Business Income from Trading : Calculate Turnover, Tax Audit,Treatment of Loss | Income Tax | Quicko
Vložit
- čas přidán 22. 07. 2024
- For Income Tax purposes Business Income from Equity Intraday and Derivatives (Futures & Options) Trading Activity can be divided into Speculative Business Activity and Non-Speculative Business.
Let’s look at Business Income from Income Tax perspective, in this video, we will learn
- Types of Business Income
- Calculation of Turnover for Trading in Equity, Intraday, and Futures & Options
- Treatment of Losses - Set off and Carry forward
- Tax Audit Applicability
- Expenses a Trader can claim
- Due Date to file Income Tax Return with Tax Audit & without Tax Audit
You can learn more on Learn by Quicko:
- What Expenses can a Trader claim? learn.quicko.com/expenses-tra...
- Treatment of Trading Income : Speculative and Non-Speculative Business Income : learn.quicko.com/trading-inco...
- Tax Audit Applicability from Trading Income:
learn.quicko.com/trading-inco...
- How to Calculate Trading Turnover?
learn.quicko.com/traders-calc...
- List of Documents required to file Income Tax Return for a Trader:
learn.quicko.com/documents-re...
- Treatment of Loss: Set Off and Carry Forward of Loss:
learn.quicko.com/set-off-carr...
- Tax Treatment for:
i. Equity Intraday Trading: learn.quicko.com/intraday-equ...
ii. Futures and Options Trading: learn.quicko.com/fo-trading-t...
iii. What is the Tax Treatment on sale of shares - Capital gains or business income? learn.quicko.com/sale-of-shar...
Ask us as many questions you want on our Tax Q&A and we will answer them in the simplest way possible :) qna.tax/
This video is made with love. Help us reach a wider audience - Like & Share the video. We are on a mission to simplify taxes for all.
Twitter: / howtoquicko
Facebook: / myquicko
Instagram: / howtoquicko
Linkedin: / quicko-com
Quora: www.quora.com/profile/Quicko-2
==== Video Details ===
Types of Income Heads: (0:00)
Types of Trading Activities: (0:11)
Income from Trading Activities: (0:40)
Tax Treatment: (0:52)
Turnover Calculation: (3:08)
Turnover Calculation for Equity Intraday: (3:41)
Turnover Calculation for F&O Trades : (4:24)
Treatment of Losses: (5:03)
Expenses that a Trader can Claim: (5:55)
Presumptive Taxation Scheme: (8:09)
Tax Audit Applicability: (8:50)
Documents required for ITR: (11:22)
Due Date: (11:54)
Which ITR to File: (12:23)
Outro: (12:38)
The Rules for Income Tax Audit have been updated by the Income Tax Department.
Read More on Tax Audit Applicability here - learn.quicko.com/section-44ab-tax-audit-income-tax
What a fantastic explanation, precise and clear.
Very helpful. Thanks for the prompt reply as well.
I have been searching for this presentation and here you are. Crisp and clear.
Hey Jay, we are glad you liked the content :)
Excellent presentation. I have never seen such clarity in any other presentation
Hats off to the presenter. What an excellent presentation it is!. Complicated/confused Tax provisions were simplified and exemplified. Thanks
Can't find better than this anywhere else
Thanks
Very nice. Crisp, clear & concise. Thanks
BEAUTIFULLY EXPLAINED. GREAT PRESENTATION IN A VERY EASY AND UNDERSTANDABLE METHOD
Brilliant and easy to understand the explanation ... thanks for using the presentation with examples ... i am going to file my returns thru your platform
Informative
Most waited video for beginners...thanks☺️☺️☺️
USEFUL....
very useful
thank u so much
Tax audit depends on the way you are treating your trading income. If you are treating your trading income as "normal business income" then only if the turnover exceeds 1 Cr you will be subject to audit, this less than 6% / greater than 6% rule does not apply if you declare it as normal business income. You need to just check your trading report and see the "turnover intraday" section (if you are using Zerodha). If this section reports a number less than 1 Cr then you do not have to do any tax audit. The entire section on audit that you described applies only if you treat your trading income as a "presumptive business income".
Quicko.com may please respond on the above opinion
Thanks l
Currency trading incomes with international brokers how can I pay tax which ITR and which income I can show
if i have loss in f n o trading and i have profit in equity short term capital gain. i don't want to carry forward my loss for next year then in this case can i avoid filling ITR3 AS I AM GOVT EMPLOYEE I WANT TO FILL ITR2
Sir I Have Stock Turnover Less than 1 Crore
Having Income Less Than 6%
Treading In - Intraday, Options , BTST , & Few With Delivery
No Salary Income
Having Dividend Income of 0.5L
Will I Need To Do Tax Audit ?
