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I buy and sell shares. Do I fall in the category of trader or investor?
Good Question. If you buy shares and hold it for certain period and then sell it then it is an investment. As per income
tax, you can decide whether you want to deem it as trading or investment and then you have to follow this
for upcoming years as well. Intraday trading and F&O trading will always be considered as business. If
you deem it as investment then capital gain/loss arise from sale of investment otherwise, it will be considered
as business income/loss.
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Do I need to show my income from trading in income tax return. If yes, how should I do it?
Yes, you are required to show your income or losses from your trading in your income tax return. You need to show the profit
or loss from trading in profit and loss account in ITR-4 (renamed as ITR-3 from Y 2016-17). The benefit of
showing the loss from trading is you can set it off from other incomes (except salary) and save tax.
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What are all the documents I need to submit along with my income tax return?
Since the return has gone paperless, you need not submit any documents to the Income tax department or ClearTax while filing
your return. You are required to keep the proofs with you as the Income Tax Department recommends that you
keep these documents in a file with yourself for 6 years.
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I am salaried person and I have a loss from trading. What are tax compliances I need to fulfill?
If your taxable salary is more than Rs. 250,000 then tax audit will be applicable in your case. The reason is since you have
loss from trading business hence it is below 8% of trading turnover thus, as per section 44AB in such case
if your total income is more than Rs. 250,000 then you have to get your books accounts audited from a CA
and then ITR will be filed.
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I have a loss from trading and other business income. Can I set off the loss from trading against my normal business income?
If the trading is not intraday then it is non-speculative business and the loss of speculative business can be set off against
non-speculative as well as speculative business profit. If it is intraday trading then it is a speculative
business and the loss from such business can be set off against speculative business profit only.
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How do I calculate my turnover from F&O trading?
If you do delivery based trading then the total of sales values is your turnover. In case of non delivery based trading,
total of positive and negative converted into positive figure of all the transaction is considered to be
the turnover.
If you are trading in options then the turnover will be the total of positive and negative converted into
positive figure of all the transaction and the premium received on sale of options.
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When tax audit is applicable to me?
There are two situations when tax audit becomes applicable:
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When your turnover (as explained above is more than Rs. 2 crores (Rs.1 crore till FY 15-16)
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When you declare profit less than 8% of your turnover and your total income is more than Rs. 250,000. Loss
from trading also comes in the category of declaring profit less than 8% of turnover. Total income in
such case will be calculated after setting off the loss against other incomes (except salary).
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Can I opt for presumptive taxation (section 44AD) for my trading income?
Trading income can be declared as per presumptive taxation as well, if the turnover is less than Rs. 2 crores (Rs. 1 crore
till FY 15-16). If you have earned high profits from trading then it is preferable to opt for presumptive
taxation and declare 8% (6% from FY 16-17, if receipts are in digital form) of your turnover as income as
pay tax on total income as per tax slab rate. Please note if tax audit is applicable to you then you cannot
opt for presumptive taxation.
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Can I opt out of presumptive taxation scheme?
You can choose to opt out of presumptive taxation at any time. However, if you opt out, you are not eligible to file under
presumptive tax for the next 5 years. For example, you file presumptive tax returns for FY16-17 and file
under normal taxation for FY17-18. You are not eligible to file under presumptive tax upto FY 22-23. Read
here to know more.
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When should I opt to file returns under presumptive tax?
If you have not maintained any records of your income and expenses and you are eligible, then you may opt to file returns
under presumptive tax.
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What are the benefits of filing returns under presumptive tax?
There are three key benefits to file returns under presumptive tax
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Easy to File: The tax form is much shorter and simpler as compared to a complex 30 page form for filing
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Save Money: Professionals can now file tax returns on their own instead of paying a tax consultant. Typically,
consultants charge anywhere from Rs. 5000 – 15000 for such filings
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Save tax: Usually professional do not have much expenses to declare. By declaring 8% of income as profit
and balance as expense, a lot of tax saving can be done.
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I heard that new tax forms were released. Can you tell me about it?
