What Expenses Can a Trader claim in Income Tax Return?

author portrait

Sakshi Shah

F&O Trading
income from trading
Income Tax
ITR-3

A trader can claim all the expenses directly connected to the trading income as a deductible. The expenses incurred should be wholly and exclusively in relation to business and professional income. Therefore, these expenses include business expenses such as:

ITR for F&O Traders
CA Assisted Income Tax Return filing for Individuals and HUFs having income from F&O/ Derivatives Trading.
[Rated 4.8 stars by customers like you]
ITR for F&O Traders
CA Assisted Income Tax Return filing for Individuals and HUFs having income from F&O/ Derivatives Trading.
[Rated 4.8 stars by customers like you]

Can I claim Tax paid as Business Expense?

Have any questions ?
Have any queries for trading income, ask us on TaxQnA and we will answer it in the simplest way!
Have any questions ?
Have any queries for trading income, ask us on TaxQnA and we will answer it in the simplest way!

Note: Trader having income they classify Capital Gains cannot claim any trading expense except Brokerage. This can happen in the case of traders investing in equity delivery and mutual funds.

Confused on how to classify income from sale of shares?
Read here to understand if this income classifies as Business Income or Capital gains!
Read More
Confused on how to classify income from sale of shares?
Read here to understand if this income classifies as Business Income or Capital gains!
Read More

Expenses which a Trader cannot claim in Income Tax Return

Points to remember for Trader who claims Business Expenses

A trader having Business Income should claim valid business expenses in the P&L Statement. They also need to prepare financial statements and file ITR-3. The trader also needs to calculate the trading T/O and determine the applicability of Tax Audit to file ITR.

Check Tax Audit Applicability u/s 44AB
Check Income Tax Audit applicability u/s 44AB to file Tax Audit Report Form 3CB - 3CD with your Income Tax Return.
Explore
Check Tax Audit Applicability u/s 44AB
Check Income Tax Audit applicability u/s 44AB to file Tax Audit Report Form 3CB - 3CD with your Income Tax Return.
Explore
Import Your Trades
File ITR Online

India’s fastest growing Tax Filing Platform

[Rated 4.8 stars by customers like you]

Import Your Trades

File ITR Online

India’s fastest growing Tax Filing Platform

[Rated 4.8 stars by customers like you]

FAQs

Can I claim GST paid as a business expense?

CGST, SGST, IGST paid on expenses is deductible as a valid business expense only if is the business has no GST Registration. If the business is registered under GST, they can claim the credit of Input GST against Output GST. Hence, they are not allowed double deductions. Thus, they cannot claim GST paid as a business expense.

  • Jay says:

    Hi

    Say my expenses are Rs. 2,00,000 and income is also Rs. 2,00,000. Assuming all expenses are valid as per above description.

    Is it possible to claim 100% deduction on my income ( 2,00,000 expenses cancelling out 2,00,000, income)?

    • Sakshi Shah says:

      Yes. If all the expenses are related to business income and you have valid proofs, you can claim all the expenses against the business income or loss.

  • S K Agrawal says:

    If I am a salaried person. Salary is my main source of income and I buy and sell Shares in the year. From this share trading I earn some profit / loss. For carrying out this Shares business I have taken internet wifi connection at home and on my mobile (a separate plan). Can I deduct wifi and mobile net charges as Expenditures for doing Shares business, obviously mobile net data is used for social media purposes also. Please clarify.

    • Anushka Shah says:

      Trading in Equity Shares can be treated as Capital Gains or Business Income, If you treat it as Capital Gains, you cannot claim the wifi and mobile expenses. However, if you treat it as a business income, you can claim such expenses since they are directly related to the trading activity. Further, if such expense has been incurred for personal purpose, you should claim only that proportion which is actually incurred on trading activity. Feel free to write to us at help@quicko.com

  • Vishal says:

    If i am trying to fill ITR 3 determines by you on my own, it takes more than 6 hours but do not proceed and keep saying we will start E – Filling soon.
    I am filling it using broker Zerodha.

    • Anushka Shah says:

      Hey Vishal, Our development team is working on the changes in the Quicko product as per the ITR utility released by the Income Tax Department. Once the product is live, you can e-file your tax return. If you could share your email id, we will notify you once the product is ready. Meanwhile, if you need help of an expert to prepare and file your tax return, you can view our plans here – ITR Plans

  • Amit Patnaik says:

    Dear Ms. Shah,

    I am confused, and I was hoping you could offer some advise.

