CAMS : Services, Features & Consolidated CAMS Statement

What is CAMS?

Computer Age Management Services (CAMS) is a SEBI agency under the R&T (Registrar and Transfer) category. It is a platform providing with technology-enabled services and processing related solutions to mutual fund houses as well as investors. It facilitates in building up an interactive and user-interactive delivery model to investors.

What does CAMS do?

Computer Age Management Services is under the collective ownership of NSE Investment Ltd, HDFC Group, Warburg Pincus LLC, and Acsys Investment Private Ltd to provide a variety of services. Below are a few services which it provides:

  • KYC verification & validation
  • System integration with bank
  • Online transaction through MY CAMS app
  • Redemption & payout settlements
  • Customer service
  • Record Management Services
  • White label Call center
  • Brokerage computation & payout
  • Data management
  • Processing of transactions
ITR for Capital Gains from Investment in Stocks
CA Assisted Income Tax Return filing for Individuals and HUFs having long term and short term Capital Gains / Loss from investing.
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ITR for Capital Gains from Investment in Stocks
CA Assisted Income Tax Return filing for Individuals and HUFs having long term and short term Capital Gains / Loss from investing.
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CAMS has myCAMS an online application for the convenience of the investors. Using this, you can make a single Login User ID. However, the validity of the login credentials you generate will have only 48 hours. This is because the information you give is confidential and sensitive. Therefore, if you delay beyond two days, you will have to start the whole process again.

How does CAMSonline work?

myCAMS is an online portal of CAMS. Here investors can easily retrieve their mutual fund statements by providing their PAN and registered email id. The user needs to access the ‘Mailback Services’ in order to get the statements.

Investors can find the details of NAV & the fees by scheme name in the app. The realized gain statements show data about long-term and short-term capital gain. Further, the Consolidated Account Statement shows details of all the mutual fund holdings of the person which are invested over multiple mutual fund houses, over a given period of time. It is a very popular mechanism to keep a track record of all the investments. However, they do not have any legal authorization to offer mutual fund recommendations or even distribute funds.

Features of CAMS

  • QUALITY: CAMS is an ISO 9001:2008 certified establishment. It is generally famous for its stringent quality check policies. Therefore with the help of six sigma levels of quality, they set up 50 lakh accounts annually.
  • Risk Management: CAMSonline follows a self-determining risk management method. For example, it regularly manages every possible operative risk with customized software to steady outcomes.
  • Access: CAMS has more than 250 locations with expanding plans. Their high reach has helped manufacturers to reduce expenditures. Which further eliminates the need to spend on in-house infrastructure. Thus you can visit CAMS service centers for infrastructure installation and maintenance service post the purchase.
  • Confidentiality: Customer info at CAMS is highly protected due to the sensitive nature and a matter of security. In order to ensure the security of customer’s information, the data is used only to serve customers. Further the access is restricted to only the rightful owner.
  • Technology Driven: CAMS promotes locally developed technology solutions. That is on par with international standards leading to fast distribution and adaptability. In addition, IT infrastructure of CAMS has the capability to support over 1 crore transactions per month.
  • E-KYC Facility: CAMS provides E-KYC to the investors online and via mobile app. It is an instant and cost-free facility. Further, this provides the investor to complete their KYC online without any hassle.
  • Portfolio Mapping: Under CAMS service all the mutual funds that the investor has invested in are mapped to your investment portfolio. Therefore it is important to provide the same email ID for all your investments to ensure correct mapping.
  • Single User-Id: Once you register yourself under CAMS online service, you can use the registeration details all your future mutual fund transactions.

CAMS Online Registration Process

Registration through CAMS online

  • Click on ‘New User Registration’ to create a new user.
  • In the ‘New User Registration screen’, enter the registered email id and captcha. Further, click on Submit.
  • On successful completion of the registration process, a confirmation box is displayed on the screen.
  • New User Registration confirmation mail is sent to the user registered email id, along with the login credentials.
  • You can use this user id and password for the initial login in myCAMS ‘User Login’ screen.
  • Furthermore, when you log in for the first time, it will navigate to the ‘Change Password’. You can set your password.
  • Users may now re-login to myCAMS with the user id as the registered email id and the new set password.

Registration through myCAMS App

  • Download myCAMS mobile app from Google Play Store or iTunes app store and install the same.
  • Click on Register Now.
  • Enter your registered email id in the ‘New Registration screen’ .
  • Click on Submit.
  • You will receive a confirmation email along with the login password.
  • In the login screen of myCAMS mobile app, enter your registered email id as User ID and the login password received.
  • Click on ‘LOGIN’.
  • Change your password as per the instructions before proceeding.
  • Re-login to explore myCAMS services.
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Process to get Consolidated Account Statement Online

In order to download your account statements from Asset Management Companies (AMCs) for your mutual funds investment, follow the below given steps:

  1. Visit CAMsonline website.

    Click on “Investor Services” on the home page of Camsonline website.

  2. Click on CAMS

    Consolidated Account Statement – CAMS + KFintech + FTAMIL

  3. Select the Statement Type, Date, Folio Listing, Email ID, PAN (Optional)

    Now enter the Password, Verification code, and click on “Submit”.

  4. You will receive a mail from Camsonline.

    In order to open and view the file, you need to provide the password which you had previously created.

FAQs

What should I do if some of my folios are missing in myCAMS user login portfolio valuation?

If in case any of your folios missing in the myCAMS login, please ensure that your email id is updated in all your Mutual Fund investments serviced by CAMS.

What is a Consolidated Account statement (CAS)?

Account Statement is a single account statement that consolidates financial transactions. Further, It consists of all the mutual fund holdings of the person which invested over multiple mutual fund houses.

What happens if there are no financial transactions in a particular folio for the month?

CAS will include only the folios with financial transactions and hence these folios will not reflect in the statement.

Income Tax on Trading

Stock Trading means buying and selling financial instruments such as shares, mutual funds, commodity, currency, bonds, debentures, etc. An Investor does the buying and selling of stocks and securities with the intention of investing and building an investment portfolio. A Trader does the buying and selling of stocks and securities with an intention to earn quick profits due to fluctuations in prices. Trading Income comprises of equity delivery, equity intraday, equity F&O, commodity trading, currency trading, etc. While equity delivery trading is usually considered to be an Income from Capital Gains, all other forms of trading is considered to be Business Income as per Income Tax.

Read the provisions of income tax on trading income – calculate trading turnover, the applicability of tax audit, tax rates, applicable ITR Form, Due Date to file ITR, set-off and carry forward loss, calculation of advance tax, and tax loss harvesting.

Calculate Trading Turnover

When the trading income is treated as business income, it is important to calculate the trading turnover to determine the applicability of the Tax Audit as per the Income Tax Act.

Type of Trading Calculation of Trading Turnover
Equity Intraday Trading Absolute Profit
Equity Futures, Commodity Futures, Currency Futures Absolute Profit
Equity Options, Commodity Options, Currency Options Absolute Profit + Premium on Sale of Options
Equity Delivery Trading & Mutual Fund Trading Sales Value

Tax Audit Applicability

The applicability of the Tax Audit is determined on the basis of Trading Turnover and the Profit or Loss on it. In the case of a stock trader, a Tax Audit is applicable in the following situations:

  • If trading turnover is up to INR 1 Cr, the taxpayer has incurred loss or profit is less than 6% of Trading Turnover and total income is more than the basic exemption limit.
  • If trading turnover is more than INR 1 Cr and up to INR 2 Cr and the taxpayer has incurred loss or the profit is less than 6% of Trading Turnover.
  • If trading turnover is more than INR 1 Cr and up to INR 2 Cr, profit is more than or equal to 6% of Trading Turnover, and the taxpayer does not opt for the Presumptive Taxation Scheme under Sec 44AD
  • Trading Turnover is more than INR 2 Cr.
Check Tax Audit Applicability u/s 44AB
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Check Tax Audit Applicability u/s 44AB
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Tax Rates for Trading Income

Business Income is taxable at slab rates as per the Income Tax Act.

Total Income Tax Rate
Up to INR 2,50,000 NIL
INR 2,50,000 to 5,00,000 5%
INR 5,00,000 to INR 10,00,000 20%
Above INR 10,00,000 30%

Note: Surcharge is liable for the total income as per the prescribed surcharge slab rates. Cess is liable at 4% on (basic tax + surcharge).

ITR Form for Trader or Investor

Traders need to choose their ITR form based on the instruments they have traded in, this could be Equity, Mutual Funds, Intraday, Futures & Options, etc. The income tax department has notified ITR Form based on different income situations. Here is the defined ITR Form for Trader or Investor.

  • A trader having Income from Capital Gains should file ITR-2.
  • A trader having Business Income should file ITR-3.
  • Trader who has opted for the Presumptive Taxation Scheme should file ITR-4 on Income Tax Website.
Check which ITR Form to file?
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Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.
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Due Date for ITR for Trading Income

  • Up to FY 2019-20
    • 31st July – for traders to whom Tax Audit is not applicable
    • 30th September – for traders to whom Tax Audit is applicable
  • FY 2020-21 Onwards
    • 31st July – for traders to whom Tax Audit is not applicable
    • 31st October – for traders to whom Tax Audit is applicable
FY 2019-20: Due Date to file Income Tax Return for in case tax audit is not applicable and Tax audit report is 31st December 2020. If Tax audit is applicable you can file your ITR by 31st January 2021
Tip
FY 2019-20: Due Date to file Income Tax Return for in case tax audit is not applicable and Tax audit report is 31st December 2020. If Tax audit is applicable you can file your ITR by 31st January 2021

Set Off and Carry Forward Loss – Income from Trading

  • Short Term Capital Loss can be set off against Long Term Capital Gain (LTCG) and Short Term Capital Gain (STCG). A trader can carry forward the remaining loss for 8 years and set off against future STCG and LTCG
  • Long Term Capital Loss can be set off against Long Term Capital Gain (LTCG) only. A trader can carry forward the remaining loss for 8 years and set off against future LTCG.
  • Speculative Business Loss can be set off against Speculative Business Income only. A trader can carry forward the remaining loss for 4 years and set off against future Speculative Business Income only.
  • Non-Speculative Business Loss can be set off against any income except Salary in the current year. A trader can carry forward the remaining loss for 8 years and set off against Business Income in future years.

