Kotak Securities: Create an account and Log in, Download Holding Statement, Tax P&L Report, and Ledger

To understand your trading activity and the income tax compliances, you need certain documents like Tax P&L, Ledger, Holding Statement, etc. But, before you get any of these documents you first need to have a Kotak Securities Account and log in.

This article will guide you through the following:

How to Create and Log in to Kotak Securities?

Here’s how you can open a trading account online with Kotak Securities by following these steps:

  1. Visit the Kotak Securities website.

    You can access it from here.

  2. Fill in your details.

    Such as your Name, Mobile Number and City.

  3. Click on Open an account now

    As seen below:

  4. A sales representative from Kotak Securities will contact you on your registered number.

    They will take it from there.

  5. During the IPV there are documents required by the sales representative.

    These include:
    – Self-attested PAN copy;
    – Self-attested Aadhaar copy;
    – Passport size photo;
    – Bank account details that are to be linked with the Demat account;
    – And, the signature of the account holder will also be required.

  6. Once these documents are verified your account will open.

    You will receive a confirmation for the same.

  7. Kotak Securities login

    Once your account is activated you can navigate to the website and log in

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How to download Holding Statement for Kotak traders?

Here’s how you can download the Holding Statement from your account:

  • Step 1: Visit the Kotak Securities portal and log in by entering the required details.
  • Step 2: Click on Reports. Select the DP Holdings option from the dashboard
  • Step 3: Next, click on the download option. It is located at the bottom of the page
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How to download Tax Profit and Loss Report?

  • Step 1: Visit the Kotak Securities portal and log in to your account by entering the required details.
  • Step 2: Next, the top bar go to “Reports“. Select “Trades”
  • Step 3: The Trading report is now displayed. There is an option to download the report. To download click on the “Down arrow” and choose “Excel
  • Step 4: The file will be downloaded on your PC under the Downloads section.
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How to download Ledger for Kotak securities traders?

  • Step 2: Go to Services. Next, click on Account services
  • Step 3: Click on View my ledger
  • Step 4: Select the necessary filters and Click on Go. Click on NSE for details
  • Step 5: You can now view your Ledger Entries
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FAQs

How does the Tax profit and Loss Statement help me?

This statement represents your trading profits and losses and is used to calculate your Tax liability. Therefore, it is needed to file an ITR 3.

What is the difference between Trading and Demat account?

Demat accounts hold securities and certificates of stocks, shares, etc electronically while a Trading account lets you buy or sell those securities in the stock market.

Can I have 2 trading accounts?

Yes. An Individual can have as many trading accounts as they want. Additionally, you can link the same bank account with different trading accounts. However, you can’t have multiple accounts linked with the same broker.

Sovereign Gold Bond – Taxation on SGB

What is SGB – Sovereign Gold Bond?

SGB i.e. Sovereign Gold Bond are bonds issued by the government of India under the Sovereign Gold Bond (SGB) Scheme. SGB is government security denominated in grams of gold and is thus an alternative to holding physical gold. Investors such as Individuals, HUF, trust, university, and charitable institutions can invest in SGB. RBI i.e. Reserve Bank of India issues such bonds to the investors at an issue price with a fixed maturity.

The minimum investment is 1 gm and the maximum is 4 kg for Individuals and HUFs. It is 20 kg for trusts and other entities as per the government. These bonds are issued for a tenure of 8 years. Premature redemption is only possible after the completion of 5 years of investment. Additionally, investors can sell the bonds in the secondary market at the existing market price of gold.

Income Head for Sovereign Gold Bond

Capital Gains on Sale of SGB

Income from Capital Gains would arise on the redemption of SGB or sale of SGB on the stock exchange. Both redemption and sale are covered under the definition of transfer of a capital asset. While Redemption of SGB means its expiry on the date of maturity (including pre-mature redemption), Transfer of SGB is its sale on a recognised stock exchange.

IFOS Income from SGB

The RBI on behalf of the government pays periodical interest on SGB. The rate of interest is 2.5% per annum on the amount of initial investment. Interest is credited semi-annually and the last interest is payable to the investor on the date of maturity along with the principal.

Interest on SGB is taxable under the head IFOS (Income from Other Sources). The taxpayer should report the interest under Schedule OS in the Income Tax Return.

Tax on Sovereign Gold Bond

Tax Treatment on Interest

The Interest on SGB is taxable at slab rates under the head IFOS (Income from Other Sources).

