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

Are you able to understand the replies and act accordingly to this thread ??

  • Yes, able to understand BUT NOT able to take suggested course

    Votes: 0 0.0%
  • Somewhat able to take desicions, BUT seek professional help in my area

    Votes: 0 0.0%
  • Find it tough to understand the replies hence always seek other professional help

    Votes: 0 0.0%
  • Not able to understand any of the replies !!!

    Votes: 0 0.0%

  • Total voters
    4
  • Poll closed .

diosys

Well-Known Member
Hi Diosys,

Till 31st march I will be trading,so I am not sure how much profit/loss can come in the coming days,so when sould I pay the Income Tax on earnings from tradings till 31st march.Hope am clear in my query.

Thanks & Regards,

MFRahman.
taxes can be paid anytime till the date of filing of your return.....which is 31st July...so you have enough time to pay.
 

nac

Well-Known Member
Here are my doubts after reading 25 pages in this thread. This is gonna be like an essay. Sorry for making this big.

Advance Tax - Advance Tax need to be paid in three installments (For Individual) before Sep 15, Dec 15 and Mar 15. If failed, need to pay penalty of 1% per month. For salaried, they can calculate their income. But for traders (Full time and only source of income) can't be sure how much I would have earned at the end of the year. Without knowing how could I pay such taxes. And you have mentioned we can pay tax before july 31st. Little bit confusion here. (I read about advance tax somewhere in the web not in this thread.) When I was a salaried employee, they deduct tax from my salary. I am filing ITR for the last two years, but never get the deducted tax back. So, Its better to pay the only amount we need to pay as tax, not by paying in advance and looking for them reverse it back to my account.

STT - STT can only be deducted as expenses for the trades done or we can deduct the total sum of STT in TAX amount (For eg: I am an individual trading(day) is my only source of income, I earned 3L and no standard savings. Tax would be 0-1.6L is nil and 1.6L-3 is 10% i.e. 14000. Total sum of STT for the year is 5000/-. Can I deduct this STT of 5000 in 14000?

Speculative/Business:
Day trading - Speculative
FnO - Business
Both are taxed as per slab (For Individual). Term Speculative and Business are different or both means same but with different terms????

ITR:
For an individual who earns only from day trading/swing trading/position trading both in cash and derivatives. What's the ITR form he needs to be filled. You can mention like this too.
ITR form for DAY TRADER (who does only day trading)
ITR form for SWING TRADER (who does only swing trading)
ITR form for POSITION TRADER (who does only position trading)
ITR form for DERIVATIVES TRADER (who does only derivatives trading)

CALCULATION OF TURNOVER:
Calculation of turnover for day trading is same as FnO?

LTCG:
Following quote confused me (taken from this thread, but i don't know who's quote is this)
LTCG -TAX EXEMPT
LTCG - TAX 20%

You have mentioned long term capital gains are tax exempt, then why 20% here???

Books of accounts:
Soft copy of contract notes, ledgers, bills etc from back office (from my DP) is enough. Or I should personally make journal, ledger, trial balance, balance sheet entry????

FOREX:
Upto my knowledge four currency combination can be traded by residential indians.
INR vs USD, EUR, JPY & GBP

Can we trade(legally) any other combination other than the above four???

Maintaining books of accounts:
If Business income is >1.2L maintaining books of accounts is must. You have mentioned day trading is speculative. So day trader no need to maintain(legally) books of account.

Calculating Profit/Loss in FnO:
Since profit and loss determines turnover in FnO, How this is calculated?
Profit/Loss = Sale price-Buyprice-STT-Brokerage-Service tax-Stamp duty-Regulatory charges.
or Just Sale price - Buy price

Tax Slab for SWING/POSTION/DERIVATIVE TRADER:
You have explained me this tax slab for a day trader. Can you please explain for these kind too.

PERSON A-Does only short term trades(few days to less than a year) on cash market, no other form of trade and income. What's his basic exemption? He has tax slabs like salaried? Can he save under standard savings? (Reason for rising question is, you have mentioned there is only 15% of tax for what he earned in STCG even though he falls under 20%/30% tax slab)

PERSON B-Does only long term trades(more than one year) on cash market, no other form of trade and income. What's his basic exemption? He has tax slabs like salaried? Can he save under standard savings?

PERSON C -Does only derivatives trading, no other form of trade and income. What's his basic exemption? He has tax slabs like salaried? Can he save under standard savings?
 
