Trading options and income taxes
Will it be quarterly or annually? Each status has very different tax implications. Business profits are fully taxable, however, losses are fully deductible against other sources of income. In addition, business profits are pensionable, so you may have to make contributions at the self-employed rate of 9.
Day traders have their own tax category, you simply need to prove you fit within that. Taxes in India are actually relatively straightforward then. However, seek professional advice before you file your return to stay aware of any changes.
The tax implications in Australia are significant for day traders. Unlike in other systems, they are exempt from any form of capital gains tax. Once you meet these requirements you simply pay tax on your income after any expenses, which includes any losses at your personal tax rate. The only rule to be aware of is that any gain from short-term trades are regarded as normal taxable income, whilst losses can be claimed as tax deductions.
Paying taxes may seem like a nightmare at the time, but failing to do so accurately can land you in very expensive hot water. The tax consequences for less forthcoming day traders can range from significant fines to even jail time. Over time this can reach So, think twice before contemplating giving taxes a miss this year.
It is not worth the ramifications. The good news is, there are a number of ways to make paying taxes for day trading a walk in the park. Below several top tax tips have been collated:. To do this head over to your tax systems online guidelines. Follow the on-screen instructions and answer the questions carefully. Then email or write to them, asking for confirmation of your status. Once you have that confirmation, half the battle is already won. Some tax systems demand every detail about each trade.
Check the first chapter on how to classify yourself. Short term equity trades if the frequency is high, it can be shown as non-speculative, otherwise as STCG. Thanks for putting up this page. What documents do I need to get my trading audited and where can I download them from the backoffice? Also check this link: My frequency and no. Hi I also done speculative intraday trading in which my loss is Rs. My income for salary is Rs. Now I went to a CA and he is telling me that audit is not applicable to me as delivery based trading done by me is investment.
My turnover in delivery based trading is 95 lacs and for intraday trading is 9 lacs. What should I do?
Ankit, Intraday trading is treated as speculative business income. Is there a limit on rental expense? Sec 80gg says max Rs.
I stay in a rented appartment with family, but one room which owner has given me separately for pm. Agreement and receipts are there. So can pm be shown as expense. I am self employed. Should i file tax this year or next year? Do i need to pay advance tax? All filing of returns for the period April 1st to March 31st will have to be done next year. Yes, advance tax will also need to be paid. Do read through the other chapters as well.
Hi Nithin , I have done few trades and my total turnover fro FY may be more then 1 Cr but my income from the same is less then 2. You will need it to be audited if you have any tax liability i. I have recently completed my MBA, prior to which I had worked and filed my returns. During the past year I had no income. I did some trading and have losses of around Do I still have to file returns if I had taken a year of education break?
Can I show these losses for next assessment year if I do not file returns this year? Arijit, you are not forced to file ITR, but I think it is best to do. In such a case, you will have to unnecessarily take the effort of explaining the ITO.
If we have missed filing returns for a year, can we file it in the subsequent year? I am filing ITR 4 for the first time and have some confusions. Really appreciate if you can help me with this. I have below income. Salary income Intraday loss of 1. Is that a right place? Is that a right place to add? Also, is there a place where I can show split up of other expenses?
Hi Nithin, I got a notice from IT that my return related to intraday loss carry forward is incorrect. Please check the attachment for exact note from IT department. Below is what I updated in the ITR-4 xls file: Profit and Loss sheet: In Section 53c, entered expense total as 1. Mayur all income generated from April 1st has to be filed only by next year July.
Currently you have to file only for the time period between April 1st to March 31st Intraday trading is speculative business, delivery is capital gains, u will need to use ITR4.
Do read through all the chapters of this module. Mayur, can you go through all the chapters in this module: Now my CA has realised that audit is required. But he is still saying that my loss of Rs. Ankit check the first chapter on classifying yourself, if you consider delivery based trading as a business u can add it to business loss. The thing to remember is to continue same classification next year as well, there has to be consistency in how you classify yourself.