Section 193 for TDS on Interest on Securities specifically mentions that no tax should be deducted on interest paid on government security. Thus, TDS is not applicable for payment of interest on SGB.

Tax Treatment on Sale or Redemption

Individual Investor

  • Redemption of Sovereign Gold Bond – Capital Gain on Redemption of Sovereign Gold Bond by an Individual Investor is exempt from tax since it is excluded from the definition of transfer as per Section 47 of the Income Tax Act.
  • Transfer of Sovereign Gold Bond – If the individual investor transfers the Sovereign Gold Bond by selling it on the stock exchange, it is taxable as LTCG if held for more than 12 months at the rate of 20% with indexation benefit, otherwise, tax is charged at the rate of 10% without indexation or STCG if held for up to 12 months at the slab rates applicable to the taxpayer.

Other Investors

The redemption or transfer of SG Bond in case of investors other than individuals is taxed as LTCG at the rate of 20% with indexation benefit or at the rate of 10% without indexation benefit. STCG at slab rates if held for up to 12 months.

Applicable ITR Form in case of SGB

  • ITR Form: If you have invested into SGB and earned Interest, you should file ITR-1 (ITR for IFOS Income). However, if you have redeemed or sold SGB, you should file ITR-2 (ITR for Capital Gains Income).
  • Due Date – 31st July of the Assessment Year. Thus, ITR for FY 2020-21 (AY 2021-22) should be filed on or before 31st July 2021.

FAQs

What is the benefit of investing into SGB (Sovereign Gold Bond) over physical gold?

SGB is a government security that investors holds in demat form thus eliminating the risk and cost of holding physical gold. The investor need not worry about the purity of gold and need not pay making charges if they invest into SGB. The investment in SGB is safer than physical gold since SGB is a government security, pays periodical interest and assures market value of asset on maturity.

What would be the tax treatment if SGB is bought on the secondary market and held it till maturity?

Tax treatment of SGB bought from the secondary market and redeemed (held until maturity) is as follows:
– Exempt if you are an Individual Investor
– Taxable at slab rates if STCG and at 20% with indexation benefit if LTCG if you are any other investor.

What is the rate of interest and how is it payable?

The bonds bear interest at the rate of 2.5% p.a. on the amount of initial investment. Additionally, the interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.

How will I receive the redemption amount?

The interest and redemption amount will be credited to the bank account furnished by the customer at the time of buying the bond.

Can I receive the bonds in the Demat form?

Yes. The bonds can be held in the Demat account. A specific request for the same must be made in the application form itself. Till the process of dematerialization is completed, the bonds will be held in RBI’s books. The facility for conversion to Demat will also be available subsequent to the allotment of the bond.

Can I use these securities as collateral for loans?

Yes, these securities are eligible to be used as collateral for loans from banks, financial Institutions and NBFCs. But, it would be subject to decision by authority and can’t claim as matter right.

Tax on Gifted Shares & Securities

A gift is a sum of money or movable property or immovable property received without consideration or inadequate consideration. Tax on shares gifted is defined under Section 56(2) of the Income Tax Act.

A gift of monetary value exceeding INR 50,000 is taxable as Income from Other Sources (IFOS) at slab rates. The gift received from a relative, or on the occasion of marriage, as inheritance or in contemplation of death is exempt from tax.

Gift of Shares & Securities

Shares and securities are considered as movable property. Trading plaforms like Zerodha have built a platform to gift stocks, mutual funds and bonds after introduction of e-DIS (electronic delivery instruction slip) by CDSL. Thus, it is now possible to gift stocks and securities to friends and relatives online.

Tax on Shares Gifted for Sender

  • On transfer of shares & securities:
    • The Gift Tax Act (GTA) was abolished in 1988 and thus sender need not pay tax on gifts.
    • As per Section 2(14) of the Income Tax Act, shares and securities are Capital Assets. The transfer of a Capital Asset is taxable as Capital Gains. However, the definition of ‘transfer’ as per Section 47 specifically excludes gifts. Thus, the gift of shares and securities is not taxable in the hands of the sender of the gift.
  • On the sale of shares & securities:
    • The sale of shares & securities is not taxable in the hands of the sender of the gift.
    • Clubbing of Income – If the receiver of the gifted asset is a spouse or minor child, any income that arises directly or indirectly from such asset is clubbed with the income of the sender as per Section 64(1)(iv) & Section 64(1A) of the Income Tax Act.