Calculate Advance Tax on Business Income

If the tax liability of the trader is expected to exceed Rs. 10,000, then they must calculate and pay Advance Tax. This is so as to avoid Interest under Section 234B and 234C. Advance Tax is to be paid in quarterly installments on 15th June, 15th September, 15th December, and 15th March. The trader should also determine the taxable income for each quarter, calculate tax liability, and make payment of Advance Tax online.

Tax Loss Harvesting – Income from Capital Gains

Tax Loss Harvesting is the practice of realizing the unrealized loss through the sale of shares. And therefore, adjusting it with the realized profits to reduce the tax liability. Before opting for Tax Loss Harvesting, the trader should be aware of the rules to set off loss as per the Income Tax Act.

If you are a Trader or Investor having income from trading in equity delivery, intraday, or F&O, you can log in to Quicko to file your Income Tax Return on your own. You can also go for CA Assisted Plans to take the help of an expert to prepare and file your Income Tax Return.

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FAQs

I have incurred loss from F&O / Intraday trading. Is Tax Audit by Chartered Accountant mandatory?

Tax Audit as per Income Tax Act is mandatory if the profit is less than 6% of Trading Turnover. Since you have incurred a loss, Tax Audit under Section 44AB is mandatory. You must appoint a practicing Chartered Accountant to audit your books of accounts.

I am a trader having income from Intraday / F&O Trading. Am I liable to pay Advance Tax?

As per the Income Tax Act, an assessee whose total tax liability exceeds Rs. 10,000 should pay Advance Tax. Thus, if a trader’s total income tax liability exceeds Rs. 10,000, he/she should pay advance tax in 4 installments of the financial year. If the trader has opted for the Presumptive Taxation Scheme, he/she can pay advance tax for the entire financial year by 15th March.

I have earned profits from equity trading and F&O trading. How can I calculate the tax liability?

– Equity Delivery Trading is a Capital Gains Income. LTCG is taxed at 10% in excess of Rs. 1 lac. STCG is taxed at slab rates.
– Equity Intraday Trading is a Speculative Business Income and taxed at slab rates.
– F&O Trading is a Non-Speculative Business Income and taxed at slab rates.

Tax on Mutual Funds in India

What are Equity Mutual Funds?

If you have invested in Mutual Funds, you need to file your ITR and pay tax on this income. Trading in various types of mutual funds has become very easy due to the availability of online trading platforms. Under Income Tax, trading in mutual funds is classified as a Capital Gains Income.

  • Equity Mutual Funds – Equity oriented Mutual Funds are funds that invest in equity instruments. Types of equity mutual funds include large-cap funds, mid-cap funds, small-cap funds, ELSS (Equity Linked Savings Schemes), Index funds, etc.
  • Debt Mutual Funds – Debt Mutual Funds are funds that invest in fixed income securities like bonds, treasury bills, and other debt instruments. Types of debt mutual funds include liquid funds, short-term funds, income funds, hybrid funds, etc.
ITR for Capital Gains from Investment in Stocks
CA Assisted Income Tax Return filing for Individuals and HUFs having income from sale of securities.
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ITR for Capital Gains from Investment in Stocks
CA Assisted Income Tax Return filing for Individuals and HUFs having income from sale of securities.
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Income Heads for Tax on Equity Mutual Funds

Capital Gains on Mutual Funds

Equity Mutual Funds – Since these mutual funds invest in equity-oriented instruments, the treatment is the same as equity shares.

  • Long Term Capital Gain (LTCG): Any gain arising on the sale of equity mutual fund held for more than 12 months is considered as Long Term Capital Gain i.e. LTCG on mutual funds.
  • Short Term Capital Gain (STCG): Any gain arising on the sale of equity mutual fund held for less than 12 months is considered as Short Term Capital Gain i.e. STCG on mutual funds.

Other Income from Mutual Funds

  • Dividend Income from Equity Mutual Funds
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Capital Gains

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Types of Mutual Fund Schemes

  1. Based on the maturity period
    • Open-ended schemes: This scheme doesn’t have a fixed maturity period. Investors can buy and sell directly at any time in this scheme.
    • Closed-ended scheme: This scheme has a stipulated maturity period. In this scheme, the investor can directly invest at the time of the initial issue. Once they are listed on the stock exchange, the investor can buy and sell these units.
    • Interval scheme: this scheme has the combined advantage of open-ended as well as close-ended schemes. Investors can trade at predetermined intervals.
  2. Based on investment objectives
    • Growth Schemes: Most importantly the aim of this scheme is to provide capital appreciation. These schemes generally invest in equities and are ready to bear short-term loss to gain in the long run.
    • Income Schemes: These schemes provide a steady flow of income to its investors. It will generally tend to invest in bonds and stocks.
    • Balanced Schemes: These schemes aim to provide the combined benefits of Growth schemes and income schemes. They invest in shares and fixed income securities in the proportion indicated in their offer documents.
    • Money Market Schemes: This is suitable for investors looking to utilize their surplus funds for a short period of time while searching for better options. These schemes invest in short-term debt instruments and try to provide reasonable returns for the investors.
  3. Other schemes
    • Tax saving scheme: These schemes offer tax benefits to investors. The government offers tax incentives for investment in specific instruments. For example, Equity Linked Savings Schemes (ELSS) and Pension Schemes.
    • Sector Funds: Sector funds are for investors with the main objective to invest only in the equity of the companies existing in a specific sector, as mentioned in the fund’s offer document. For example, a technology fund will invest in software companies like Infosys Technologies, Satyam Computers, etc.
    • Index Funds: A fund that tries and works on the performance of a specific Index as BSE Sensex or NSE 50.

Tax on Equity Mutual Fund

Taxability of Mutual Funds would depend upon the nature of income. Capital Gains on mutual funds is taxable as per the table below.

Type of Mutual Fund Period of Holding Long Term Capital Gain Short Term Capital Gain
Equity Mutual Fund 12 months 10% in excess of INR 1,00,000 under Section 112A 15% under Sec 111A

Other Income on sale of mutual funds is taxable in the following manner:

  • Dividend Income – Exempt up to FY 2019-20. Taxable at slab rates FY 2020-21 onwards.

ITR Form, Due Date and Tax Audit Applicability for Investors

  • ITR Form: Trader should file ITR-2 (ITR for Capital Gains Income) on Income Tax Website if income is treated as Capital Gains.
  • Due Date
    • Up to FY 2019-20
      31st July – for traders to whom Tax Audit is not applicable
      30th September – for traders to whom Tax Audit is applicable
    • FY 2020-21 Onwards
      31st July – for traders to whom Tax Audit is not applicable
      31st October – for traders to whom Tax Audit is applicable
FY 2019-20: Due Date to file Income Tax Return in case tax audit is not applicable is 31st Decemeber 2020 and when tax audit is applicable it is 31st January 2021
Tip
FY 2019-20: Due Date to file Income Tax Return in case tax audit is not applicable is 31st Decemeber 2020 and when tax audit is applicable it is 31st January 2021
  • Tax Audit: Since the income is treated as Capital Gains, the applicability of tax audit under Section 44AB need not be determined.
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Carry Forward Loss for Mutual Funds Trading

  • Short Term Capital Loss (STCL) can be set off against both Short Term Capital Gain (STCG) and Long Term Capital Gain (LTCG). Remaining loss can be carried forward for 8 years and set off against STCG and LTCG only.
  • Long Term Capital Loss (LTCL) can be set off against Long Term Capital Gain (LTCG) only. Remaining loss can be carried forward for 8 years and set off against LTCG only.

Example

Mr. Vijay is a salaried individual and has done mutual fund trading in FY 2020-21. His total salary income for a year is INR 8,70,000. And has Short Term Capital Loss of INR 30,000 from sale of equity shares and Long Term Capital Gain of INR 2,50,000 from Equity Mutual Funds. Dividend Income of INR 50,000 in FY 2020-21.

Now in the above example, Vijay needs to file ITR-2 for FY 2019-20. And his total income and tax liability will be as follows:

Particulars Amount (INR) Amount (INR)
Salary Income   8,70,000
Capital Gains    
Short Term Capital Loss 30,000  
Long Term Capital Gain 2,50,000  
Less: Exemption u/s 112A (1,00,000)  
Taxable Long Term Capital Gain 1,50,000  
Total Capital Gains after set-off of losses (taxed @10%)   1,20,000
Income from Other Sources    
Dividend Income   50,000
Total Taxable Income   10,40,000
Tax at slab rate 96,500  
Tax at special rate 12,000  
Total Income Tax   1,08,500
Health & Education Cess @4%   4,340
Total Tax Liability   1,12,840
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FAQs

How do I report income from trading in Mutual Funds in the Income Tax Return i.e. ITR?

A trader should file ITR-2 and report income from trading in Mutual Funds as Capital Gains.
– Equity Mutual Funds – Tax on LTCG is 10% in excess of INR 1 lac and tax on STCG is 15%.
– Debt Mutual Funds – Tax on LTCG is 20% with indexation and tax on STCG is as per slab rates.
The trader can set off LTCL with LTCG and STCL with both STCG and LTCG. The remaining loss can be carried forward for 8 years.