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diosys

Well-Known Member
Here are my doubts after reading 25 pages in this thread. This is gonna be like an essay. Sorry for making this big.

Advance Tax - Advance Tax need to be paid in three installments (For Individual) before Sep 15, Dec 15 and Mar 15. If failed, need to pay penalty of 1% per month. For salaried, they can calculate their income. But for traders (Full time and only source of income) can't be sure how much I would have earned at the end of the year. Without knowing how could I pay such taxes. And you have mentioned we can pay tax before july 31st. Little bit confusion here. (I read about advance tax somewhere in the web not in this thread.) When I was a salaried employee, they deduct tax from my salary. I am filing ITR for the last two years, but never get the deducted tax back. So, Its better to pay the only amount we need to pay as tax, not by paying in advance and looking for them reverse it back to my account.

STT - STT can only be deducted as expenses for the trades done or we can deduct the total sum of STT in TAX amount (For eg: I am an individual trading(day) is my only source of income, I earned 3L and no standard savings. Tax would be 0-1.6L is nil and 1.6L-3 is 10% i.e. 14000. Total sum of STT for the year is 5000/-. Can I deduct this STT of 5000 in 14000?

Speculative/Business:
Day trading - Speculative
FnO - Business
Both are taxed as per slab (For Individual). Term Speculative and Business are different or both means same but with different terms????

ITR:
For an individual who earns only from day trading/swing trading/position trading both in cash and derivatives. What's the ITR form he needs to be filled. You can mention like this too.
ITR form for DAY TRADER (who does only day trading)
ITR form for SWING TRADER (who does only swing trading)
ITR form for POSITION TRADER (who does only position trading)
ITR form for DERIVATIVES TRADER (who does only derivatives trading)

CALCULATION OF TURNOVER:
Calculation of turnover for day trading is same as FnO?

LTCG:
Following quote confused me (taken from this thread, but i don't know who's quote is this)
LTCG -TAX EXEMPT
LTCG - TAX 20%

You have mentioned long term capital gains are tax exempt, then why 20% here???

Books of accounts:
Soft copy of contract notes, ledgers, bills etc from back office (from my DP) is enough. Or I should personally make journal, ledger, trial balance, balance sheet entry????

FOREX:
Upto my knowledge four currency combination can be traded by residential indians.
INR vs USD, EUR, JPY & GBP

Can we trade(legally) any other combination other than the above four???

Maintaining books of accounts:
If Business income is >1.2L maintaining books of accounts is must. You have mentioned day trading is speculative. So day trader no need to maintain(legally) books of account.

Calculating Profit/Loss in FnO:
Since profit and loss determines turnover in FnO, How this is calculated?
Profit/Loss = Sale price-Buyprice-STT-Brokerage-Service tax-Stamp duty-Regulatory charges.
or Just Sale price - Buy price

Tax Slab for SWING/POSTION/DERIVATIVE TRADER:
You have explained me this tax slab for a day trader. Can you please explain for these kind too.

PERSON A-Does only short term trades(few days to less than a year) on cash market, no other form of trade and income. What's his basic exemption? He has tax slabs like salaried? Can he save under standard savings? (Reason for rising question is, you have mentioned there is only 15% of tax for what he earned in STCG even though he falls under 20%/30% tax slab)

PERSON B-Does only long term trades(more than one year) on cash market, no other form of trade and income. What's his basic exemption? He has tax slabs like salaried? Can he save under standard savings?

PERSON C -Does only derivatives trading, no other form of trade and income. What's his basic exemption? He has tax slabs like salaried? Can he save under standard savings?
1.) Advance tax is an estimate which needs to be based and paid on last years earning....It is legally required by persons having a tax outgo greater than Rs. 10000 in a year...Your understanding is correct that if the tax payment is negligible then advance tax can be avoided....but for HNI if they avoid then pretty heavy interest is levied.

2.) Earlier STT was a advance tax but not now...what you are stating was the position two years back....Now it can only be claimed as an expense. For your eg 300000-5000 and not 14000-5000

3.) No both have different meaning....Speculative is where delivery is not taken and business is generally where delivery are taken...

4.) ITR form for DAY TRADER (who does only day trading) - Business Income - ITR 4
ITR form for SWING TRADER (who does only swing trading) - Business Income - ITR 4
ITR form for POSITION TRADER (who does only position trading) - Can be Business or capital gain income depends on volume - ITR 3 or 4
ITR form for DERIVATIVES TRADER (who does only derivatives trading) - Business Income - ITR 4

5.) Yes its same.

