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

[TFL]

Diosys, thanks for your wonderful & prompt reply and for your well-meaning advice to keep books of accounts (in large caps )...

If I may explain what I do maybe you can guide us (me & TFL):

I have a spreadsheet which is a replica of my bank statement which I suitably modify to as to make it filterable / searchable / sortable. So this will provide me information re. cash inputs to my broker and receipts from him.

Each and every contract note, I break up into its components. Say I buy and sell X different scrips in intraday and take delivery of Y different scrips and give delivery of Z different scrips. I paste the relevant part of my contract note into a spreadsheet that allows me to break up scrip-wise and as per intraday or delivery basis. For each, I also pro-rata allocate the various charges (brokerage, ST+EC, stamp duty, Exchange levy and STT) using a spreadsheet formula. The formula ensures that STT on intraday is charged only on the sell leg (for easy deduction u/s 80E (?)).

The proceeds of each contract note are added to a "mega" spreadsheet that contains all the transactions I've done since I started (in Jan 2008). So the contents again are searchable, filterable, sortable.

Additionally, I have a spreadsheet that reflects all credits / debits with my broker. My business begins & ends with him!

The broker provides a closing balance of shares and their market value for 31st March 2008 & 31st March 2009.

I'm not interested in deducting expenses such as conveyance, broadband, etc., so I feel I'm maintaining "proper" records although not in the classical cash book / ledger type of way.

Hope this will give some clue...
http://www.traderji.com/taxation-ma...-thread-settling-these-issues.html#post340342

 

[magnet]

Sir i have been filing returns from the year 2003-2004 assessment year.....

I wanted to know which are the records which i need to maintain...i mean should i maintain 2003-2004 records whole life or is their any period say 3 year from present date for which IT ppl can ask detail

 

[diosys]

Sir i have been filing returns from the year 2003-2004 assessment year.....

I wanted to know which are the records which i need to maintain...i mean should i maintain 2003-2004 records whole life or is their any period say 3 year from present date for which IT ppl can ask detail

maximum 6 years at present as per Income tax act....

Practically i would suggest that you can safely destroy the vouchers etc but store the ledger and cash book.

 

[magnet]

maximum 6 years at present as per Income tax act....

Practically i would suggest that you can safely destroy the vouchers etc but store the ledger and cash book.

Thanks

Another question....

1 :: Who decides whether a person is trader or investor(for applying stcg on stocks..delivery based/intraday(1-2 transaction in whole year))?

Assessing officer or Your CA

seeing your buy/sell frequency?

2:: Wealth tax applies to FD and amount in saving account too?

 

[diosys]

Thanks

Another question....

1 :: Who decides whether a person is trader or investor(for applying stcg on stocks..delivery based/intraday(1-2 transaction in whole year))?

Assessing officer or Your CA

seeing your buy/sell frequency?

2:: Wealth tax applies to FD and amount in saving account too?

ans 1.) YOU....in one of supreme court cases even doing a single transaction has been held to be business....so it does not matter with the frequency (though it does play a very important role)... The intention with which the securities were purchased is the key....you have to demonstrate that the purchase was with an investment bias not trading....

ans 2.) FD interest gets added to your income and are taxed according to slab you fall in...there is no specific rate of taxation.

 

[Northie]

dear diosys, I have heard somewhere on this forum that when you trade (individual trader) in nifty futures and options then the tax is flat 10% of profit generated. Please shed some light.

 

[diosys]

dear diosys, I have heard somewhere on this forum that when you trade (individual trader) in nifty futures and options then the tax is flat 10% of profit generated. Please shed some light.

No it is not....it is taxed at normal rates of taxation as it would be business income...

 

[lazytrader]

Dear Diosys, Don't worry these are not tax related queries

Congratulation on 2yrs completion of your thread. It is good to have a tax expert among traders! I feel sorry that you have to answer the same silly questions time and again when they have been clearly explained already. So to prevent myself and new boarders doing so I have read all the 750+ posts in this thread an complied a simple Q&A and a small list of useful tit-bits from your replies. I think there are some issue with them since the tax laws have changed and since you started this thread and I myself didn't understand some of your replies. I request you to please go though it in your free time and update missing or wrong info and after reading it I have a couple of questions to ask.

Q&A:
====
1.I trade in intraday,short term and in F&O,so how to calculate the turnover for each?
A.) Tax audit is to be done when one's turnover is above 40 Lacs...For those in other industry it is the basic sale achieved....But in the case of transactions of F&O there is a difference... For the purpose of F&O transactions the limit of 40 Lacs is the profit or loss in absolute terms...Let me explain with an example....