Is Dividend earned on Mutual Funds taxable?

Yes. The dividend income earned on Equity Mutual Funds which was earlier exempt is now a taxable income.
– Dividend up to FY 2019-20 – exempt
– Dividend FY 2020-21 onwards – taxable at slab rates. The amount in excess of INR 5,000 is liable for deduction of TDS under Sec 194K at 10%.

Is Mutual Fund taxable?

Yes. Income from Mutual Fund is taxable under the Income Tax Act.
(a) Capital Gain on Sale of Equity Mutual Funds – Tax on LTCG is 10% in excess of INR 1 lac and tax on STCG is 15%.
(b) Capital Gain on Sale of Debt Mutual Funds – Tax on LTCG is 20% with indexation and tax on STCG is as per slab rates
(c) Dividend Income on Mutual Funds – Taxable at slab rates from FY 2020-21
(d) Interest Income on Mutual Funds – Taxable at slab rates

What Expenses Can a Trader claim in Income Tax Return?

Expenses a Trader can Claim

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:

  • Rent Expense – If the trader has an office in rented premises, you can claim the rent paid as a valid expense. Hence, you must save the rent receipts and rent agreement for future references.
  • Insurance Expense – You can claim insurance expenses on assets used for business purposes.
  • Repairs & Maintenance – Expense paid for repairs of the laptop, furniture, or any other equipment for business purposes are deductible.
  • Office Supplies – Expense like stationery expense, printing expense, tea coffee expenses, etc. is a valid deductible.
  • Electricity Expense – Electricity Expense for office claimed as an expense is deductible. If you are working from home, you can claim electricity expenses proportionally.
  • Membership Fees– If you pay any membership fee for a trading platform or for a platform related to trading, it is deductible. For example, a trader can claim the membership fee paid for becoming a member of the trader’s club. However, if he pays membership fees of a golf club for his recreational purpose, it cannot be claimed
  • Legal & Professional Fees– Any fee paid to a professional for their services is deductible as a valid expense. This includes tax return filing, tax audit, legal advice, consultancy services, etc.
  • Books & Subscriptions – If a trader pays for subscriptions of magazines or purchased books related to trading, it is deductible.
  • Depreciation – It means claiming the cost of the asset as expense over the life of the asset. As per the IT Act, we cannot claim the cost of the asset as an expense; however, you can claim the depreciation on the asset as an expense. For example, You have purchased a high-end computer for Rs 10 lakhs. The depreciation rate is 60%. Hence, you can claim 6 lakhs as depreciation in the 1st year (10,00,000*60%). And can carry forward the remaining amount to next year.
  • Mobile & Internet Expense – Expense incurred to pay mobile bills, telephone bills and internet charges can be claimed. It is deductible if the expense if it is for business purpose.
  • Finance Costs – If you take a loan for your trading business, you can claim interest paid on such a loan as a deductible expense.
  • Trading Expenses – All charges and expenses paid for the purpose of trading are deductible. This includes Brokerage, Turnover Fees, Clearing Charges, Exchange Transaction Charges, STT, Stamp Duty, GST, etc.
  • Other Business Expenses – Any other expense that is directly related to your trading business can be claimed as a valid expense
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Can I claim Tax paid as Business Expense?

  • STTSecurities Transaction Tax is paid on trading in securities i.e. equity shares, equity mutual funds, ETFs, equity futures, equity options, etc. The trader can claim STT paid as a valid business expense if he/she reports such income as a business income
  • Stamp Duty – Stamp Duty is an expense on the transfer of securities. Therefore, the trader can claim Stamp Duty paid as a valid business expense if he/she reports such income as a business income
  • CTT – Commodities Transaction Tax is on trading in commodities. The trader can claim CTT paid as a valid business expense
  • Input GST – CGST, SGST, IGST is on trading expenses is deductible as a valid business expense. Only if is the trader has no GST registration. If the trader has registration under GST, they can claim the credit of Input GST against Output GST. Hence, they are not allowed double deductions.
  • Tax on Income – Tax paid on income such as Income Tax or tax paid on sales such as GST cannot be claimed as a business expense

Expenses which a Trader cannot claim in Income Tax Return

  • Personal Expenses – An expense incurred for personal purposes is not deductible.
  • Fines & Penalties – The non-compliance or delay in compliance attracts interest and penal consequences. Hence, interest, fine, late fee, penalty, etc. are not a valid deductible.
  • Tax – Any form of Tax paid on the income earned is not deductible as an expense. For example Income Tax, Advance Tax, GST etc
  • Cash Payment – If an expense has been paid in cash for an amount exceeding Rs. 20,000, it cannot be claimed as an expense. Additionally, there are exceptions to this mentioned under rule 6DD of the Indian Income Tax Act
  • TDS not deposited – If tax is not deducted at source or not deposited, then such expense is not deductible. These expenses include interest, commission, rent, royalty, professional or technical fees paid or payable to any person in India.

Points to remember for Trader who claims Business Expenses

  • The invoice should be in the name of the trader and the invoice date should fall in the relevant financial year
  • If a trader incurs an expense for both personal and business purpose, he/she should claim a reasonable portion towards business
  • The trader should preserve the bills, invoices, or any other proofs of the payments made. You need to submit proofs during the process of Tax Audit by a Chartered Accountant. If the Income Tax Department issues a notice, these proofs justify expenses claimed.
  • If a trader uses some specified services, he/she should deduct TDS as per the applicable TDS section. For example, Mr. X, a trader obtained the services of a professional CA for auditing his books of accounts and filing ITR. Mr. X should deduct TDS u/s 194J on making payment to the Chartered Accountant. He should deposit the TDS and file TDS Return Form 26Q
  • The trader should not pay expenses in cash. The cash payment made to a single person in a day should not exceed Rs. 10,000. Thus, pay expenses using modes other than cash
  • While calculating Income Tax on trading, the trader can claim deductions under chapter VI-A. This includes LIC premium (80C), medical insurance premium (80D), interest on an educational loan (80E), etc.
  • If the income from business or profession is more than Rs.1,50,000 or the total sales or gross receipts is more than Rs.25 lacs in any of the preceding 3 years, then you must maintain books of accounts which can help the Assessing Officer to calculate the taxable income as per the Income Tax Act
  • If a trader opts for Presumptive Scheme u/s 44AD, they cannot claim expenses. This is because they are not required to maintain books of accounts.

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.
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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
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Expenses that can be claimed in case of Sale of shares

Income from Sale of shares is taxable under the head Income from Capital Gains. Expenses which are wholly and exclusively incurred in relation to the transfer of shares, are allowed to be deducted from sales consideration. Expenses such as brokerage, stamp duty, sales commission, etc. can be claimed as an expense in your Income Tax Return. All these expenses are allowed as deduction only for the purpose of calculating the Capital Gains. However, Securities Transaction Tax (STT) is not allowed as a deduction.

ITR for Capital Gains from Investment in Stocks
CA Assisted Income Tax Return filing for Individuals and HUFs having income from sale of securities.
[Rated 4.8 stars by customers like you]
ITR for Capital Gains from Investment in Stocks
CA Assisted Income Tax Return filing for Individuals and HUFs having income from sale of securities.
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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.

Speculative Busines Income and Non-Speculative Business Income Tax Treatment

Tax on income from trading as capital gains or business income depends on the nature of the trading. Income from any business or profession is classified under the head “Profits and Gains from Business and Profession” in the Income Tax Return. Read when to treat trading income as a speculative or non-speculative business income. Following types of trading income is considered as Business Income:

  • Equity Delivery Trading – When a trader buys an equity share from the stock market and holds it for more than a day.
  • Equity Intraday Trading – When a trader buys an equity share and sells it on the same day.
  • Mutual Funds Trading – Buying and selling of mutual funds – equity, debt, ETFs, etc.
  • Equity F&O Trading (Futures and Options) – Trading into Futures and Options with Equity Shares as an underlying asset.
  • Commodity Trading (F&O and Intraday) – Trading into commodity instruments and Futures & Options with a commodity as an underlying asset.
  • Currency Trading (F&O and Intraday) – Trading into currency instruments and Futures & Options with currency as an underlying asset.
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Note: Based on the nature of trading, Income from trading in Equity Delivery and Mutual Funds can be classified as either Income from Capital Gains or Business Income.

Speculative Business Income

As per the Income Tax Act, a contract in which the purchase or sale of any commodity including stocks and shares is settled without actual delivery, it is called a Speculative Transaction. Intraday Trading means trading in stock or security by squaring off the trade within the same trading day. Therefore, Equity Intraday Trading is Speculative Business Income.

The definition of Speculative Transaction specifically excludes derivative transactions i.e. equity F&O, commodity (intraday and F&O), and currency (intraday and F&O) trading. The trader enters into such transactions for the purpose of hedging and thus such income is a Non-Speculative Income.

In the case of Equity Intraday Trading, the share does not transfer to the trader’s Demat Account. The broker squares off the position at the end of the trading day for all intraday trades. Therefore, the buyer of the shares does not pay for the full value of shares. Instead, they should deposit the difference between buy value and sell value as a margin to execute the intraday trade.