I have delivery based trading with high frequency and consider it to be business loss. But CA is simply classifying delivery based as investment. My question is it going to create any problems? Also I left my job last year. So in this year my income will be only due to trading i.
Ankit, best to reason this out and go with what ur CA says. If it is really high frequency, it is better to show as a business income instead of capital gains. But since there is no definition from the IT department on what is higher frequency, so it should be alright.
As I am planning to declare the loss for the first time. I tried contacting many CAs and other friends. But unable to get the complete clarity. As tomorrow is last date for filing and in case of loss carry forward. Kindly provide me suitable solution ASAP. I have done only option trading.
Does STT and brokerage and other charges which are charged on a transaction have to reduced from the transaction value to arrive at sale and purchase price. All STT, Brokerage etc can be shown as expenses.
Do I need to file audited return? I have spoke with many CAs and everybody is giving diferent explanation. In your case it is quite tricky, if you have no income tax to be paid for last year, then no audit is required. Income tax slabs come into play for salary above 2. Do speak to the taxiq team, or consult any other CA. How about commodities do they come under speculative or non speculative trades. Adding profit values and loss values do i get my turn over. Hi, my CA has quoted me a price of Rs.
It includes the price to get a digital signature for me. Is the price reasonable? Digital signature will cost you between Rs to Rs Hi Nithin I have not made any profit after 1 April Shall I still fill the Challan before 15 S2p ? Dear Nithin Damn confused by my tax audit requirements. Pls clarify whether i need an audit or not.
I have a salary income of 2,40, Int income of around 3. Turnover over 1 cr. Pls help me out. Since your total income is less than Rs 2. Since there is no tax to be paid, no audit is required.
Do speak to a CA once. Just 1 more query. Can u help me out with the ITR form no i am supposed to file my return in this case? But i cant find any option in ITR3 to state my losses. Do i need to file in ITR-4? Now assume that Trader has actually received only 4 Lakh as Actual Profit in his hands after deducting say other expenses like Trading fees etc.
Now if Trader goes thru Audit thru CA and Auditor also says same 4 Lakh as the actual profit then whether trader now can pay tax on 4 Lakh at the rate of Please clarify on this. Audit is fine but will that help here in this case to pay on tax on Actual profit with the audit. Because in this case say if we IT way calculation Tax would be more than actual profit received in the hand of Trader. I am not able to get what you are trying to ask. Can you go through a ll the chapters , we have one chapter on turnover and audit.
Turnover calculation is only to determine if you need an audit or not. How much tax you have to pay is based on the income tax slab you fall in. Yes CA fees can be shown as deduction. Also clarify when audit is done who has to file the return for the trader?
What happens if there is profit in first 3 qtrs and loss in Qtr 4 and overall there is loss in the FY year at the end of the FY year. If advance tax is paid for first 3 qtrs say and in the 4th Qtr loss is more than profit of Previous 3 Qtrs whether IT Dept will refund the advances paid as there is loss or will adjust it for next financial year.
If advance Tax has to be paid then what form to be used for payment. Your CA will file your returns along with audit. If you end up paying tax and there is a loss, you can get a tax refund. Sir, Could you please tell me if I am classified as trader then I have to pay tax for long term held for more than 1 year capital gains on stock trading?
No Sir, I have both gains from both long term more than days and also short term delivery based more than 1 day but less than days. So I think I would be classified trader.
So which I have to pay tax on long term capital gains also? Moreover I am a salaried person. Hi Nitin thanks, could you please suggest me a good CA who can take care of my accounting and audit needs if required. I have a loss of 5 lakhs in derivatives and I am getting audit done.
But I also happen to be a working professional and been filing only ITR 1 and 2 till this time. This time I am filing ITR 4. Questions — a Any consequence of filing ITR 4 viz a viz with my employment as they would not know about my trading.
Ur employer need not know of what ITR form you are using. I am an agriculturist. I have invested Rs 17 lakhs in FD at the rate of 8. I have not given form 15g to the bank.