    As per Quicko’s ‘Import trade from Zerodha’ utility,I have incurred losses for STCG, LGCG and Business income (day-trading).

    Am I liable for filing a return via ITR-3 even if I have not made any profits? Can I add-on by business expenses to my business income (day-trading losses) and offset it against it taxes on my salaried income? Or since I made no profits, I cannot offset any expenses for this AY and can carry the losses as well expenses over to the next AY?

    Looking forward to hearing back,

    Best regards,

    • Anushka Shah says:

      Hello Amit,
      Income from trading in equity delivery is a Capital Gains Income. Income from trading in intraday and F&O is a non-speculative business income. Such income must be reported in ITR-3 even if there are no profits. Further, if there are losses, you can claim such loss, carry forward them to future years and adjust against future incomes to save taxes. You can claim the expenses against profit or losses. The total loss after claiming expenses can be carried forward to future years. Such loss cannot be set off against salary income.

  • Sagar Grover says:

    The part which is highlighted in yellow whats the significance of that.If I have paid Rs 2500 to fill my return and 10000 for audit,,can that really be deducted as an expense, my previous ca told me i cant

    • Anushka Shah says:

      Hey Sagar,
      Any expense directly related to trading activity can be claimed as a valid business expense. Thus, you can claim ITR filing fees and audit fees as valid business expenses against your business income from trading.

  • rakesh says:

    iam salaried, can i take loan for trading purpose and can show interest paid on loan as expenses??

    • Maharshi Shah says:

      Yes, you need to report the loan as a liability in the balance sheet and the interest paid on the loan can be claimed as a valid business expense.

  • Pratik Prasad Gupta says:

    I am salaried person and I did Trading to generate some extra income but have huge losess.

    Now I have some short term capital loss , Speculative loss (Intraday) and Non Speculative loss (F&O). My all over turnover is less then 1 crore so shall i need audit ?

    Please also tell me shall i deduct expenses related to exchange charges, sebi charges, Turnover Charged, Gst and brokerage from Short term loss if treated as capital gain or loss ?

    • Anushka Shah says:

      Hey Pratik,
      Tax Audit Applicability- If the total trading turnover is less than INR 1 Cr, profits are less than 6% of turnover, income is more than basic exemption limit and you have opted out of presumptive taxation in any of the previous 5 years after opting in for it, Tax Audit is applicable as per Section 44AB.

      Expenses for Capital Gains- Yes. You can claim all the expenses except STT for Capital Gains Income.

  • deepak says:

    I have availed a home loan for residential property and after acquiring the property I use it for my business purpose in a legal manner (after paying conversion charges to authorities) and obtaining proper business licence for the premises. Now, is it possible to treat homeloan interest as business expense because interest is being paid on aquisition cost of business premises. Please clarify

    • Anushka Shah says:

      Hey Deepak,
      Yes. You can claim the Interest as a Business Expense. However, if the Income Tax Department issues a tax notice to disallow such interest expense, you must submit relevant proofs to justify that such property was used for business purpose.

  • Vishesh says:

    Helle
    My intrady loss 2lac and delivery based short term gain 5lac..
    Other income zero audit required??plz reply here

  • Abhishek Shah says:

    I trade fno futures, suppose my income is 10 lacs for the financial year. My expenses add to 2 lacs. So now,
    1. Do I have to pay taxes on 10-2= 8 lacs?
    2. Or 30% of 10 lacs = 3 lacs-2lacs(expenses)= 1 lac

    • Aakash Lalchandani says:

      Hey Abhishek,

      In this case, you will have to pay taxes on 10 lacs(F&Oincome)-2 lacs(F&Oexpenses)=8 lacs. Hope this helps 🙂

  • mehul Parmar says:

    suppose my trading income (business income) is more than 1,50,000₹.so I have to maintain my books of accounts. but my turnover is less than 5cr and my profit>6% of turnover. so I don’t need to audit my financial statements. am I right ?

    • Maharshi Shah says:

      Hello Mehul, the rule states that, when you are having a trading turnover less up to 2 Cr, if you are having any profits or losses less than 6% of your total trading turnover and are having any other income more than the basic exemption limit, i.e, more than 2.5L, then you have to go through tax audit.

Leave a Reply

Your email address will not be published. Required fields are marked *

Close Bitnami banner
Bitnami