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Income Tax provisions for Trader having speculative business income:

  • A trader should prepare financial statements and file Form ITR 3 on Income Tax Website
  • A trader can claim expenses directly related to trading income
  • Trading Turnover is the Absolute Profit i.e. sum of absolute values of profit or loss
  • The trader can set off the Speculative Loss only against Speculative Business Income
  • A trader can carry forward losses that remain for 4 years and set them off against Speculative Business Income only
  • Moreover, this income is taxable at slab rates as per the Income Tax Act

Non-Speculative Business Income

Any business income that’s not Speculative in nature is a Non-Speculative Business Income. Hence, this income includes trades in Equity F&O, Commodity (Intraday and F&O), and Currency (Intraday and F&O). Since F&O Trading is a hedge and there is the delivery of the underlying security, it is non-speculative in nature. The definition of Speculative Transactions specifically excludes the Intraday Trading of Commodity and Currency and it is thus a Non-Speculative Income. Additionally, if the trader has significant trading activity in delivery-based equity trading and mutual funds, it is a Non-Speculative Business Income.

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Income Tax provisions for Trader having non-speculative business income:

  • A trader should prepare financial statements and file Form ITR 3.
  • Traders can claim expenses directly related to trading income.
  • Trading Turnover for Futures Trading is the Absolute Profit i.e. sum of absolute values of profit or loss. Trading Turnover for Options Trading is the sum of Absolute Profit and premium on the sale of Options.
  • The trader can set off Non-Speculative Loss in the current year against any income except Salary.
  • The trader can carry forward the remaining loss for 8 years and set off against both Non-Speculative Income and Speculative Business Income.
  • Moreover, this income is taxable at slab rates as per the Income Tax Act.

FAQs

Can I set off Speculative Loss against other Incomes?

The trader can set off the Speculative Loss only against Speculative Income. A trader can carry forward the remaining loss for 4 years and set off against Speculative Business Income only. Therefore, the trader cannot set off speculative business loss against any other income except speculative business profits.

Can I set off Non-Speculative Loss against other Incomes?

The trader can set off Non-Speculative against any income except Salary in the current year. A trader can carry forward the remaining loss for 8 years and set off against Business Income (speculative and non-speculative) in future years.

Is Intraday trading in Futures and Options also considered as Speculative Business Income?

No. Intraday Trading in F&O is a Non-Speculative Income. The definition of speculative transactions specifically excludes trading in derivative transactions. Further, such transactions are done with the intention of hedging. Therefore, the Intraday Trading of F&O is considered to be a non-speculative business income.

Long Term Capital Gain Tax on Shares – Equity Shares & Equity Mutual Funds

Up to FY 2018-19, Long Term Capital Gain (LTCG) on the sale of shares and securities on which Securities Transaction Tax (STT) is paid was exempt under Sec 10(38) of the Income Tax Act. However, under Budget 2018, the exemption under Sec 10(38) was removed. Further, a new Section 112A was introduced to levy 10% income tax on Long Term Capital Gains on the sale of equity shares, equity mutual funds and units of business trust in excess of Rs. 1 lac for a financial year. Sec 112A was applicable from FY 2018-19 (AY 2019-20) onwards.

What is Long Term Capital Gain?

The profit or loss on the sale of a capital asset held for more than the specified holding period is a Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL).

Based on the period of holding, here is a summary of Capital Gain on the sale of Capital Assets. Eg: If the listed equity share of a domestic company is sold after 12 months of purchase, the profit or loss is Long Term Capital Gain or Long Term Capital Loss.

Capital Asset Period of Holding
Equity Shares of Domestic Company listed on a recognized stock exchange 12 months
Equity Shares of Domestic Company not listed on a recognized stock exchange 24 months
Equity Shares of Foreign Company whether listed or not 24 months
Equity-oriented Mutual Funds or ETFs (Exchange Traded Funds) 12 months
Debt-oriented Mutual Funds or ETFs (Exchange Traded Funds) 36 months
Debentures or Bonds listed on a recognized stock exchange 12 months
Debentures or Bonds not listed on a recognized stock exchange 36 months
Immovable Property such as land, building or house property 24 months
Movable Property such as jewelry, car, painting, work of art 36 months
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Grandfathering Rule

Traders who would have invested into equity markets with a view to earning tax-free income in the form of Long Term Capital Gains would now have to pay tax as per the new rule. The announcement of 10% LTCG was made on 1st February 2018. Thus, an investor who was holding an investment in equity shares and equity mutual funds as on 31/01/2018, should not be required to pay tax on entire capital gains. Hence, to ensure that LTCG earned up to 31st January 2018 should not be taxed, the Capital Gains earned up to 31/01/2018 would be grandfathered using a formula.

For equity shares and equity mutual funds bought on or before 31/01/2018, the cost of acquisition should be calculated as follows:

  1. Lower of Fair Market Value as on 31/01/2018 or the Actual Selling Price
  2. Step 1 or Actual Cost Price whichever is higher

Section 112A – Calculation of Long Term Capital Gain Tax on Shares

The budget was announced on 01/02/2018 and so the provisions for tax on LTCG are different based on the date of purchase.

Particulars

Up to 31/01/18 01/02/18 Onwards
Date of Purchase Shares bought on or before 31/01/2018 Shares bought on or after 01/02/2018
STCG (sold within 365 days) STCG @ 15% STCG @ 15%
LTCG (sold after 365 days) SP = price at which shares are sold SP = price at which shares are sold
CP = Follow these steps:

Higher of the following:

(i) Price as on 31.01.18 or Actual Selling Price whichever is less

(ii) Actual Cost
CP = price at which shares are bought
LTCG = SP – CP LTCG = SP – CP
Tax = 10% (LTCG – Rs.1,00,000) Tax = 10% (LTCG – Rs.1,00,000)

Examples for Grandfathering Rule

  Case I Case II
Purchase Date  1st Jan 2018 10th Feb 2018
Purchase Value 2,00,000 2,00,000
Sell Date  10th Jan 2020 10th Jan 2020
Sale Value 3,50,000 3,50,000
Grandfathering rule applicable Yes No
Actual Cost * 2,40,000 ** 2,00,000
LTCG
= Sale Value – Actual Cost
1,10,000 1,50,000
Exempt Exempt up to INR 1 Lakh Exempt up to INR 1 Lakh
Tax Liability 1,10,000 – 1,00,000= 10,000 * 10%
= 1,000
1,50,000 – 1,00,000= 50,000 * 10%
= 5,000

*Note: Actual Cost is the Cost of Acquisition to calculate capital gains 

**Calculation of Actual Cost using FMV (Case I)

  Condition Amount (INR) Qualifying Amount
Step 1 Lower of:

Actual Selling Price
or
FMV on 31st Jan 2018
Lower of:

3,50,000 or 2,40,000  

2,40,000
Step 2 Higher of:

Value in Step 1
or
Purchase Value
Higher of:

2,40,000 or 2,00,000

2,40,000
  Actual Cost   2,40,000

Income Tax on Long Term Capital Gain

The tax rate of a capital asset is determined on the basis of the nature of capital gain i.e. LTCG or STCG.

Capital Asset STT LTCG STCG
Listed equity share of a domestic company Yes 10% in excess of INR 1 lac u/s 112A 15% u/s 111A
Listed equity share of a domestic company No 10% without indexation slab rate
Unlisted equity share of a domestic company No 20% with indexation slab rate
Listed equity share of a foreign company Yes / No 10% without indexation slab rate
Unlisted equity share of a foreign company Yes / No 20% with indexation slab rate
Equity Mutual Fund or ETF Yes 10% in excess of INR 1 lac u/s 112A 15% u/s 111A
Debt Mutual Fund or ETF No 20% with indexation slab rate
Listed Debentures or Bonds No 10% without indexation slab rate
Unlisted Debentures or Bonds No 20% without indexation slab rate
Land, Building, House Property, Car, Jewellery, Paintings, Art of Work NA 20% with indexation slab rate

Long Term Capital Gain Tax on Shares – Equity Shares and Equity Mutual Funds

Date of Purchase Date of Sale Tax Treatment
On or before 31/01/2018 On or before 31/01/2018 Exempt u/s 10(38)
On or before 31/01/2018 Between 31/01/2018 and 01/04/2018 Exempt u/s 10(38)
On or before 31/01/2018 01/04/2018 onwards Calculate LTCG as per the above table
* LTCG up to 31/01/2018 exempt
* LTCG after 31/01/2018 – Tax at 10% in excess of Rs. 1 lac
On or after 31/01/2018 01/04/2018 onwards Calculate LTCG as per the above table
Tax at 10% in excess of Rs. 1 lac
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Exemption from LTCG

The taxpayer having income from the sale of a long term capital asset can claim an exemption under Section 54 to 54GB of the Income Tax Act if he/she fulfills the conditions.

A taxpayer can claim the exemption by reinvesting the proceeds from the sale into a specified capital asset. Such exemption would lower the capital gains and save taxes on the same. However, the taxpayer must hold the new asset for the specified period as per the relevant section. However, if he/she sells the asset before the specified time period, he/she must report it as an income in the relevant financial year and pay tax at the applicable rate.

The taxpayer has an option to open an account under the Capital Gains Account Scheme and park the sale proceeds in it till the time they invest in the specified asset to claim the Capital Gains exemption.

FAQs

Is LTCG taxable now?

Yes. Under Budget 2018, the exemption under Sec 10(38) was removed. Further, a new Section 112A was introduced to levy 10% income tax on Long Term Capital Gains on the sale of equity shares, equity mutual funds and units of business trust in excess of Rs. 1 lac for a financial year. Sec 112A was applicable to FY 2018-19 (AY 2019-20) onwards.

What rate is LTCG taxable at?

LTCG is taxable at a flat 10% on income that is exceeding Rs. 1lk. Therefore, it is exempt up to Rs. 1lk.

Is STCG exempt?

No. Hence, STCG is taxable at a flat rate of 15% without any exemption.

Tax Loss Harvesting for Stock Traders

Tax Loss Harvesting is the practice of selling your loss-making shares and mutual funds before the end of the financial year by converting these unrealised losses into realised loss. It helps reduce the tax liability.

