a. Intraday,,,,,,,,,,,,,,,,,,,30% ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,30%
7b. FO ,,,,,,,,,,,,,,,,,,,,,,,,,,30% ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,30%
7c. ST ,,,,,,,,,,,,,,,,,,,,,,,,,,15% ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 30%

Please correct me specially on tax rate, Income Head and Deductions.

If possible please explain by taking an example of ...(In each case)
Starting Cap 100000
Income from FO 10000
Income from intraday 10000
Income from Short term Trading 10000
Expenses/deductions as
ST+STT+BROKERAGE 1000
TV/News 1000
Internet 1000
Software 1000
Others (Magazine/electricity/phone) 1000
Office rent/ House rent 5000
Vikas Panwar

 

[swami007]

Hi,
I am a software professional..I do intra day as well as swing trading..Now am going to get a sum of 4-5 lacs from my friends (each providing me rs.65k approx).I am going to repay them with 50% returns after a specific amount of time(< 1yr)..
Let us say my taxable income is 2lacs.So my tax slab would be at 10%.Now i get
4lac and buy shares in my account.I return 6lacs(50%returns inclusive) back to them.
1) Would my taxable income be like 2lac+6lacs or 2lac + 2 lac(profits made from shares)? or is it like income from my profession is treated different and income from shares is taxed differently?
2)Will my tax slab rise to 30% as my account had 8lac in total?
3) Pls suggest a way so that i could end up paying minimal taxes in my side..

Thanks N regards,
swami.

 

[raja1344]

Hi diosys
pls. clarify my two doubts:
1. i am a regular trader in stock market and income is business income.This year suppose i have a loss of 70000 rs . in trading. I have also a share which is a long term investment as i have invested in it in face value at rs. 10 . for rs. 1000 eight years ago and now it's market value is 160000 though the problem is i've not shown in my return before.my question is ifi sold it now for 160000 what will be my tax liabilty.in my sense
if it is taken as long term investment then no tax is payble as it is long term.secondly if it is taken as business income then also tax will be zero as net income is 160000- 60000=100000.
pls. inform me whether i'm right or wrong
regards
raja

 

[diosys]

hi,
Thanks TAX GURU my queries are getting solved...but some doubts again
My Net position on my intraday trades is on loss side and net position on my options and futures trade is also on loss side by few ks.......

Now my main point is i have not paid 3 months tax since i started trading from june 2009 and i am planning to file return directly on last day only...so plesae tell as i am on road to recovery if by chance i still remain net position as loss on both intraday and options do i hv to pay tax and file return ...remember my turnover means profit+losss is not 40 laks so acc to u i am not in auditing catagory but still if i reamain in net loos or say 10k profit wud i hv to file return and can i offfset loss on profit........?
how much tax in that case wud i have to pay ......?
Will there be problems that i hv not filed returns for every 3 months?

pls reply
bye

Filed return for every 3 months ???

Your ITR is only once a year not thrice....

Even if you earn 1000 or incur loss of 10,00,00,000 return of income should be filed for utmost safety and peace of mind.

Yeah you can set off options loss or gain with futures income or loss

 

[diosys]

Hi Diosys,

Can you explain me ...
The difference of a full time trader (working Independent / Professional) & a trading firm (opens a LLP as a director and work as a salaried person for that LLP) on Tax prespective and which will be better.
And the Deductions, which he can make from trading income.
OR what are expenditures can be deduct from the income (Internet, magazine, Software Charges, Computer and electricity, rent etc.) on each case. How much will be the tax and can a full time trader is elligible for the savings on the tax....as NSC, Insurance, Medical etc as a Salaried person.

Please clear me on the following on each case......
,,,,,,,,,,,,,,,,,,,,,,,,,,,,Prof/FT(Full time),,,,,,,,,,,,,,,,,,,,,, LLP
1.Income: ,,,,,,,,,,,,,,,,,Intraday+FO+ST,,,,,,,,,,,,,,,,,,,,Intraday+FO+ST
2.Expences,,,,,,,,,,,ST+STT+Exghfee+Brokerage,,,,,,,,,ST+STT+Exghfee+Brokerage
3.Net Income ,,,,,,,,,,,,,,,,,,,,,1-3 ,,,,,,,,,,,,,,,,,,,,,,,,,,, 1 - 3
4. Deduction,,,,,,,,,,,,,,,,(?????????????),,,,,,,,,,,,,,,,,,,,,,All to run LLP
5.Taxable income,,,,,,,,,,,,(3 - ?????????),,,,,,,,,,,,,,,,,,,, (3 - 4)
6 Head,,,,,,,,,,,,,,,,,,,Profession (Is slabs are applicable),,,,,,,,,Business
7. Tax rate,,,,,,,,,,,,according to slabs or as under,,,,,,,,,,,,,,30%
7a. Intraday,,,,,,,,,,,,,,,,,,,30% ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,30%
7b. FO ,,,,,,,,,,,,,,,,,,,,,,,,,,30% ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,30%
7c. ST ,,,,,,,,,,,,,,,,,,,,,,,,,,15% ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 30%

Please correct me specially on tax rate, Income Head and Deductions.

If possible please explain by taking an example of ...(In each case)
Starting Cap 100000
Income from FO 10000
Income from intraday 10000
Income from Short term Trading 10000
Expenses/deductions as
ST+STT+BROKERAGE 1000
TV/News 1000
Internet 1000
Software 1000
Others (Magazine/electricity/phone) 1000
Office rent/ House rent 5000
Vikas Panwar

LLP would be taxable at flat 30% whereas for indi it is as per slabs of income....In any case the tax outgo would be way less for an individual plus the applicable statutory compliances would also be substantially less...

Any ependiture i mean ANY expenditure done to earn the income is allowable to be set off unless it is contrary to the prevailing civic laws...

Your balance question are very vague....Please clarify