Tax on Shares Gifted for Receiver

  • On transfer of shares & securities:
    • If the monetary value of shares & securities is up to INR 50,000, such gift is exempt from tax.
    • If the monetary value (FMV) of shares & securities is more than INR 50,000, such gift is an IFOS income and taxed at slab rates.
    • Shares & Securities received from a relative is exempt income since gift from relative is exempt as per Sec 56(2)(vii)
    • Shares & Securities received on the occasion of marriage or inheritance or in contemplation of death of payer is exempt income since such gifts are exempt as per Sec 56(2)(vii)
  • On the sale of shares & securities:
    Capital Gains tax would arise on the sale of shares. To calculate the tax on gifted shares, the following must be noted:
    • Period of Holding: Calculate the holding period from the date of purchase by the previous owner i.e. sender of gift to the date of sale by the receiver of the gift.
    • LTCG – Equity Shares held for more than 12 months from date of purchase by the sender to date of sale.
    • STCG – Equity Shares held for up to 12 months from date of purchase by the sender to date of sale.
    • Purchase Date – The date of purchase by the previous owner i.e. sender of the gift
    • Purchase Value – The value of the purchase of the previous owner i.e. sender of the gift
    • Sale Date – The date of sale by the receiver of the gift
    • Sale Value – The value of the sale by the receiver of the gift
    • Tax Liability – Calculate tax liability as per the nature of the capital asset
Transaction Sender Receiver
Gift of shares & securities Not taxable Exempt Income or IFOS Income
Sale of shares & securities Not taxable Capital Gains

Clubbing of Income – If the receiver of the gifted asset is a spouse or minor child, any income that arises directly or indirectly from such asset is clubbed with the income of the sender as per Section 64(1)(iv) & Section 64(1A) of the Income Tax Act.

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Example

Rajiv purchased 2000 shares at INR 100 of ABC Ltd on 15th February 2020. He gifted 1000 shares to his mother, Shweta on 1st September 2020. FMV on 01/09/2020 was INR 200 per share. Shweta sold out these shares on 2nd March 2021 at INR 400. Calculate the tax liability.

Tax treatment for Rajiv (sender) – No tax liability since the gift of shares is not treated as a transfer of capital asset.

Tax treatment for Shweta (receiver)

  • On receiving a gift – no tax liability since gift from a relative is an exempt income as per Section 56(2)(vii) of Income Tax Act.
  • On the sale of shares. Here is the tax calculation:
    • Sale Date – 02/03/2021
    • Sale Value – INR 4,00,000 (400 * 1000)
    • Purchase Date – 15/02/2020 (as per previous owner)
    • Purchase Value – INR 1,00,000 (100 * 1000) (as per previous owner)
    • LTCG – 4,00,000 – 1,00,000 = INR 3,00,000
    • Tax on LTCG u/s 112A = 10% * 2,00,000 = INR 20,000

Reporting in ITR – Tax on Shares Gifted

The sender of the gift need not report the gift in the Income Tax Return. The receiver of the gift should report the gift under Schedule Exempt Income if the income is exempt or Schedule OS (IFOS) if the income is taxable. If the gift is taxable, calculate tax liability at slab rates.

On the sale of such shares & securities, report income as capital gains under Schedule CG. The taxpayer should file ITR-2 on the income tax website and pay tax at applicable rates.

Documentation

It is very important to maintain proper documentation for gift transactions. It is advisable for the sender and receiver to maintain a registered a gift deed as a proof of the gift transaction. In cases of scrutiny, this document can be used to justify the genuineness of the gift transaction and avoid charges for tax evasion.

FAQs

I have 1 lac shares. If I gift 50% shares to my brother, can we both claim LTCG exemption of INR 1 lac on sale of such shares?

If you gift equity shares, it is not considered as the transfer of a capital asset, and thus income tax is not applicable. A gift from a relative is exempt and thus it would be exempt for your brother. When your brother will sell the shares, capital gains would arise.
You can both claim the benefit of LTCG exemption of up to INR 1 lakh u/s 112A. However, to determine the nature of the gains, the holding period & cost of acquisition is calculated as per the previous owner (sender).

I want to gift shares to my friend, is it taxable?