I have not paid any advance tax for this financial year and now I want to pay advance tax by 10th of October, Please let me know what amount I have to pay with penalty.
Until october, your FD income will probably be around 1lk, you have 9. So total around 9lks net income for the year until now. How much you want to pay as advance tax will depend on you, since this is business of trading the year could end up either above this 9lks or below.
So I think it is best to be conservative, and pay a small amount as tax. Probably around Rs 50, Best to consult a CA for all of this.
Sir,thanks for the previous answer, sir i want to know are there any kind of restrictions regarding selling of shares bought under IPO in India ,like can you sell them within one year? And if there are any kind of restrictions or rules which brokerage houses use to prevent trading of IPO shares or from companies in India?
It is applicable per financial year. The idea being, if a person has received so much cash, he should definitely have income over 2. If someone is not filing, he is being non-compliant. I have received a notice from IT department for not filing the returns for the assessment year In the more information tab, it is mentioned STT sale of equity shares settled without actual delivery — for the financial year during financial year — , i was salaried 3.
I have made only 2 intraday trades in equities during this period with a loss of 64 Rs. Total purchase and sell value is less than Rs. If i not disclose this loss, will i be scruitinized? You will have to use ITR4, and no audit will be required. Also i would like to know what will be a book of account with regard to trading.
What should be the entries in it? Will the zerodha statement suffice , or we need to maintain a separate one Regards Sreejith. IT department will have a problem if you declare less tax avoid tax , no one has a problem if you pay tax: Nithin Sir, Thanks for your advice.
The idea is that you are not avoiding paying any taxes by doing this. Best to speak to a CA also. Thanks a lot for the detailed explanation. I would definitely follow this site. The same year it can be setoff against any other business income.
But when you carry forward the loss, based on what head on balance sheet you carry forward, it can be setoff against profits on the same head in the future years.
Thanks a lot for the reply: Hi I have started a commission based business and my turn over is 2 to 3 cr monthly but my profits are per month so how should I show my business returns and turnover in income tax. If you invest Rs this year, you can get benefit of upto this much as deduction before calculating tax. So if your income is Rs 5. So by investing 30, you save Rs which you would have otherwise paid as taxes.
This is locked in for 3 years, if you sell before that you loose the benefit that the ELSS gave you. Hi Nithin Sir, I do intraday trade scalping in Option Premiums…so for it is the only source of earning for me. Is there any procedure to declare it as a business activity or filing ITR 4 is sufficient?? I am also running business but from my home itself and not from any other business place.. ITR4 would mean that it is a business activity. No need of any Shop license for trading stock markets.
Thanks for making me relieved……!!!! One more question Sir…In the evening I always get a message from Zerodha that your total traded value is 4 lakh or 5 lakh…this means soon I am going to cross 1 cr turnover limit….
It is best to meet a CA to respond to this notice. Since you have made losses, you could send an explanation. Do read through the entire module, you should get an idea. I am a Zerodha trader. Yes, since you are doing intraday trading, you will need to use ITR4 and declare this. Go through the module, it is explained how you can. Sir I got a notice from incometax department for not filling of tax I am a trader I have don intrady dilivery and comodity trading and having lose in all so what to do G I had not filled any itr I am a saleried person.
You will have to go meet the ITO and explain him this. Since exchanges share turnover data with IT department, it is best to always declare. Dear Sir, Can we include trading account opening fees amount in business expense when showing trading as business? Dear Sir, I have loss of 13k in fy,profit of 57k in Fy and loss 1. My client id is DS zerodha.. Dear Sir, thank you for your amazing articles on trading and taxation, it is a blessing for us. The best way to do is to MTM all open positions to 31st March, yeah even open option positions.
The second statement appears to allow carry-forward. Assuming after offsetting your losses against all other gains this year, you have some losses still pending to be offset. This can be carried forward for the next 8 years, but when you carry forward to the next year or more, it has to be offset against non-speculative gains only.
