Taxation in Capital Market
Having trouble with your taxation? Sitting with your CA and sorting out all your confusions and still doing appropriate tax saving is a cumbersome business and here we help you with an easy prep for a good understanding of taxation in Capital Market. See Taxation gives you heart-attack, we know it and we care for you, so here we stuff you up with the required knowledge if you are dealing in Capital market and have troubles with taxation.
Well, First thing first, the due dates, what are the due dates for filing the returns? The dates are July 31 for the individuals and September 30 for the companies, irrespective of the business or trade they are into. And Also the accounts needs to be audited in case the total turnover exceeds 1crore and on failure of submitting the tax audit, a penalty of 0.5% or 1.5 lakhs, whichever is less will be imposed. The gains made from Stock Exchanges are usually distinguished under the head Capital gains and will be taxed as per their holding period.
There are two types of Capital Gains in case of Investment in capital market and they are:
- STCG (Short Term Capital Gain)
- LTCG (Long Term Capital Gain)
STCG: If you have made any gains from shares within 1 year then it is known as STCG and it will be liable for 15% taxation. You can always set off your business expenses with this gain in STCG. Any STCG losses can be carried forward to 8 years and can be set off against business income. There is also one category as Intra-day meaning the transactions where buying and selling happens in a single day and any gains or losses made from it are called Speculative Gains or Losses. These Speculative gains are deemed as business income and taxed accordingly and the speculative losses can be carried forward up to 4 years but cannot be adjusted against any other profits.
LTCG: If you have invested in shares and stocks for more than 1 year then it will be known as LTCG. In case of profits, the profit will be liable for 20% taxation and if you have already paid STT (Security Transaction Tax)then it is exempt from tax under section 10(38). In case of Loss, if STT has been paid already then it cannot be adjusted against STCG but if not paid then it can be adjusted.
What to do with Brokerage, STT and other Trading Costs?
STT is paid during our buying when dealing in trading stocks so no further treatment is required as it will be already included in the cost of your shares and derivates and all your trading and other costs or expenses can be shown as your expense on while calculating your gross income.
Which ITR form to use?
Depending on your source of income the ITR forms are to be filled and ITR 1, 2, 4 are generally used for individuals with either salary income with rentals or salary income with rentals and interests, or business and profession income, and ITR 6 is to be filled by the companies.