If the monetary value of the gift is up to INR 50,000, it is not exempt as per Sec 56(2)(vii).
If the monetary value of the gift is more than INR 50,000, it is taxable in the hands of the receiver as IFOS and taxed at slab rates.
However, if the gift is given on the occasion of marriage, it is exempt as per Section 56(2)(vii) of the Income Tax Act.

Can I save taxes by gifting shares to my wife?

Gift of shares and securities to a relative is not taxable in hands of the sender of the gift and exempt in hands of the receiver of the gift. If you gift shares to your wife, there would be no tax liability on the gift transaction. Further, if your wife sells the shares, Capital Gains would arise and tax should be paid at applicable rates. On gifting of shares, the income would get divided and both can enjoy exemption limits. Thus, taxes would be saved.

Income Tax on Debt Funds in India

What are Debt 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 MFs has become very easy due to the availability of online trading platforms. Under Income Tax, trading in Debt Mutual Funds is classified as a Capital Gains Income.

  • Debt MFs – 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.
  • Equity Mutual Funds – Equity oriented MFs 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.
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Income Heads for Income from Debt Funds

Capital Gains on Debt Funds

Debt Funds – Since these MFs invest in debt instruments, the treatment is similar to other capital assets.

  • LTCG: Any gain arising on the sale or redemption of a debt fund held for more than 36 months is considered as LTCG.
  • STCG: Any gain arising on the sale or redemption of a debt fund held for less than 36 months is considered as STCG.

Debt Fund Taxation

The taxability of MFs would depend upon the nature of income. Capital Gains on Debt Mutual Funds are taxable as per the table below.

Type of MF Period of Holding Long Term Capital Gain Short Term Capital Gain
Debt Fund 36 months 20% with Indexation Slab Rates

Other Income from Debt Mutual Funds is taxable in the following manner:

  • Dividend Income – Exempt up to FY 2019-20. Taxable at slab rates FY 2020-21 onwards.
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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 Debt MFs 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 Debt Mutual Funds and Long Term Capital Gain of INR 2,50,000 from Equity Shares.

Now in the above example, Vijay needs to file ITR-2 for FY 2020-21. And his total income and tax liability will be as follows:

Particulars Amount (INR) Amount (INR)
Salary Income   870000
Capital Gains    
Short Term Capital Loss (30000)  
Long Term Capital Gain 250000  
Less: Exemption u/s 112A (100000)  
Taxable Long Term Capital Gain 150000  
Total Capital Gains after set-off of losses (taxed @10%)   120000
Total Taxable Income   990000
Tax at slab rate 86500  
Tax at special rate 12000  
Total Income Tax   98500
Health & Education Cess @4%   3940
Total Tax Liability   102440
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FAQs

How do I report income from trading in Debt Mutual Funds in the Income Tax Return (ITR)?

A trader should file ITR-2 and report income from trading in Debt Mutual Funds as Capital Gains.
Tax on LTCG – 20% with indexation
Tax on STCG – 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.

What is Indexation benefit?

Using the Indexation benefit, the taxpayer can adjust the Cost of Acquisition of the capital asset after considering the effect of inflation. Indexation is calculated using the CII (Cost Inflation Index) issued by the Income Tax Department. The taxpayer is allowed to calculate the indexed cost of acquisition to calculated capital gain on redemption of debt mutual funds. Indexation increases the cost of acquisition and thus lowers capital gains and tax liability.

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

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
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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.

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.
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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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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.

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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
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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.

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.

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

Calculation of Trading Turnover from Trading Income

Any person having income from trading in shares and securities should report it as income from business and profession. 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 calculation should be done only when the income from shares is considered as a business income and not when it is considered as capital gain income.

The method to calculate turnover for Income Tax on trading is different for each type of trade i.e. Equity Intraday, Equity Delivery, Equity F&O, Currency Trading, Commodity Trading, etc. To understand how it is calculated, we need to understand the meaning of Absolute Profit.

Absolute Profit for Trading Turnover Calculation

Absolute Profit means the sum of positive and negative differences. It is the sum of the absolute value of profit and loss of each trade during the financial year.