To derive Options turnover we need to take Selling value + Profit/Loss right?
Yes, options turnover is calculated as - Absolute profits + premium on options (Sales Value)
Very clear explanation. What could be the cost of tax audit in a tier 3 city?
Hi Umesh, the tax audit charges may differ based on the chartered accountant and the income situation of the taxpayer. Usually, tax audit charges for individuals range from INR 5000 - INR 15000.
Thank you
what is the correct nature of business code for intraday trading in itr3 for FY 20-21?
Waiting for your reply..
Hi Guru, the business code for intraday trading will be 09028 which is the code for sub-sector 'Retail sale of other products n.e.c'. For more details on business codes, you can visit here - learn.quicko.com/nature-of-business-and-profession-code
Is there any way to know whether my whole trading for year is auditable or not?
Hey Bharat, the applicability of Tax Audit under Section 44AB of the Income Tax Act is determined on the basis of total turnover and business profit/loss of the entire financial year. To check if you're eligible for a Tax Audit, use this tool - tools.quicko.com/determine-tax-audit
As f&o and intraday is treated as business income, do we need to open current account and pay advance tax.
Also want to know if creating a propiritership firm will help in this?
Every person whose tax liability for a financial year exceeds INR 10,000 has to pay advance tax on an installment basis. Income from all the different heads are added to calculate the advance tax. It is not possible to create a sole proprietorship but you could create a pvt ltd company.
Can Presumptive taxation be applied to delivery based long term trades?
Equity Delivery trading may be considered as capital gains or business income. However, such treatment should be consistent every year.
If trading in delivery based equity is considered as business income, you can opt for presumptive taxation scheme u/s 44AD if the trading turnover is up to INR 2 Crore. You must report at least 6% of turnover as business income and file ITR-4. However, you cannot carry forward losses.
You can read more about it here - learn.quicko.com/section-44ad-income-tax
How is pension income treated? Can Future and option losses be set off with income from other sources that include bank interest, dividends from stocks and income from LIC policy maturity etc…
Hey Karanbir, in the current year, you can set off your F&O losses against Income from other sources. However, if you are carrying forward your F&O loss, you can only set it off against business profits.
As for your first question, your pension income will be treated as your salary income. You can read more about it here: learn.quicko.com/income-tax-on-pension
Sir, Nice presentation. I was lecturer and used to pay income tax by using ITR 1 and present i am not doing job due to health problem and doing only stock market tradin and that too i got loss . can you tell which ITR form i have to use
Hey!
Check out our tool to determine which ITR to file - tools.quicko.com/know-your-itr-form
Ask us as many questions you want on our Tax Q&A and we will answer them in the simplest way possible :) support.quicko.com/hc/en-us/community/topics
@@Quicko Dear sir, I am trying to find out the ITR form by using the link provided by you . But it is not working . Can you please help me with the ITR form I have to file
thanks in advance
Srinivasa Murthy
Hey Srinivasa,
We have answered your query in detail on our Tax QnA - support.quicko.com/hc/en-us/community/posts/360073171751-ITR-Form
Is audit applicable when there are losses from intraday trading with turnover less than 1 cr ?
Hey Riya,
Income tax Audit is applicable in case you have losses from Intraday trades or profit is less then 6% of the turnover.
You can read more about it on our learn center : learn.quicko.com/section-44ab-tax-audit-income-tax
Hope this helps :)
No
Is it necessary to feed the detail of every trade in itr3..scripe wise detail is mandatory for intraday and short term trade??my ca told me that he has to do the scripe wise entry of all transaction in itr..how is it possible..i have 3000 trades
Hey, as per the ITR 2 utilities by the Income Tax Department for FY 2019-20 it is mandatory to report details of each trade like ISIN, share name, quantity, sale & purchase price, FMV as on 31st Jan 2018, etc under section 112A - read more on blog.quicko.com/section-112a-tradewise-details-of-ltcg-nightmare-for-traders
You can directly import those trades on to Quicko (zerodha.quicko.com) by login into your brokerage and we calculate the capital gains on the fly. Take a sneak peek : blog.quicko.com/how-to-file-your-taxes-this-tax-season
@@Quicko i hAve 2500 short term and intraday trade...
How is it possible feed all those entry in itr form...it will take lot of time to set one by one entry in itr???