What is Tax Loss Harvesting?

  • At the end of a financial year, some shares and mutual funds you are holding have an unrealised loss. Unrealised Loss means the stock has not yet been sold but if it is sold, there would be a loss since the average market value is less than the average buy value.
  • Similarly, by the end of a financial year, some shares and mutual funds you have sold have a realised profit. Realised Profit means the stock has already been sold at a profit (Marke Value > Buy Value).

Let us understand how Tax Loss Harvesting works from this example:

  • The stocks that have an unrealised loss are sold and a loss is realized before the end of the financial year.
  • This loss can now be set off against other profits and therefore it will reduce the tax liability.
  • Thus, it is the harvesting of unrealised loss to save taxes.

If the trader wants to hold the stock, he can buy the stock again so that the portfolio remains unchanged. Generally, when looked at the difference, a trader would prefer to incur the transaction cost of entering into these transactions rather than paying higher taxes.

Example

Below is a snapshot of the P&L Statement of a trader as on 28.03.2020. The tab refers to short term equity trades.

Before Tax Loss Harvesting

Realised Profit Rs. 3,85,000
Unrealised Loss Rs. 1,27,500
Total Income Rs. 3,85,000
Tax Liability Rs. 20,250
[15% of Rs. 1,35,000 (385000-250000)]

After Tax Loss Harvesting

The trader can sell 300 shares of Crest and 250 shares of Deepakfert to realise the loss of Rs.1,27,500

Realized Profit Rs. 3,85,000
Realized Loss Rs. 1,27,500
Total Income Rs. 2,57,500
Loss set off against Profit
Tax Liability Rs. 1,125
[15% of Rs. 7,500 (257500-250000)]

The trader can thus reduce the tax liability by doing Tax Loss Harvesting. Additionally, if the trader wants to keep the portfolio unchanged, he/she can buy 300 shares of Crest and 250 shares of Deepakfert again.

Taxation on Trading Income

The trader who plans to practice Tax Loss Harvesting should be able to calculate the income tax on trading income and the applicable tax rates. Based on the calculation of tax liability, the trader can decide whether to opt for it or not. The trader should analyse whether converting unrealised loss to realised loss will result in a reduction in taxes or not.

Income from trading in equity shares or mutual funds may be considered as a Capital Gains Income or as Non-Speculative Business Income. This is based on the nature of trading.

Below are the applicable tax rates:

A. Trading Income considered as Capital Gains

  Equity Shares & Equity Mutual Funds Debt Mutual Funds and other Securities
LTCG 10% in excess of Rs. 1 lac 20% with the benefit of indexation
STCG 15% slab rates

B. Trading Income considered as Non-Speculative Business Income

  • Income is taxable at slab rates as per the Income Tax Act

An opportunity for Tax Loss Harvesting is available in case of trading in equity delivery and mutual funds. It is not available in the case of equity intraday, equity F&O, commodity trading, and currency trading since the position is squared off on the same day (intraday) and on last Thursday of the month (F&O).


Rules for Set-Off

The trader who plans to practice Tax Loss Harvesting should be able to analyse which loss can be set off against which profits as per the set-off rules of Income Tax Act. However, the decision whether to convert the unrealised loss to realised loss should be made after analysing against which incomes can this loss be set-off. Therefore, if the loss cannot be set off against any existing profits, then the trader should not opt for it.

Equity Trading Income considered as Capital Gains:

  • Long Term Capital Loss (LTCL) can be set off against only Long Term Capital Gains (LTCG).
  • Short Term Capital Loss (STCL) can be set off against both Short Term Capital Gains (STCG) and Long Term Capital Gains (LTCG).
  • LTCL and STCL cannot be set off against any other income.

Equity Trading Income considered as Non-Speculative Business Income:

  • The Non-Speculative Business Loss can be set off against any income except Salary Income.

Note: Trader having Salary Income cannot set off Non-Speculative Business Loss against such income. Thus, if there are no other incomes except Salary, the trader should not go for Tax Loss Harvesting.

FAQs

I have a Realised Short Term Profit of Rs. 3,00,000. However, there is an Unrealised Long Term Loss of Rs. 1,00,000. Should I opt for Tax Loss Harvesting by selling the shares to realize the loss?

If you opt for Tax Loss Harvesting by selling the shares held for more than a year, it would be a Realised Long Term Capital Loss (LTCL). Additionally, LTCL cannot be set off against STCG (Short Term Capital Gain). Thus, in this case, Tax Loss Harvesting is not beneficial.

I want to opt for Tax Loss Harvesting to save tax but I still want to hold the stock. What should I do?

A trader can opt for Tax Loss Harvesting by selling the existing holdings on which there is an Unrealised Loss. Thus, the loss can be adjusted with realised profit to reduce the tax liability. However, if the trader wants to continue holding the stock to keep the portfolio unchanged, you can buy the shares again on the next trading day. However, you must ensure that the transaction cost of entering into buy and sell transaction is less than the amount of taxes saved from Tax Loss Harvesting.

I have an unrealised loss from Equity Trading Income. But I also have a Salary Income. Will Tax Loss Harvesting help me save taxes?

The loss from equity trading cannot be adjusted with Salary Income. Thus, the trader should not opt for it since it would not reduce the tax liability.

Updated Codes: Nature of Business and Profession

Introduction

The Central Board of Direct Taxes (CBDT) has changed the business and profession codes for the Income Tax Return (ITR) from Assessment Year 2019-2020. Hence, you must select the correct codes for the nature of the business or nature of the profession to report the correct information in the ITR. The nature of business code should be selected while filing ITR-3 and ITR-4 on the Income Tax Website.

  • ITR-3 – Taxpayer having income from business/profession who do not opt for the Presumptive Taxation Scheme should prepare financial statements and file ITR-3. The taxpayer should select the correct codes and category under which the business or profession can be classified from the drop-down list. Description of business/profession activity and Trade Name of the business/profession can also be added.
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  • ITR-4 – Taxpayer having income from business or profession and opting for Presumptive Taxation Scheme u/s 44AD or 44ADA is not required to maintain books of accounts and should file ITR-4. However, the taxpayer should select the correct codes and category under which the business or profession can be classified from the drop-down list. Description of business/profession activity and Trade Name of the business/profession can also be added.
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List of Business and Profession Codes

I. Profession Codes

Select the code from the list below in case of Income from Profession under ITR-3 or for opting Presumptive Taxation Scheme under Sec 44ADA under ITR-4:

Sub-Sector Code
Advertising  16006
Auctioneers  16010
Business brokerage 16011
Market research and public opinion polling  16012
Labour recruitment and provision of personnel  16014
Investigation and security services  16015
Building-cleaning and industrial cleaning activities  16016
Packaging activities  16017
Other professional services n.e.c. 16019

II. Business Codes

Code Sub-Sector
14001 Software development
14002 Other Software consultancy 
14003 Data processing
14004 Database activities and distribution of electronic content
14005 Other IT enabled services
14006 BPO Service
14008 Maintenance and repair of office, accounting, and computing machinery
16001 Legal Profession
16002 Accounting, Auditing, and book-keeping profession
16003 Tax Consultancy 
16004 Architectural Profession
16005 Engineering and technical consultancy 
16007 Fashion design
16008 Interior decoration
16009 Photography
16013 Business and Management Consultancy activities 
16018 Secretarial activities
16019_1 Medical profession
16020 Film artist
General hospitals 18001
Specialty and super-specialty hospitals 18002
Nursing homes 18003
Diagnostic centers 18004
Pathological laboratories  18005
Medical clinics  18010
Dental practice  18011
Ayurveda practice  18012
Unani practice  18013
Homeopathy practice  18014
Nurses, physiotherapists or other para-medical practitioners 18015
Veterinary hospitals and practice 18016
Other healthcare services  18017
Medical research  18018
Practice of other alternative medicine 18019
Individual artists excluding authors 18020
Individual artists excluding authors 20010
Literary activities 20011
Other cultural activities n.e.c. 20012

Agricultural, Animal, Husbandry & Forestry

Sub-Sector Code
Growing and manufacturing of tea 01001
Growing and manufacturing of coffee 01002
Growing and manufacturing of rubber 01003
Market gardening and horticulture specialties 01004
Raising of silkworms and production of silk 01005
Raising of bees and production of honey 01006
Raising of poultry and production of eggs 01007
Rearing of sheep and production of wool 01008
Rearing of animals and production of animal products 01009
Agricultural and animal husbandry services 01010
Soil conservation, soil testing, and soil desalination services 01011
Hunting, trapping and game propagation services 01012
Growing   of   timber,   plantation,   operation   of   tree   nurseries   and
conserving of forest
01013
Gathering of tendu leaves 01014
Gathering of other wild-growing materials 01015
Forestry   service   activities,   timber   cruising,   afforestation   and
reforestation
01016
Logging service activities, transport of logs within the forest 01017
Other agriculture, animal husbandry or forestry activity n.e.c 01018

Fish Farming

 Sub-Sector Code 
Fishing on a commercial basis in inland waters 02001
Fishing on commercial basis in ocean and coastal areas 02002
Fish farming 02003
Gathering of marine materials such as natural pearls, sponges, coral
etc.
02004
Services related to marine and fresh water fisheries, fish hatcheries
and fish farms
02005
Other Fish farming activity n.e.c 02006