Is it ok to add this amount in my expenses towards my profit in trading? Yes, this definitely is an expense. This is payment gateway charges. You can show all other debits as expense. Hi, my turnover is more than 1 cr, but I have made loss. Do I still have to get my book audited? I have an delivery volume of Rs 1. So you will need to use ITR4 itself, and yeah best to get an audit done.
Like I said, audit is quite a simple task. End of september is usually the last day for people with audit. If you are showing delivery trades as capital gains, there is no concept of turnover to be calculated. You need to declare turnover only if you declare your delivery trades as a non-speculative business income.
In case of delivery, the selling value of all your stocks add upto turnover. For intraday trading, you pay according to the tax slab you fall in. I just hope there are more entrepreneurs like you who possess such great qualities and values which our country urgently needs. Once again thank you for the prompt reply. I have filled my eretun of F. Sir, i am an government employee having salary 4. You will have to use ITR4, and yeah you can carry forward the loss. Do read the entire module, everything you need to know is on it.
HI, I have no other income and i am doing intraday trading since May 1st I would expect that my turnover will cross more than 1 crore but the profit will be less than 1. I believe, i need not to pay tax as per tax slab 2.
If i need to file ITR, what is the form no. Yes, no tax 2. No audit, because you have no taxes to be paid. Hi Nitin saheb, Thanks for your help. I am sure i dont need any audit for this amount. Which ITR form i have to use..
I have given my details below.. My total income coming less than 2. Which ITR form should I fill sir. Request you to advice. Sharath, there is no concept of showing turnover on ITR3. You can show all positive turnover as gross receipts and negative turnover as Gross sales. Trading is like any other normal business, you have to pay taxes as per the income tax slabs.
Do go through the entire module, has everything you need to know. Hi Nitin, Many thanks for such a wonderful content. The case studies are clear. Please add a scenario of having no other income other than trading and total income is less than 2. I came with that doubt and clarified by the comments. Also the case of senior citizen, who need not to pay advance tax for STCG and only self assessment tax is required. You will need audit.
But make sure to read through the entire module to understand what exactly is turnover. Short term capital Gains Rs.
If you are transacting in the markets, it is best to file returns. It will be super simple for IT departments to spot this, since exchange share trade details with IT department. Yeah, you could show this as non-speculative business losses grey area, since this could also be considered as speculative since you are not taking delivery.
But if your broker like Zerodha takes delivery of shares in ur demat and then sells it, it can be considered non-speculative. You can even carry forward this loss. HI Nithin, I have salary income of Rs. I have life insurance of Rs.
If I show loss, will I require to be audited. Sir, I am pensioner having pension income Rs. Kindly advice whether i Audit is required in this case ii ITR-4 can be filled. Dear Nitin, The entire Varsity concept and execution is extremely helpful. Brilliant initiative — thanks for this. God bless you and your team! Does she have to file income tax return if total turnover is less than 1 crore? Does she have to file income tax return if total turnover is more than 1 crore?
Does she have to get the books audit? Yes, best to file ITR4. IT department is sending notices if there is any trading happening and not filing ITR. Since here salary is not in tax bracket and no taxes to pay, no need of audit. She did get a notice for Day trading has to be shown under speculative business income on ITR4, short term trading yeah can be as capital gains. Please help me understand. Thanks for very fast reply.
Tax slab rate for 2. Sir, You are doing a great job. I had given money to my wife. And she has used most of it in share trading and incurred loss. Can show it as loan and file loss in her return or better to show as income from other source and file return accordingly.
Yep, you can show the money given to your wife as a loan, she can show the losses in her ITR. She can carry forward the losses as well. Sir, I have done lot of deliveries, so which head mention it in business income or capital gain? Sir, i am filing ITR 4 as I am an active trader. I annual income from salary is 12 lacs. No, long term capital gain is exempt from taxes. My turnover in intraday trading is less than 1 crore, and i have a loss of rs in trading, do in need to audit or maintain a book of account?