Hey Kamlesh,
You can log into your brokerage account and import your trades on to Quicko. Or import using excel. Just in case you need help, feel free to get in touch with us.
quicko.com/contact-us
Hi,
If in intraday trading turnover is 10corer (leverage) &profit is 60000 is it taxable & auidt is to done or not please explain . How much will be the tax on 10core leverage
Hey Jayesh,
If the trading turnover exceeds INR 2 Cr, Tax Audit as per Sec 44AB(a) is mandatory. Trading in Intraday is a Speculative Business Income. So, you need to prepare financial statements, get your books of accounts audited and file ITR-3. Tax Liability is calculated on the total income from all income sources.
You can calculate your tax liability and determine tax audit applicability using our tools- tools.quicko.com/income-tax-calculator and tools.quicko.com/determine-tax-audit
Ask us as many questions you want on our Tax Q&A and we will answer them in the simplest way possible :) support.quicko.com/hc/en-us/community/topics
Hope this helps!
How much will be the tax if turnover will be 10corers please guide me for how audit should be conducted
Profit is less then 8% on turnover of 10cor please how much tax in rupess
Hey Jayesh,
Tax Liability is calculated on the profits from trading income and not the trading turnover. Can you share your contact details here- quicko.com/contact-us
So someone from our team can connect with you to understand your income situation and help you with the process, pricing and discounts.
If F&O turnover is 17L incurred losses of 1.5L with salary of 5L audit will be applicable? Please clarify.
It is recommended that you have your books of accounts audited by a CA.
As per, new regime we cannot claim deductions, ... My question is can we carry forward losses in case we opt for new tax regime
Hey Nanda Kishore,
If you have opted for the new Income Tax regime, you can carry forward and set off losses but you cannot claim deductions.
@@Quicko confusing, do u mean I can carry forward losses and offset against future profit
Hey Nanda Kishore,
Yes. You can carry forward the loss and set off against future profits. However, under the new tax regime, you cannot claim the Interest on a self-occupied property. Therefore, you cannot claim and carry forward the loss under the head house property. If there is a loss under any other head of income, you can claim and carry forward it to set off against future profits.
Check out our blog for clarity on Old Tax Regime vs New Tax Regime- blog.quicko.com/budget-2020-current-tax-regime-vs-new-tax-regime-causing-a-stir-for-salaried-individuals
Feel free to reach out to us on our Tax Qna, if you have any queries!
support.quicko.com/hc/en-us/community/topics
Hi, My F.Y. 2019-2020 Turnover of Equity, FnO, Currency FnO and Mcx FnO all together is 2.50 crore and there is trading loss of 5 lac. My other income is one lac in Cash and so I am below basic tax limit and I have taken loan of 6 lac by NEFT from my friend.
Do I have to go for audit ?
Hey, you can use this tool to determine if tax audit is applicable tools.quicko.com/determine-tax-audit/
Can we claim these expenses in individual accounts also?
Hi,
Income from F/O and intraday trading is reported as business income. Here, you can claim all trading related expenses like brokerage, transfer charges etc. and calculate the net profits. You will then have to pay taxes on these profits as per your applicable slab rate.
Thank u so much mam for great explaination....just one question pls.....suppose my pure intraday turnover is 1.75 crore and actual profit as per P&L is 1.25 crore.....so in this case can i file my ITR in 44AD?? In which i will show my presumptive profit@6% of 1.75 crore turnover which will be 10.50 lacs and pay income tax according to slab.....can i do this mam as per 44AD?????🙏🙏🙏🙏
Hi Amaan, you can file your ITR 4 u/s 44AD and show actual profits and pay taxes accordingly. Since u/s 44AD, you need to report profits i.e. 6% of the turnover or actual profits - whichever is higher. learn.quicko.com/presumptive-taxation-scheme
@@Quicko Hi
What is the limit for intraday option turnover
Fortax pleas tell us
This is for a salaried employee,he has made a F&O loss of Rs 889982 on a Derivative Turnover of Rs 18255803 ( Rs 1.82 crores),Is Tax Audit required?
Hey Divya,
Yes Tax Audit will be applicable as the profit is less than 6% of trading turnover and total income exceeds the basic exemption limit.
You can read more about Tax Audit here- learn.quicko.com/trading-income-tax-audit
Feel free to drop in your contact details here so an expert can get in touch with you :)
quicko.com/contact-us
Thanks for the information
I have a trading portfolio of rs.
40,000 do i have pay tax on this ?