Mining and Quarrying

Sub-Sector  Code 
Mining and agglomeration of hard coal 03001
Mining and agglomeration of lignite 03002
Extraction and agglomeration of peat 03003
Extraction of crude petroleum and natural gas 03004
Service  activities  incidental  to  oil  and  gas  extraction  excluding
surveying
03005
Mining of uranium and thorium ores 03006
Mining of iron ores 03007
Mining of non-ferrous metal ores, except uranium and thorium ores 03008
Mining of gemstones 03009
Mining of chemical and fertilizer minerals 03010
Mining of quarrying of abrasive materials 03011
Mining of mica, graphite and asbestos 03012
Quarrying of stones (marble/granite/dolomite), sand and clay 03013
Other mining and quarrying 03014
Mining and production of salt 03015
Other mining and quarrying n.e.c 03016

Manufacturing

Sub-Sector  Code 
Production, processing and preservation of meat and meat products 04001
Production, processing and preservation of fish and fish products 04002
Manufacture of vegetable oil, animal oil and fats 04003
Processing of fruits, vegetables and edible nuts 04004
Manufacture of dairy products 04005
Manufacture of sugar 04006
Manufacture of cocoa, chocolates and sugar confectionery 04007
Flour milling 04008
Rice milling 04009
Dal milling 04010
Manufacture of other grain mill products 04011
Manufacture of bakery products 04012
Manufacture of starch products 04013
Manufacture of animal feeds 04014
Manufacture of other food products 04015
Manufacturing of wines 04016
Manufacture of beer 04017
Manufacture of malt liquors 04018
Distilling and blending of spirits, production of ethyl alcohol 04019
Manufacture of mineral water 04020
Manufacture of soft drinks 04021
Manufacture of other non-alcoholic beverages 04022
Manufacture of tobacco products 04023
Manufacture of textiles (other than by handloom) 04024
Manufacture of textiles using handlooms (khadi) 04025
Manufacture  of  carpet,  rugs,  blankets,  shawls  etc.  (other  than  by
hand)
04026
Manufacture of carpet, rugs, blankets, shawls etc. by hand 04027
Manufacture of wearing apparel 04028
Tanning and dressing of leather 04029
Manufacture of luggage, handbags and the like saddler and harness 04030
Manufacture of footwear 04031
Manufacture  of  wood  and  wood  products,  cork,  straw and  plaiting
material
04032
Manufacture of paper and paper products 04033
Publishing, printing and reproduction of recorded media 04034
Manufacture of coke oven products 04035
Manufacture of refined petroleum products 04036
Processing of nuclear fuel 04037
Manufacture of fertilizers and nitrogen compounds 04038
Manufacture of plastics in primary forms and of synthetic rubber 04039
Manufacture of paints, varnishes and similar coatings 04040
Manufacture of pharmaceuticals, medicinal chemicals and botanical
products
04041
Manufacture of soap and detergents 04042
Manufacture of other chemical products 04043
Manufacture of man-made fibers 04044
Manufacture of rubber products 04045
Manufacture of plastic products 04046
Manufacture of glass and glass products 04047
Manufacture of cement, lime and plaster 04048
Manufacture of articles of concrete, cement and plaster 04049
Manufacture of Bricks 04050
Manufacture of other clay and ceramic products 04051
Manufacture of other non-metallic mineral products 04052
Manufacture of pig iron, sponge iron, Direct Reduced Iron etc. 04053
Manufacture of Ferro alloys 04054
Manufacture of Ingots, billets, blooms and slabs etc. 04055
Manufacture of steel products 04056
Manufacture of basic precious and non-ferrous metals 04057
Manufacture of non-metallic mineral products 04058
Casting of metals 04059
Manufacture of fabricated metal products 04060
Manufacture of engines and turbines 04061
Manufacture of pumps and compressors 04062
Manufacture of bearings and gears 04063
Manufacture of ovens and furnaces 04064
Manufacture of lifting and handling equipment 04065
Manufacture of other general purpose machinery 04066
Manufacture of agricultural and forestry machinery 04067
Manufacture of Machine Tools 04068
Manufacture of machinery for metallurgy 04069
Manufacture of machinery for mining, quarrying and constructions 04070
Manufacture of machinery for processing of food and  beverages 04071
Manufacture of machinery for leather and textile 04072
Manufacture of weapons and ammunition 04073
Manufacture of other special purpose machinery 04074
Manufacture of domestic appliances 04075
Manufacture of office, accounting and computing machinery 04076
Manufacture of electrical machinery and apparatus 04077
Manufacture  of  Radio,  Television,  communication  equipment  and apparatus 04078
Manufacture of medical and surgical equipment 04079
Manufacture of industrial process control equipment 04080
Manufacture  of  instruments  and  appliances  for  measurements  and
navigation
04081
Manufacture of optical instruments 04082
Manufacture of watches and clocks 04083
Manufacture of motor vehicles 04084
Manufacture of body of motor vehicles 04085
Manufacture of parts & accessories of motor vehicles &  engines 04086
Building & repair of ships and boats 04087
Manufacture of railway locomotive and rolling stocks 04088
Manufacture of aircraft and spacecraft 04089
Manufacture of bicycles 04090
Manufacture of other transport equipment 04091
Manufacture of furniture 04092
Manufacture of jewellery 04093
Manufacture of sports goods 04094
Manufacture of musical instruments 04095
Manufacture of games and toys 04096
Other manufacturing n.e.c. 04097
Recycling of metal waste and scrap 04098
Recycling of non- metal waste and scrap 04099

Electricity, Gas and Water

Sub-Sector  Code 
Production, collection and distribution of electricity 05001
Manufacture and distribution of gas 05002
Collection, purification and distribution of water 05003
Other essential commodity service  n.e.c 05004

Construction

Sub-Sector  Code 
Site preparation works 06001
Building of complete constructions or parts- civil contractors 06002
Building installation 06003
Building completion 06004
Construction and maintenance of roads, rails, bridges, tunnels, ports,
harbour, runways etc.
06005
Construction and maintenance of power plants 06006
Construction  and maintenance of industrial plants 06007
Construction  and maintenance of power transmission and
telecommunication lines
06008
Construction of water ways and water reservoirs 06009
Other construction activity n.e.c. 06010

Real Estate and Renting Services

Sub-Sector Code
Purchase, sale, and letting of leased buildings (residential and non-residential) 07001
Operating of real estate of self-owned buildings (residential and non-residential) 07002
Developing and subdividing real estate into lots 07003
Real estate activities on a fee or contract basis  07004
Other real estate/renting services n.e.c 07005

Renting of Machinery

Sub-Sector  Code 
Renting of land transport equipment 08001
Renting of water transport equipment 08002
Renting of air transport equipment 08003
Renting of agricultural machinery and equipment 08004
Renting of construction and civil engineering machinery 08005
Renting of office machinery and equipment 08006
Renting of other machinery and equipment n.e.c. 08007
Renting of personal and household goods n.e.c. 08008
Renting of other machinery n.e.c. 08009

Wholesale and Retail Trade

Sub-Sector  Code 
Wholesale and retail sale of motor vehicles 09001
Repair and maintenance of motor vehicles 09002
Sale of motor parts and accessories- wholesale and retail 09003
Retail sale of automotive fuel 09004
General commission agents, commodity brokers and auctioneers 09005
Wholesale of agricultural raw material 09006
Wholesale of food & beverages and tobacco 09007
Wholesale of household goods 09008
Wholesale of metals and metal ores 09009
Wholesale of household goods 09010
Wholesale of construction material 09011
Wholesale of hardware and sanitary fittings 09012
Wholesale of cotton and jute 09013
Wholesale of raw wool and raw silk 09014
Wholesale of other textile fibres 09015
Wholesale of industrial chemicals 09016
Wholesale of fertilizers and pesticides 09017
Wholesale of electronic parts & equipment 09018
Wholesale of other machinery, equipment and supplies 09019
Wholesale of waste, scrap & materials for re-cycling 09020
Retail sale of food, beverages and tobacco in specialized stores 09021
Retail sale of other goods in specialized stores 09022
Retail sale in non-specialized stores 09023
Retail sale of textiles, apparel, footwear, leather goods 09024
Retail sale of other household appliances 09025
Retail sale of hardware, paint and glass 09026
Wholesale of other products n.e.c 09027
Retail sale of other products n.e.c 09028

Hotels, Restaurants and Hospitality Services

Sub-Sector  Code
Hotels – star rated 10001
Hotels – non-star rated 10002
Motels, inns, and Dharmshalas 10003
Guesthouses and circuit houses 10004
Dormitories and hostels at educational institutions  10005
Short stay accommodations n.e.c 10006
Restaurants – without bars 10007
Canteens 10008
Independent caterers 10009
Casinos and other games of chance 10010
Other hospitality services n.e.c 10011

Transport & Logistics Services

 

Sub-Sector Code
Travel agencies and tour operators  11001
Packers and movers 11002
Passenger land transport  11003
Air transport 11004
Transport by urban/sub-urban railways 11005
Inland water transport 11006
Sea and coastal water transport 11007
Freight transport by road 11008
Freight transport by railways 11009
Forwarding of freight  11010
Receiving and acceptance of freight 11011
Cargo handling  11012
Storage and warehousing 11013
Transport via pipelines (transport of gases, liquids, slurry, and other commodities) 11014
Other transport and logistics services n.e.c 11015

Post and Telecommunication Services

Sub-Sector Code
Post and courier activities  12001
Basic telecom services 12002
Value added telecom services 12003
Maintenance of telecom network 12004
Activities of the cable operators 12005
Other post & telecommunication services n.e.c 12006

Financial Intermediation Services

Sub-Sector Code
Commercial, saving banks and discount houses 13001
Specialized institutions granting credit 13002
Financial leasing  13003
Hire-purchase financing  13004
Housing finance activities  13005
Commercial loan activities  13006
Credit cards 13007
Mutual funds 13008
Chit fund 13009
Investment activities 13010
Life insurance  13011
Pension funding  13012
Non-life insurance  13013
Administration of financial markets 13014
Stockbrokers, sub-brokers and related activities 13015
Financial advisers, Mortgage advisers, and brokers 13016
Foreign exchange services 13017
Other financial intermediation services n.e.c 13018

