A Zerodha Trader has to file ITR based on the income they have from trading in equity, mutual funds, or derivatives. Zerodha provides a Tax P&L Report to all its traders aggregating the trading transactions done during the financial year. Using the Tax P&L Report, the trader can determine which ITR Form to file and also determine the applicability of the Tax Audit. If you are a Zerodha Trader and looking to file your ITR (Income Tax Return), then you can refer to the detailed process below.
Zerodha
Trader
Zerodha
Tax P&L Statement Tabs in Zerodha Explained
Therefore, as you can see from your image, your Tax P&L Statement is broken down into 7 different sections:
- Equity Tax P&L Statement – consists of the following categories:
- Equity Intraday – Trading in the stock cash market on a same-day basis. Thus, it would mean buying and selling on the same day itself.
- Equity Delivery – Buying shares and holding them for a certain period of time is called delivery based trading. Hence, the shares you bought will be transferred in your Demat account. This consists of the following 2 sections:
- Long term trades
- Short term trades
- Mutual Funds Tax P&L Statement
- Debt Funds – Mutual funds that invest in fixed income securities for example bonds and treasury bills
- Equity Mutual Funds – An equity fund is a mutual fund that invests principally in equity stocks example listed banks’ shares, FMCG, etc.
- Futures and Options Tax P&L Statement
- Equity Future – An agreement to buy or sell a specified quantity of underlying equity share for a future date at a price agreed upon between the buyer and seller
- Equity Options – In essence, equity options work in an extremely similar way to other options, such as forex or commodities. They offer the trader the right, but not the obligation, to purchase (or sell) a set amount of shares at a certain level (referred to as the ‘strike price’) before it expires. To buy an option, traders will pay a premium
- Commodity Tax P&L Statement
- Commodities Futures – Agreements to buy or sell a raw material at a specific date in the future at a particular price
- Commodities Options – Contract permitting the option buyer the right, without obligation, to buy or sell an underlying asset in the form of a commodity, such as precious metals, oil, or agricultural products, at a designated price until a designated date
- Currency Tax P&L Statement
- Currency Futures – Futures contract to exchange one currency for another at a specified date in the future at a price that is fixed on the purchase date; see Foreign exchange derivative
- Currency Options – Currency option is a contract that gives the buyer the right, but not the obligation, to buy or sell a certain currency at a specified exchange rate on or before a specified date
- Other Credits and Debits
- This generally includes all charges and credits which are directly not associated with your trading activity
- Equity Dividends Breakdown
- A dividend is a token reward paid to the shareholders for their investment in a company’s equity. And therefore, it usually originates from the company’s net profits.
Explanation of Sub-Tabs of the Zerodha Tax P&L report
- Realized Proft Breakdown
- Realized profit is the profit that comes from a completed trade; in other words, a trade that has been exited. Realized profit is generally already deposited into the trader’s trading account. And it can be generally withdrawn from their trading account to a bank account.
- Turnover Breakdown (Scripwise)
- The definition of turnover is different for each type of trading transaction. Hence, in the case of Intraday Trading, the Turnover equals Absolute Profit. And, Absolute Profit is the sum of all positive and negative differences from all the transactions.
- Other Debits/Credits including Service Tax
- The other debits and credits include all charges and credits which are directly not associated with your trading activity. For example: some of the credits and debits can be explained as DP Charges, payment gateway charges, etc.
- Account Head
- Account head is generally a name under which particular types of transactions are recorded.
- Short Term Trades
- Short-term trading refers to trading strategies in the stock market or futures market in which the time duration between entry and exit is within a range of few hours to a few weeks. Hence it is referred to at as short term.
Which ITR Form is Applicable to Zerodha?
To file an ITR is an annual process for Zerodha Traders. Based on the income situation, the taxpayer needs to file the prescribed ITR Form. The taxpayer should report incomes, calculate and pay taxes, claim TDS Credits and request refund for the overpayment of taxes while filing their ITR. The income tax department has also notified ITR Forms based on different income situations. To know which ITR Form is applicable to you, you can use the below calculator.
Taxpayers having income from trading need to file ITR-2 or ITR-3 and this is based on the nature of income from trading. In the case of Capital Gains Income, file ITR-2 and in case of Business Income, file ITR-3.
Due Date to file ITR for Zerodha
Income Tax Return(ITR) filing is done after the completion of a financial year. So, the due dates for ITR filing are as per section 139 of the income tax act. Due dates for different category of taxpayers are as follows:
|
Category |
Due Date |
|
Individuals to whom audit is not applicable |
31st July of the Assessment Year |
|
Companies |
30th September of the Assessment Year |
|
Individuals to whom audit is applicable |
30th September of the Assessment Year |
|
Individuals/ HUF who are partners in a firm and firm’s accounts are subject to audit |
30th September of the Assessment Year |
Additionally: the above due dates can be extended by the IT Department via order.