Suppose you bought one lot of 150 shares of Financial Technology at Rs. 3000...Then you sold it at 3100....Therefore your profit is 100*150=15000...
Now you bought one lot of 1400 shares of HCC at 100 and then sold it for 110...so your profit if 10*1400=15000...
Third, you bought one lot of 8000 shares of IFCI at 60 and then sold it for 50...so you incur a loss of Rs. 10*8000=80000...

therefore for the purpose of determining the total turnover you achieved would be 15000(FTIL profit) + 14000(HCC profit) + 80000(IFCI loss) = 1,19,000.... it would not be the total transaction values but the absolute profit or loss incurred in the transactions...

2.Do i need to maintain any book of accounts,if yes how is that done
A.) Books of accounts are required of the income from business exceeds 1,20,000 so judge from yourself....In any case i suggest maintenance of books.

3.while filing return do i need to submit all the electronic contract notes printouts?
A.) NOTHING is to be attached with your ITR.....absolutely NOTHING

4.how to add this income in my salary income?
A.) Very simple.....simply add both the incomes and then calculate the tax payable on them....

5.when is tax audit applicable in each case that is intraday trading and F&O.
A.) Tax Audit is required when the sale exceeds 40 lacs....determine it according to the formula given to you in the Answer1

Compiled replies:
===============
-Depreciation and costs can be deducted when calculating tax from business income, also payment done to accountant to maintain books
-Capital gains tax is lower than business tax
-Business income is taxed at 30% flat rate
-Individuals are allowed exemption limits but corporates are not
-Tax need not filed if gross income (income before deductions) is less than exemption limit
-Trading income tax filed with ITR3
-If business income then ITR4
-Turnover is more than 40L in business then it is auditable
-If it is auditable then you need to maintain your books
-If income from derivatives then turnover is total profit+total loss (not -loss, +loss) is "used to determine" if auditable
-STCG can't be offset against long term loss but long term gain can be offset agaist STCG
-STCG on equities is 15% (over expemtion) LTCG on equities is nil (LT for equities is 1yr all else it is 3yrs)
-I wonder what happended to the guy who wanted to invest all his life savings in RPL
-Land purchased outside 8km city limit doesn't have to pay CG tax
-A "pure" day trader is taxed at 30% flat rate (incase of a seperate account with investments that it can be filed as CG tax)
-Tax Free: PF, ELSS, Divident on shares and debt funds
-If tax is filed as business then the closing value of your stock can be used to calculate tax (if your stock are work lower than purchase you can save tax on the difference by deducting it from taxable income)
-Loss can be carried over for 4 yrs or 8yrs (need clarification)
-STT is deducted for taxable income under business head (trader). No deduction for investor (STCG/LTCG)
-80C can be used for deduction from business income
-Books of accounts are cash book, day book, ledger and relevant vouchers with their supporting. Tally will do but Excel will not.
-F&O income comes under business income. Here option turnover is the option premium
-Gifted money tax is to be paid by the person who gifts it
-I guess the commodities equivalent of STT, CTT has been abolished from next yr
-Forex trading is taxed at lower rate that equities trading. But someone said forex trading in illegal in India. Need clarity.
-Short term gain cannot be set off with long term loss or salary income but can be carried forward. Eg: Loss on shares held for more than a yr, but made profit in day trading. You have to pay tax on day trading profits.
-There is LTCG on debt MFs: 20% with indexation or 10% without. Surcharges / cesses extra (Not quite clear)
-Taxes can be paid anytime without penalty if the same is before any notice sent by IT even if its 50 years....It shows that it was a bonafide mistake and not intentional on your part to hold back the tax..
-TDS from FD is deducted if Interst income is more than 10k in the FY
-Long term profits can be set-off against long term losses
-Intrady trading income from equities is speculation and from derivatives is business both taxed at the same rate
-Short term losses can only be set off against capital gain (long term or short term) if not possible then maximum carry forward allowed is for 8 years for non speculative
-IT Returns for past 6 yrs have to be maintained as per current IT laws

 

[Northie]

I've came to know. Info for those people who don't know it

Taxation in futures and options:

Futures and Option trades have been specially classified as business in the Income Tax Act, 1961. As such, income from F&O (Options) will also be considered as business income. Please use ITR 4 for purposes of your tax return. Of net income, first Rs. 1,50,000 is tax free. The next Rs. 1,50,000 will be taxed at 10% and the next Rs. 2,00,000 will be taxed @ 20%. Over and above 5,00,000, the tax rate is 30%. After calculating the total tax, please add Edu. Cess at 3% of such tax amount. If the total income exceeds Rs. 10,00,000 during the financial year, 10% surcharge is also payable.

 

[Northie]

One Excerpt from net:

Trading in derivatives is not a speculative transaction according to Section 43(5) of the Income Tax Act. However, the income from futures will be short-term gains. If you are an investor you will have to pay 10% short-term capital gains tax. But if you are a dealer, your income would be taxable as business income at the applicable slab rates. Similarly, the income from options would be defined as short-term capital gains, whether it is from buying or selling or from exercising the option. Again, if you are a dealer in shares, the income would be treated as business income.