Sub-Sector Code
Cybercafe 14007
Computer training and educational institutes 14009
Other computation related services n.e.c 14010

Research and Development

Sub-Sector  Code 
Natural sciences and engineering 15001
Social sciences and humanities 15002
Other Research & Development activities n.e.c. 15003

Education Services

Sub-Sector  Code
Primary education 17001
Secondary/senior secondary education 17002
Technical and vocational secondary/senior secondary education  17003
Higher education  17004
Education by correspondence  17005
Coaching centers tuitions  17006
Other education services n.e.c 17007

Health Care and Services

Sub-Sector Code
Independent blood banks  18006
Medical transcription  18007
Independent ambulance services 18008
Medical suppliers, agencies and stores 18009

Social and Community Work

Sub-Sector  Code 
Social work activities with accommodation (orphanages and old age homes) 19001
Social work activities without accommodation (Creches) 19002
Industry associations, chambers of commerce 19003
Professional organisations 19004
Trade unions 19005
Religious organizations 19006
Political organisations 19007
Other membership organisations n.e.c. (rotary clubs, book clubs and 19008
philatelic clubs)  
Other Social or community service n.e.c 19009

Culture and Sport

Sub-Sector  Code 
Motion picture production 20001
Film distribution 20002
Film laboratories 20003
Television channel productions 20004
Television channels broadcast 20005
Video production and distribution 20006
Sound recording studios 20007
Radio – recording and distribution 20008
Stage production and related activities 20009
Circuses and race tracks 20013
Video Parlours 20014
News agency activities 20015
Library and archives activities 20016
Museum activities 20017
Preservation of historical sites and buildings 20018
Botanical and zoological gardens 20019
Operation and maintenance of sports facilities 20020
Activities of sports and game schools 20021
Organisation and operation of indoor/outdoor sports and promotion and production of sporting events 20022
Other sporting activities n.e.c. 20023
Other recreational activities n.e.c. 20024

Other Services

Sub-Sector Code
Hairdressing and other beauty treatment 21001
Funeral and related activities 21002
Marriage bureaus  21003
Pet care services 21004
Sauna and steam baths, massage salons, etc. 21005
Astrological and spiritualists’ activities  21006
Private households as employers of domestic staff 21007
Other services n.e.c 21008

Extra Territorial Organisations and Bodies

Sub-Sector  Code 
Extraterritorial organizations and   bodies   (IMF,   World   Bank, European Commission etc.) 22001

FAQs

What is the full form of “n.e.c”?

“n.e.c” stands for “not elsewhere classified.” Hence, the information given here is exclusive and not available elsewhere.

How to Choose the Correct Business or Profession Codes?

Follow these steps to select the correct business or profession codes:

-Select the codes by verifying the nature of the product or services involved to determine the sector of business or profession.
-Under each sector, the nature of the activity involved is to be seen for determining the sub-sector.
-In case you are undertaking multiple activities, different businesses, or professions, then you have to select various codes under the same trade name.
-In cases where there is more than one trade name for the under single PAN, then you have to mention multiple codes under different trade names.
-Each Sector has an others code n.e.c., in case your product or services or activity is not specifically listed in the main classification, then one can choose n.e.c.

Tax on Dividend Income & its Treatment

A dividend means the distribution of profits by a company to its shareholders. It is different from interest. While interest is paid regularly, the dividends are paid only when the Company decides to pay. It is usually paid when a Company is earning profits. The Company used to DDT -Dividend Distribution Tax on payment of dividends. Making dividend exempt in the hands of the shareholder under Section 10(34) of Income Tax Act. The dividend received from a Domestic Company is a Domestic Dividend while that received from a Foreign Company is a Foreign Dividend, and should be reported under the head Income from other sources.

The tax treatment of foreign dividends is different from domestic dividends. Earlier, domestic dividend income was exempt from tax in the hands of the shareholder. 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.

Update on Tax on Dividend in Union Budget 2020 & Budget 2021

After the abolishment of Dividend Tax under Budget 2020, from FY 2020-21 dividend which was earlier exempt now became a taxable income. Under Budget 2020, TDS under Section 194 and Section 194K was introduced for deduction of TDS on dividend paid on equity shares and equity mutual funds. After Under Budget 2021, dividend paid to REIT / InvIT is now exempt from TDS.

Advance Tax liability would arise on dividend income only once the dividend is declared or paid since it is difficult for the shareholders to estimate the dividend income accurately.

Below is a detailed understanding of the tax on dividend income in India from equity shares, equity mutual funds; and TDS applicability.

Tax on Dividend Income from Equity Shares

Upto FY 2019-20

As per Section 115-O, a Domestic Company pays Dividend Tax at 15% on the dividend distributed to the resident shareholders. Therefore, the Shareholder’s Dividend Income (up to INR 10 lacs) was exempt u/s 10(34). There would be Dividend Tax at slab rates if the amount is in excess of INR 10 lacs as per Section 115BBDA of the Income Tax Act. TDS was not applicable to dividends since the income was not taxable in the hands of the shareholder.

Foreign Dividend is a taxable income under the head Income from Other Sources i.e. IFOS.

FY 2020-21 Onwards

Under Budget 2020, the removal of Section 115-O led to the abolishment of the DDT. Thus, a Domestic Company is not liable to pay tax on the dividends distributed on Equity Shares to shareholder residents in India. Dividends would be taxable in the hands of the shareholder (as per applicable slab rates). Since the income is taxable in the hands of the shareholder, TDS would be applicable. As a result, existing Section 194 was amended.

As per Sec 194, a Domestic Company distributing dividends to a resident should deduct TDS at a rate of 10% if the amount exceeds INR 5000. The taxpayer should report such income under the head IFOS in the ITR filed on Income Tax Website.

Tax on Dividend Income from Mutual Funds

Upto FY 2019-20

As per Section 115-O, when a Domestic Company distributed dividends on Equity Mutual Funds, it was liable to pay Dividend Tax at 15%. Since the Company paid the tax, dividend income was exempt (up to INR 10 lacs) u/s 10(34) in the hands of the investor. Since the income was not taxable in the hands of the shareholder, there was no applicability of TDS.

FY 2020-21 Onwards

Under Budget 2020, the Finance Minister removed Section 115-O and abolished Tax on Dividend. Thus, a Domestic Company is not liable to pay tax on the dividend distributed on Equity Mutual Funds. Since this tax is not paid by the company, such income on Equity Mutual Funds becomes taxable in the hands of the investor as per applicable slab rates. Since the income would be taxable in the hands of the investor, TDS would be applicable. As a result, the Finance Minister introduced a new Section 194K.

As per Sec 194K, a Domestic Company distributing dividends on equity mutual funds to a resident shareholder should deduct TDS at the rate of 10% if the amount exceeds INR 5000. The taxpayer should report such income under the head IFOS in the ITR filed on Income Tax Website.

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FAQs

Is TDS deducted on dividend paid to a non-resident shareholder?

Yes. Domestic Company distributing dividends to a shareholder not resident in India should deduct TDS at the prescribed rates as per Section 195 of the Income Tax Act. In the case of a resident shareholder, TDS should be deducted at the rate of Sec 194 or Sec 194K.

Is TDS required to be deducted under Sec 194K on the sale of mutual funds?

The Sec 194K i.e. TDS on Income from Mutual Funds was introduced under Budget 2020. There was confusion about whether ‘Income from Mutual Funds’ would include capital gains on the sale of mutual funds or not. However, CBDT issued a clarification that TDS under section 194K should be deducted @ 10% on Dividend Income only and not on Capital Gains on the sale of Equity Mutual Funds.

What is the prescribed limit of dividend for deduction of TDS under Sec 194K?

The prescribed limit to deduct TDS on dividend income is Rs. 5000.
Sec 194K – Domestic Company should TDS on dividends from mutual funds at 10% if the dividend income per recipient exceeds Rs. 5000 in the financial year
Sec 194 – Domestic Company should TDS on dividends from equity shares at 10% if the dividend income per recipient exceeds Rs. 5000 in the financial year

Equity Trading Income: Delivery, Intraday, Futures & Options

Equity trading includes means buying and selling of various financial instruments such as delivery stocks, intraday, futures, and options, etc. The buying and selling of stocks and securities are done with an intention to create an investment portfolio or to earn profits due to fluctuations in prices.

Different forms of trading include Equity Delivery, Intraday, Futures, Options, Commodity Trading, Currency Trading, etc. Therefore, it is important to understand the different types of trading to calculate trading turnover, determine the applicability of Tax Audit, determine applicable ITR Form, calculate tax liability, etc. Let us understand the different types of equity, intraday, futures, and options trading in detail.

Equity Intraday Trading

When a trader buys an equity share and sells it on the same day, it is called Equity Intraday Trading. The intention is to earn profits from the fluctuation of prices in a single day. In the case of Equity Intraday Trading, there is no delivery of shares and therefore ownership is not transferred. For Income Tax, Equity Intraday Trading is considered as a Speculative Business Income since trading is done without the delivery of shares and with an intention to earn quick profits.

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Example of Equity Intraday Trading

Below is the Price of 1 Equity Share of Sun Pharma

Date Time Price (INR)
29th January 2020 11:00 AM 445
29th January 2020 2:30 PM  451

Akshay buys 100 shares of Sun Pharma on 29th January 2020 11:00 AM and sells them on 29th January 2020 2:30 PM

  • This is called Equity Intraday Trading since the shares are bought and sold on the same day
  • Profit = 100 shares * (451 – 445) = Rs. 600
  • Since the shares are not transferred to the trader’s Demat account, it is considered as a Speculative Business Income

Equity Delivery Trading

When a trader buys an equity share from the stock market and retains it for more than 1 day, it is called Equity Delivery Trading. It is called delivery trading because the intention of this purchase is to hold the share for a time long enough for the ownership to be transferred to the buyer. In this case, the share is delivered to the trader’s Demat account.