If your total income is over Rs 2. Dear nitin ji, My income from salary is , lost heavily in intraday trading during Jan to the tune of 10 lakhs, what shall I declare in itr4, I will be filling for the first time, please guide. Thank you, can I carry forward the losses and how I will be taxed, brief indicative workout please. Along with the trading loss, you can add all expenses that you incurred while trading, and carry forward it to next 8 years.
This loss can be set off against gains in the future. Since you have a business loss, no taxes on this. You will have to pay taxes on your salary income though. Do go through the entire module. In last financial year , my total turnover is 1. If any audit required in my case or not? Which file I use for income tax return. Sir, My wife salary was just 1. Never filed her ITR. What should I do now as now I have to maintain books, he has shown income of more than 2.
He is not listening. Should I file my return again in ITR4. Ideally you should have filed using ITR4 itself. But you are not evading any taxes, so you should be okay. Check out the chapter on ITR forms. Thanks for the prompt reply. Why no audit as gross income is more than 2. Pl sir this last query. Check out about ITR4S in this post. Suggest you to go through the entire module once.
Yeah, you will need to use ITR4 technically and get it audited. But maintaining books and all is quite simple really. How to calculate profit and turnover in the following cases. Now the questions are … 1. Will the three days back released govt. If this is acceptable I can save a lot really. Would you please give a detailed answer to this please….
Technically you could use ITR4S and save quite a bit of taxes. But this is a grey area, a loophole of sorts. Best to consult a CA. THis is not three days back, this option has always been there. I am a trader. I am also a zerodha customer. I shifted from other account. Last year i loss 3 laks. How to file the returns. I am salaried employee.
Please advise me how to file incometax. I have a net profit of 1. You will have to pay tax as per IT slabs on your Rs 1. Pls do revert back and help me out. Do intraday share traders need to register for and pay Profession Tax in the state they reside in?
But if he were, then yeah he needs to be paying advance tax on your behalf. In case if they pay the advance tax, should I be getting a TDS certificate of the same, well before the due date for advance tax? If i have a loss in intraday trading then, 1 is it necessary to audit it?
If total income is less than tax limit, no need for audit. I am government employee. Is it offence in trading of securities in future and options by government employee by any rule? If you have carried forward from previous year, you have to pay advance tax only after setting off losses with profits. Pujah, whatever you incur when trading can be shown as expense.
Turnover is just for calculation purposes for if you need an audit or no, no need to put it on ITR4. I have a loss of almost in AY , while paying Advance Tax for AY , should i deduct this amount from the Advance Tax Payable to arrive at advance tax payable amount? I had a turnover of 85lacs And loss in fno is 8 lacs Is audit required? Also if you could guide me where will the positive and negative turnover come in itr4 Specific line number please and the schedule name.
Audit required if you have other income on which tax has to be paid. Positive turnover in receipts, negative turnover in sales.
We have also started this http: Hi nithin If you could tell me where and which line in itr4 It would be helpful Thanks. Thanks for a great write up. If i have an amount of Rs 60, as interest from my savings account. Then what will be the loss carried forward. So will my loss carry forward be Rs 40, or Rs 50, My wife is house wife with no income. These are derivative products; which means you do not have any ownership in the underlying asset at no point do you own the share in question, for instance.
In fact, there are only two possible outcomes once the option expires: HMRC will almost always regard this as a form of gambling: Cases that have gone before the courts help to shed light on this. A more recent case Hakki v Secretary of State for Work and Pensions  EWCA Civ concerned a professional poker player who made a living through his winnings and who was facing a child maintenance payment order from the Child Support Agency. The Court of Appeal once again confirmed the general principle that gambling is not a trade.
So even if your only source of income is from binary options profits, it seems unlikely at present that profits would be deemed liable for tax.
But do not rule it out completely. The answer, in the majority of cases, is likely to be no as it is not classed as income for tax purposes.
But as ever with tax, it all depends on the context.