Tax Audit Applicability for Zerodha
Stock Traders generally trade in shares, securities, commodities and currency through online trading platforms. For Income Tax on trading, Equity Intraday, Equity F&O, Commodity Trading and Currency Trading is considered as a Business Income. Thus, it is important to determine the applicability of Tax Audit as per the provisions of Income Tax Act.
The limit for turnover under Section 44AB is Rs. 1 Cr. Under Budget 2020, the turnover limit under Sec 44AB has been increased from Rs. 1 Cr to Rs. 5 Cr if the following conditions are satisfied:
- Cash Payments do not exceed 5% of the Total Payments in the financial year
AND - Cash Receipts do not exceed 5% of the Total Receipts in the financial year
Calculation of Trading Turnover for Zerodha
Any person having income from trading in shares and securities should report it as income from business and profession. Thus, to determine the applicability of Tax Audit as per the Income Tax Act, we should calculate Trading Turnover for such income. It is important to note that tax liability does not depend on Turnover. The trading turnover should be calculated only when the share trading income is considered as a business income and not when it is considered as capital gains income.
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FAQs
You can download the Tax P&L Statement from the Zerodha Console after logging into the portal and navigating through Reports > Tax P&L from the dashboard. Zerodha provides its traders with the option of downloading the Tax P&L Statement for all the segments.
No. Contract Turnover is the sum of the purchase value and sales value. It is not applicable for income tax purposes. Trading Turnover or Business Turnover is the absolute profit that is: sum of positive and negative differences. This turnover is to determine the applicability of the tax audit and the applicable ITR form. Therefore, Trading Turnover is different from Contract Turnover.
Hey @TeamQuicko
Thanks for the blog! Just one quick question - Why do we have to report a quarterly breakdown of Dividend Income under IFOS?
Thank you!
Hey @TanyaChopra
This quarterly breakdown of Dividend Income under IFOS will help to calculate and determine penalty u/s 234C for the delay in payment of Advance Tax.
Hope this helps!
I had received dividend recently but I had noticed that TDS had been deducted. any idea as to why has it happened and is there a way I can claim this TDS?
Hey @HarshitShah
After the introduction of Budget 2020, dividend income is now taxable in the hands of the shareholder; and is also subject to TDS at 10% in excess of INR 5000 u/s 194 & 194K. Foreign Dividend is taxable at slab rates. TDS is not applicable to such dividends. The taxpayer should report such income under the head IFOS in the ITR filed on the Income Tax Website.
Hope this helps!
Hey @HarishMehta
Yes, dividend income is now taxable from FY 2021-22 onwards and it has to be reported under the head of IFOS.
You can read more about it here:
Hi @Maulik_Padh,
You need to pay Income tax on the net taxable income, i.e. after subtracting deductions, expenses, etc.
If the net taxable income is negative i.e. if there is loss, you can carry it forward when filing the ITR
Here are some of the articles which might help
Hi @ameyj
The amount of TDS deducted shall reflect in your Form 26AS only and it will also reflect the name of the deductor.
Using the name of the deductor you can find out on which share you have received the dividend and you can also cross-check the same in your bank statement.
Yes, you are right, TDS is to be deducted when the dividend paid exceeds 5000 INR in a financial year. However, the 5,000 INR limit pertains to all the dividends an individual gets in a year, or the total dividend per shareholder that a company pays out in a year, is left to interpretation, and hence registrars and share transfer agents (RTA) are not taking any chances and are deducting TDS even on small amounts.
Hope this helps
Hi @ameyj
You can submit a grievance on Income Tax Portal mentioning the issue and also attach the 26AS.
The other option is to leave it as it is and clarify it when the tax department sends the notice.
Hi @TeamQuicko
Consider that I have 10 shares each of 10 different Indian companies. Each of the 10 companies are declaring a dividend of INR 100 before the FY ends. Now I will be recieving 1000 as dividend from each company, thereby a total of 10,000.
The 5,000 dividend limit, is it applicable to each company / total dividend recieved by me in a year. If it is applicable to each company, then I would not attract TDS of 10% for dividend.
Also pl clarify, how would the company B know that I have got shares of Company A,C,D,E so on…
@Saad_C @Laxmi_Navlani @Divya_Singhvi @Kaushal_Soni @AkashJhaveri can you help with this?