The intention is to earn short/long term capital gains. Equity Delivery Trading is considered as either Capital Gains or Non-Speculative Business Income.

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Types of Equity Shares

Equity shares are also referred to as ordinary shares. They are one of the most common kinds of shares. Equity shares are classified as per the type of share capital.

  • Authorised share capital: This is the maximum amount of capital a company can issue. A company can raise such capital by issuing equity shares. However, companies can increase the authorized share from time to time.
  • Issued share capital:
    • This is the portion of authorised capital that a company offers to its investors
    • For example, if the nominal value of one stock is INR 100 and a company has issued 40,000 such shares, then its issued share capital will be INR 40 lakh
  • Subscribed share capital:
    • This refers to the portion of issued capital upon which investors accept and agree
    • Referring to the above example, in case investors have purchased 25,000 shares of that company, then its subscribed capital would be INR 25 lakh. If investors buy all the stocks that a company has issued, then issued and subscribed equity shall be the same
  • Paid-up capital:
    • The amount of money investors pay against its holdings of a company’s stock is its paid-up capital
    • Since most companies accept the entire subscription amount at one go, and therefore, subscribed and paid capital are the same thing.
    • Furthermore, if a stock is trading at a premium, then that excess amount is accounted as shares premium

There are a few other types of shares

  • Right shares:
    • Right shares refer to the shares that a company issues to its existing shareholders to purchase new shares at a specific price within a particular period
    • In other words, the right shares are those new stocks on which existing stakeholders can lay claim before such issuing company opens them up to public trading
    • Such stocks are issued to protect the ownership rights of existing shareholders
    • Similar to bonus shares, companies issue the right shares on a pro-rata basis as well
  • Sweat equity shares:
    • Organizations often compensate employees or directors for their exceptionally well performance by issuing sweat equity shares to reward them
    • Several companies use this compensation method to enhance employee retention by endowing them with a stake in that organization’s assets and ownership
  • Bonus shares:
    • Bonus shares are those stocks that companies issue to the existing shareholders without any additional charge
    • Usually, companies provide these bonus shares to shareholders instead of paying out dividends
    • Furthermore, organizations issue bonus shares on a pro-rata basis.
    • So, if Mr. Ansh holds 100 shares of ITC Ltd and the company announces its decision to issue 1:4 as a bonus, then he will receive 25 additional shares for free
  • Voting and non-voting shares:
    • Generally, most types of equity shares carry voting rights because of the stake in ownership it entails.
    • However, in some cases, companies can issue shares with the condition that it will confer differential or no voting right at all to such shareholders

Example of Equity Delivery Trading

Below is the Price of 1 Equity Share of Sun Pharma

Date Time Price (INR)
29th January 2020 11:00 AM  445
29th January 2020 2:30 PM 451
30th April 2020 1:00 PM 441

Akshay buys 100 shares of Sun Pharma on 29th January 2020 11:00 AM and sells them on 30th April 2020 1:00 PM

Equity Futures

When a trader expects the price of a share to move up or move down in the near future, they can enter into a Futures Contract. Therefore, a Futures contract is an agreement to buy or sell an underlying asset on a future date at a pre-agreed price. The trader is required to deposit advance money called ‘Margin’ with the brokerage house to ensure that they do not default in case of a loss. Once the trader squares off the futures position or the Futures Contract expires, the margins are unblocked. In the case of a Futures Contract, the buyer’s gain equals the seller’s loss and vice versa.

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Example of Futures Trading

The price of the Futures contracts constantly fluctuates based on demand. Therefore, in the developed market today the futures price is based on demand and supply and one can check the average price on the stock exchange to see the price at which the future is available for them to buy.

  • Underlying Asset – Sun Pharma Share
  • Current Price of Underlying Asset – Rs. 451.55
    This is the current price of the stock which changes based on the trading done.
  • Price of Futures – Rs. 452
    This is the minimum buy price of one shares’ future and also fluctuates with demand for the futures contract.
  • Minimum Lot Size – 1250
    Lot Size is the minimum number of shares that a trader needs to buy or sell to enter a Futures Contract. So it means that the trader should buy or sell in multiples of 1250 shares of Sun Pharma to enter into this Futures Contract.
  • Current Date– 29th January 2020
  • Expiry Date – 30th Jan 2020
    This is the date on which the Futures Contract would expire. The Futures Contract expires on the last Thursday of the month. So in the case of Sun Pharma, the contract would expire on 30th Jan 2020 which is the last Thursday of January

Interpretation of Example: Since the expiry date is in less than a day and the futures price is close to the shares’ current price. However, this also means that the delivery of this share on the future date will be at Rs. 452 regardless of the current price of the share then i.e. even if the shares’ price was to increase to Rs. 460 on 30th Jan 2020 you would still buy them for Rs. 452. The future allows you protection from price fluctuation.

Given below is the snapshot of Futures Contract of Sun Pharma:

Options Trading

Options is a contract with the right to buy or right to sell an underlying asset at an agreed-upon price today (strike price) on a specified future date. Hence, the buyer of an Option receives the ‘Right to Buy’ or ‘Right to Sell’ the underlying asset at a specified future date. Therefore, the seller of an Option has the ‘Obligation to Buy’ or ‘Obligation to Sell’ the underlying asset at a specified future date. The buyer may or may not exercise the option and thus pays a premium to the seller to attain this right. This is called ‘Option Premium’.

  • Buyer of Call Option – Right to Buy the underlying asset at the strike price on a future date
  • Buyer of Put Option – Right to Sell the underlying asset at the strike price on a future date
  • Seller of Call Option – Obligation to Buy the underlying asset at the strike price on a future date
  • Seller of Put Option – Obligation to Sell the underlying asset at the strike price on a future date
Buyer of an Option has a limited loss (premium paid) and unlimited profit while the Seller of an Option has an unlimited loss and limited profit (premium received)
Tip
Buyer of an Option has a limited loss (premium paid) and unlimited profit while the Seller of an Option has an unlimited loss and limited profit (premium received)

Example of Call Option

Akshay buys a Call Option on Nifty Index from Raj at a price of Rs. 1000 and expiry of one month from today. Akshay pays a premium of Rs.10 to Raj.

  • Buyer of Call Option – Akshay
  • Seller of Call Option – Raj
  • Option Premium – Rs.10
  • Expiry of Contract – 1 month
  • Strike Price or Exercise Price – Rs. 1000

If the price of Nifty on expiry is Rs. 1200

  • Akshay’s Call Option is ‘in the money’. He will exercise the Call Option
  • So, Akshay has the ‘Right to Buy’ Nifty at Rs.1000 from Raj
  • Therefore, Akshay’s Total Profit = 1200 – 1000 – 10 = Rs. 190
  • And since Raj has the ‘Obligation to Sell’ Nifty at Rs.1000 to Akshay
  • Raj’s Total Loss = 1000 – 1200 + 10 = Rs. -190

If the price of Nifty on expiry is Rs. 800

  • Akshay’s Call Option is ‘out of the money’. Therefore, he will not exercise the Call Option
  • And hence, The Call Option lapses
  • Therefore, Akshay’s Total Loss = Rs. -10
  • And Raj’s Total Profit = Rs. 10

Example of Put Option

Akshay buys a Put Option on Nifty Index from Raj at a price of Rs. 1000 and expiry of one month from today. And, Akshay pays a premium of Rs.10 to Raj.

  • Buyer of Put Option – Akshay
  • Seller of Put Option – Raj
  • Option Premium – Rs.10
  • Expiry of Contract – 1 month
  • Strike Price or Exercise Price – Rs. 1000

If the price of Nifty on expiry is Rs. 800

  • Akshay’s Put Option is ‘in the money’. So, he will exercise the Put Option
  • And so, Akshay has the ‘Right to Sell’ Nifty at Rs. 1000 to Raj
  • Therefore, Akshay’s Total Profit = 1000 – 800 – 10 = Rs. 190
  • Since Raj has the ‘Obligation to Buy’ Nifty at Rs. 1000 from Akshay
  • Therefore, Raj’s Total Loss = 800 – 1000 + 10 = Rs. -190

If the price of Nifty on expiry is Rs. 1200

  • Akshay’s Put Option is ‘out of the money’. So, he will not exercise the Put Option
  • Hence, the Put Option lapses
  • And Akshay’s Total Loss = Rs. -10
  • Therefore, Raj’s Total Profit = Rs. 10
Import Your Trades
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FAQs

How do I calculate my Trading Turnover?

Trading turnover is calculated in case of equity intraday, futures, and options. In the case of Equity Intraday Trading, Absolute Profit is Trading Turnover. Trading turnover is required for understanding Tax applicability and Tax audit applicability as well.

What is Absolute Profit?

Absolute Profit means the sum of positive and negative differences in a trade transaction. Eg: Loss from Scrip X is Rs. -5000 and profit from Scrip Y are Rs. 8000, absolute profit = 5000+8000 = Rs. 13,000.

Is Trading Turnover same as Contract Turnover?

No. Trading Turnover is different than Contract Turnover.
Contract Turnover is the sum of the purchase value and sales value. It is not considered for income tax purposes. Trading Turnover or Business Turnover is the absolute profit i.e. sum of positive and negative differences. This turnover is considered to determine the applicability of the tax audit and the applicable ITR form.