You are right. The Income Tax department has released new IT forms. Traders need to file under ITR-4 (which renamed as ITR-3
from FY 16-17) if they opt for normal provisions or tax audit is applicable to them. But if they opt for
presumptive taxation then they need to file under ITR-4 (Sugam).
In case you deem your transaction as investment then ITR 2 needs to be filed.
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When do traders have to file income tax returns?
Like salaried persons, traders opting for presumptive tax will now need to file their income tax returns by July 31, 2017.
If tax audit applies to them, then the last date to file ITR as well as tax audit report is September 30,
2017.
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When do I need to maintain accounting records?
Traders eligible under presumptive tax have the benefit of not maintaining any books of account. However, they are mandated
to keep books of account if the income disclosed is less than 8% of gross receipts and the total income exceeds
Rs. 250,000 OR the turnover exceeds Rs. 2 crores (Rs. 1 crore till FY 2015-16). In this case, professionals
will also be required to get their audit done.
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What is GST?
Goods and Services Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of Goods and Services at national
level and is expected to remove the cascading effect of tax (tax-on-tax) which is prevalent presently. It
will replace all the taxes currently levied and collected by the Centre (such as Central Excise Duty, Service
tax and CVD) and by the State (such as VAT and CST), on businesses. Click here to read
more.
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Does GST apply to me?
GST will apply when turnover of the business or the gross receipts of the profession exceeds Rs 20 lakhs (Limit is Rs 10
lakhs for the North Eastern States).
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Which business expenses can I claim benefits in my tax return?
The expenses which are directly or indirectly related to your business can be claimed in the income tax return against business
income. Like, brokerage paid, rent of the business premises, electricity, repair and maintenance of the premises
and vehicle used for business purpose, salary and wages, depreciation on asset used for business,etc.
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What is Assessment Year?
Assessment year (AY) is the year in which you assess your income and tax of the previous year. In this year, income tax return
is required to be filed for the previous financial year. For example, AY for FY 16-17 will be AY 17-18.
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What is Financial Year?
Financial year is the year in which you earn income from the month of April to the month of March.
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How can I file tax returns on my own?
For the traders opting for presumptive taxation, calculate your turnover and fill turnover and income in business and profession
tab in your Clear tax account. It will automatically calculate your income, then fill the details of your
section 80 deductions and taxes paid. That is how, you can proceed to file your return.
In case any tax due comes up, then pay the tax first via challan 280 online then fill the details of the
challan in the tax paid tab under self tax payment sub tab to proceed to file your return.
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What is Advance Tax?
Advance tax is the prepayment of tax to avoid lump sum tax payment with high interest while filing the income tax return.
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Why do I need to pay advance tax?
Advance tax needs to be paid to avoid to pay lump sum amount of tax at once while filing return. If your tax liability is
more than Rs. 10,000 and you do not pay advance tax on time then 1% per month interest will be levied under
section 234B and 234C on your tax due till the date of payment.
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When do I pay advance tax?
Being a professional, if your tax liability is more than Rs. 10,000 then you are required to pay advance tax in 4 installments,
i.e., on 15 June (15%), 15th Sept (45%), 15th Dec (75%) amd 15th March (100%).
Being a businessman opting for presumptive taxation, 100% tax should be paid in advance by 15th March of
the relevant Financial year.
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How do I pay advance tax?
You can pay it online using your net banking or debit card through challan 280. You can pay it offline as well in any income
tax listed banks along with the hard copy of filled challan 280.
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How do I pay advance tax?
You can pay it online using your net banking or debit card through challan 280. You can pay it offline as well in any income
tax listed banks along with the hard copy of filled challan 280.
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Can I get a local CA to get my accounts prepared?
Yes, a local CA can be contacted to prepare your books of accounts. We can help you with the same as we have CAs in all major
cities of India.
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I am a professional also I am an NRI for this year as per income tax laws and trade in shares. Can I opt for presumptive
taxation?
No, presumptive taxation is available for Indian residents only. NRI cannot opt for it.