6.) LTCG where STT has been paid for shares is only exempt....Others are still taxable at 20% for eg selling of land....

7.) You should make all of these ideally. Basic is Ledger and Cash book.

8.) Not aware of forex trading regulations...Though there is nothing in income tax law which prohibits one from doing so.

9.) Speculative falls within the ambit of business income hence books of accounts are required.

10.) First option is correct.

11.) Tax slab for all are the same it does not matter how and in what form the income has been earned...the only thing is that the person should be an individual.
 

nac

Well-Known Member
^ Thanks you.

Again I re-read the 25 pages and come up with new doubts and clarification required from the above post.

MANDATORY AUDITING:
Assume person X starts trading(day) with a capital of 1 lakh. He has no other asset or savings or anything. All he has is this 1 lakh amount. In day trading he makes 25 lakhs profit and 26 lakhs loss. Now his net loss is 1 lakh i.e., he lost his initial investment. Now falls under mandatory auditing. Even, His survival is doubtful now, how can he afford auditing?

ADVANCE TAX:
"Advance tax is an estimate which needs to be based and paid on last years earning. Advance Tax is legally required by persons having a tax outgo greater than Rs. 10000 in a year."
Person X income was just 1 lakh. So, he got exempted from paying tax. If he earns 10 lakh this year, he doesn't need to pay advance tax.(Because, based on last years earnings, he wouldn't have earned much to fall into any tax bracket.)

DAY TRADER NEEDS TO MAINTAIN BOOKS OF ACCOUNT:
He can get ledger from his back office. From where he can get cash book. If he has to make it, (he can make it if he knows making it or else he needs to employ someone to do it.) With the mere income of 1.2Lakh how he can afford to employ someone to maintain books of account.

CALCULATING TURNOVER OF DERIVATIVES FOR AUDITING PURPOSE:
As you said, Profit/Loss is calculated after deducting STT, TAX, and other fees.
So he needs to audit each and every trade to find which one falls into profit/loss or some times no profit/loss)
(For eg: Nifty 1 lot Bought @ Rs. 2/- and Sold @ Rs.3/- (STT, tax and other Fees is Rs. 50/- for both buying and selling (assumed amount for calculation). Here its no profit or loss(Profit on trade is Rs. 50/- and fee is Rs. 50/- So, 50-50 is 0). So this trade can't be taken into account for auditing purpose. Am I right?

DOCUMENTS NEED TO BE ATTACHED ALONG WITH ITR:
You have mentioned, individual no need to attach anything but just ITR.
Do anyone else need to attach the same, if he falls into mandate auditing category or his income for a particular year is 2 crores or something???

STOCKS SOLD @ LOSS BUT NO STT PAID:
How? Without paying STT how can he sell his shares. or there were no STT some years back???

MAINTAINING TWO DEMAT ACCOUNT TO AVOID AMBIGUITY:
Assume I have one demat account. I have holdings of RELIANCE 100 shares bought @Rs.1000/-. In my DP that shares always stay with same qty and same price. Even though I do intraday trading in RELIANCE. How come ITO take FIFO method here and club my holdings with intraday trading. Even if I have two demat account he would take FIFO method and club everything.
In one of your post you have clearly explained how would assessing officer will take into account for short term and long term positions of the same scrip. But here is long/short term with intraday. Is there any possible to club long/short term with intraday??? If no, he can maintain one demat and could cause no ambiguity. Am I right?

PAGE NO. 103, POST NO. 1026:
He invested 1.4Lakh now he has only .6L how he might have to pay tax. Please explain this.

OPTION TURNOVER:
As you said, derivatives turnover is calculated by adding profit and loss (cumulative).
But, here is a quote says
"Option turnover is calculated by adding premium(buy and sold)"
I don't know where i read this. Some one wrongly written it or this is how option turnover was calculated some years back???
And your quote "F&O income comes under business income. Here option turnover is the option premium"
NOW, I am totally confused?????

DOUBTS AND CONTRADICTIONS - TAX READY RECKONER:
"Books needs to be maintained if the sale in any of the previous three years is in excess of Rs. 10,00,000"
What do you mean by sale, selling house, land or something else? For day trader, he would sell that 10 Lakh amount worth shares everyday. Please explain

STCG-"STCG on equities is 15% (over expemtion)"
In your above post you said "Tax slab for all are the same it does not matter how and in what form the income has been earned...the only thing is that the person should be an individual." (Assume X earns 10L)If that's the case over exemption i.e., 1.6L and 1 lakh savings, balance is 7.4Lakh(10-1.6-1) so his tax liability is Rs. 1,11,000/-(@15% of 7.4Lakh) not Rs. 1,26,000/-(1lakh standard savings so tax is nil, 1.6tax basic exemption, 1.6-3 @10% i.e 14k, 3-5 @20% i.e. 40k, 5-7.4 @30% i.e 72k.
Please clarify this.