For Example:

  • Trade 1
    • Trader buys 400 units of Scrip 1 at Rs.100 on 25/01/2020
    • Trader sells 400 units of Scrip 1 at Rs.90 on 26/01/2020
  • Trade 2
    • Trader buys 200 units of Scrip 2 at Rs.45 on 25/01/2020
    • Trader sells 200 units of Scrip 2 at Rs.50 on 26/01/2020
  • Absolute Profit
    • Loss from Trade 1 = (90-100) * 400 = Rs. -4,000
    • Profit from Trade 2 = (50-45) * 200 = Rs. 1,000
    • Absolute Profit = 4000+1000 = Rs. 5,000

Method of Trading Turnover Calculation for Tax Audit Applicability

Examples

Equity Intraday Trading

  • On 25/10/2018 you buy 5 shares of Britannia at Rs. 5390 and sell them on the same day at Rs. 5350. Loss = (5350-5390)*5 = Rs. -200
  • On 24/10/2018 you buy 17 shares of RBL Bank at Rs. 483 and sell them on the same day at Rs. 488. Profit = (488-483)*17 = Rs. 85
  • Trading Turnover = Absolute Profit = 200+85 = Rs. 285

Equity Delivery Trading

  • On 14/11/2018 you buy 2 shares of Britannia at Rs. 5855 and sell them on 26/11/2018 at Rs. 5995. Profit = (5995-5855)*2 = Rs. 280
  • On 14/02/2019 you buy 9 shares of Hindustan Unilever at Rs. 1784 and sell them on 18/03/2019 at Rs. 1697. Loss = (1698-1784)*9 = Rs. -774
  • Trading Turnover = Sales Value = 2(5995)+9(1697) = Rs. 27,263
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Equity / Currency / Commodity Futures Trading

  • On 17/01/2019 you buy 75 units of Bank Nifty Futures at Rs. 10,922.95 and sell them on 18/01/2019 at Rs. 10,893.35. Loss = (10893.35-10922.95)*75 = Rs. -2220
  • On 05/04/2018 you buy 40 units of Bank Nifty Futures at Rs. 24,624 and sell them on the same day at Rs. 24851.7. Profit = (24851.7-24624)*40 = Rs. 9,108
  • Trading Turnover = Absolute Profit = 2220+9108 = Rs. 11,328

Equity / Currency / Commodity Options Trading

  • On 11/09/2019 you buy 80 units of Bank Nifty Options at Rs. 28.45 and sell them on the same day at Rs. 51.8. Profit = (51.8-28.45)*80 = Rs. 1,868
  • On 12/09/2019 you buy 40 units of Bank Nifty Options at Rs. 134.2 and sell them on the same day at Rs. 105.25. Loss = (105.25-134.2)*40 = Rs. -1,158
  • Trading Turnover = Absolute Profit + Sales
    • Absolute Profit = 1868+1158 = Rs. 3,026
    • Sales = 80(51.8) + 40(105.25) = 4144 + 4210 = Rs. 8,354
    • Trading Turnover = Absolute Profit + Sales = 3026 + 8354 = Rs.11,380
ITR for F&O Traders
CA Assisted Income Tax Return filing for Individuals and HUFs having income from F&O/ Derivatives Trading.
[Rated 4.8 stars by customers like you]
ITR for F&O Traders
CA Assisted Income Tax Return filing for Individuals and HUFs having income from F&O/ Derivatives Trading.
[Rated 4.8 stars by customers like you]

FAQs

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 purpose. 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.

I am an Intraday Trader. How do I calculate trading turnover to determine the applicability of a tax audit?

To determine whether a tax audit is applicable or not, calculate the trading turnover. In the case of Equity Intraday Trading, Absolute Profit is Trading Turnover. Absolute Profit means the sum of positive and negative differences. Eg: Loss from Scrip 1 is Rs. -5000 and profit from Scrip 2 is Rs. 8000, absolute profit = 5000+8000 = Rs. 13,000. If the turnover exceeds Rs. 1 Cr then tax audit is applicable.

I am an F&O Trader. How do I calculate trading turnover to determine the applicability of a tax audit?

To determine whether a tax audit is applicable or not, calculate the trading turnover. If you are investing in Futures, Absolute Profit is Trading Turnover. Absolute Profit means the sum of positive and negative differences. Eg: Loss from Scrip X is Rs. -5000 and profit from Scrip Y is Rs. 8000, absolute profit = 5000+8000 = Rs. 13,000. If you are trading in Options, trading turnover = Absolute Profit + Premium on sale of options. If the total trading turnover exceeds Rs. 1 Cr, tax audit is applicable.