Pure trader-You have said individual's tax liability is based on slab where he falls. But your other quote confuses me "A "pure" day trader is taxed at 30% flat rate"

Gift - You have posted like this, if X transfer some money to his wife as gift that will be taxed and income generated with that income will be taxed on X's head. And you have said solution and iterate that its not a fool proof as transfer money as gift to X's mother in law and ask her transfer back to his wife.
And your quote "Gifted money there is no tax if between relatives."
Clarification needed.

Again it become like an essay. I'll try and write short and precise.
 
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nac

Well-Known Member
Hi!

I read another 25 pages and come up with few more doubts.
Some of my doubts may be similar to my previous set. If you feel that the explanation going to be given(for the previous set) is enough, leave it.

PAGE NO. 71 POST NO. 703
You have posted like this. Since his trading was intraday make a entry like following.
Broker a/c dr
Other charges(stt, stamp etc) a/c dr
To profit a/c cr

Since it determines the tax audit, shouldn't be the entry trade-to-trade basis?
Like if he do 50 trades, 50 entry needs to be in the cash book. Am I right? or it can also be done in other way as you said? (Because, profit/loss for the day will be reflected here not profit/loss of every trade done)
With ref. to this you have a post. (POST NO. 706) I couldn't understand what you are coming to say? Can you please be more clear in this?(Before clearing 706, please clear the above)

POST NO. 1199:
You have said "Can be Business or capital gain income depends on volume"
What do you mean by VOLUME here? What's the limit which differentiate capital gain or business?

POST NO. 687, PAGE NO. 69:
He's salaried, his income is 1.51L. He earned 6 K which falls on STCG. No intraday, No derivatives. He is an individual, STCG should be added with his salary and based on his tax slab he should pay tax. WHY SHOULD HE NEEDS TO PAY 15% FLAT?
I am smelling information like this, STCG can be treated as BUSINESS or CAPITAL GAIN. If BUSINESS, it will be taxed based on slab(for individual). If its CAPITAL GAIN, flat 15%. What makes to determine the transaction is BUSINESS or CAPITAL GAIN?


CASH BOOK means JOURNAL???

CALCULATING TURNOVER(Short term and Long term - CASH):
Adding buying price*quantity+selling price*quantity
or just selling price*quantity

WHAT DO YOU MEAN BY 'WITH INDEXATION' & 'WITHOUT INDEXATION'?

GIFT - TAX:
You have said gift between relatives is tax free. We(TJ members) have discussed one scenario where one gifted 1lakh FD and interest earned on that FD become tax free (gifting it before interest accrued) and also a link outside TJ explains how he saved interest on FD of 78lakh by gifting them to his family members. I didn't make a note of those post no. or page no. I guess, you would remember now.

And in one your post you mentioned like this, X gift's some money to his wife, she trades and earn some. You said that the amount she earned on the gift amount will be taxed on X's head. HOW? HOW? HOW? (Even here the amount earned was after gifting it, not before gifting)
In the first scenario he escapes not paying tax for the interest earned on FD by gifting it. The amount earned by the wife should be taxed on her own head why on X's head?

I guess, I made shorter than previous. I have few more original (MY) case to clarify. I will post them after getting reply(both this and previous set).

He (DIOSYS) being alone on the other side and facing bunch of guys shooting with questions. Now diosys look like one man army.
Dedicating time in his busy schedule, and that too for years.
This is the only thread created by him. He has posted 625 posts out of which 532 post only in this thread i.e., 85% of his posts are in this very thread. See, how much time he spends here in this thread.
When I read some post, that makes me comment something funny. And I realize that there is someone who dedicates his time and should not mess this thread with my comments.
I joined this forum two years ago, After realizing that this is not a tech forum where we can get reply faster, I come to this forum very rarely. You can check my statistics how active I was before these last 40 days in this forum.
After I am getting response and I need some information from TJ, I stayed and now in this thread i am getting a lot because of diosys
Hat's off man you're really really doing great.:thumb:
 

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