Hey Rameez,
The taxability may differ based on the asset classes you trade in.
It is mandatory to file your ITR when your income is above the basic exemption limit. You can learn more about income tax on trading here - learn.quicko.com/income-tax-trading
Hi,
If my delivery based trading turnover is 3 crore but incurred net loss however intraday and fno turnover is less than 50 lakhs with a profit of 275,000. Is the Tax Audit applicable. If I show delivery based as short term capital gain in which case turnover does not matter and intraday and fno as business income where turnover is less than 50 lakhs with profit of 275,000. Please confirm if tax audit is applicable in such case.
Tax Audit as per Income Tax Act is required to be determined only if the equity delivery trading is treated as business income. Since the turnover for business income is less than 1 Cr and profit is less than 6% of turnover, tax audit would be applicable only if the total income from all sources is more than the basic exemption limit.
Read more about how to treat Sale of Shares as Capital Gains or Business Income here: learn.quicko.com/sale-shares-capital-gains-business-income
Feel free to ask us any tax-related queries on our TaxQnA & we promise to answer it in the simplest way: support.quicko.com/hc/en-us/community/topics
For any further queries you can contact us quicko.com/contact-us
Hope this helps :)
@@Quicko Thanks for your quick reply. In that case most of the traders would be required to do Tax audit even salaried employees as most do positional or swing trade with time margin of week to a month and operate with profit margin of 2 to 4 percent. It is still a good return considering time frame. As transactions increase so as the turnover. Trader is mainly concerned with the amount of profit made regardless of turnover.
Hi Parvez,
The Income Tax Act has defined its set of conditions under which tax audit is applicable in case of trading income. We can help you with filing your income tax return. You can drop in your contact details or write to us at help@quicko.com. One of the experts would get in touch with you on call to resolve your query and help you with tax compliance.
Hope you have a great day!
Thank you very much for information
VERY GOOD VEDIO EXPLANING ALL DETAILS. MY QUERRY IS THAT MY EQUITY SALES TURNOVER IS MORE THAN 2 CRORES BUT LESSS THAN 10 CR. AND MY RECEIPT/PAYMENT IN CASH IS LESS THAN 1 % OF TURN OVER. WHETHYER I NEED TAX AUDIT ? 2 ) DURING F.Y. 2019-20 DUE TO COVID MARKETS WERE VERY DOWN AND MY SHARES HOLDING AS ON 31/03/2020 WAS DOWN BY 1.5 CR.. MY ACCOUNTANT HAS TREATED THIS AS LOSS.AGAIN FOR F.Y.AS ON 31/3/2021 THE VALUE OF MY HOLDING HAS INCRESED BY 1.5 CR.AND MY ACCOUNTANT HAS CONSIDERED THIS AS PROFIT .IS IT RIGHT ? MY CONTENTION IS THE LOSS OR PROFIR FROM THE SHARE MARKET ARISE ONLY WHEN ONE ACTUALLY SALE THE SAHRES.PLEASE GUIDE ME .
SUDHAKAR
Hey Sudhakar, can you please post your on your online community platform Tax Q&a so that others can take a look at it as well - qna.tax/
What is the due date for filing F&O losses (ITR3) for trading activity done in 2021-2022?
Hey, the due date to file ITR for FY 2021-22 when tax audit is not applicable is 31st July 2022
In cases when Tax Audit is applicable, the due date to file ITR is 31st October 2022.
@@Quicko thank you. i will check if my trading activity is need auditing. if auditing is required what should i do @Quicko ?
@@VEERESHSEPB Hey, you can share your email address and contact number with us and we will get back to you for the same
Mam, I am IT employee. Have salary income. I did some trading during free time. But it was a loss. My turn over is Rs 3500 and loss is -1650. Loss only. It is more then 6% loss. Govt asking me to do tax audit is like jungle law isn't it ? What I should do, in this scenario. Can I ignore this loss and simply file ITR 2 with salary income
Hey Sunil,
You should report the trading income in the ITR. If it is an income from sale of equity shares or mutual funds, report it as Capital Gains Income and file ITR-2. If it is an income from intraday or F&O, report it as Business Income and file ITR-3. If you do not report such income in the ITR, the Income Tax Department may issue a tax notice.
Reach out to us on support.quicko.com/hc/en-us/community/topics incase you have any other questions!
Maa'm, In absolute profit method , do we calculate sell value - buy value of each day's trade or share wise trade during entire financial year
Hey Sarthak,
Absolute Profit should be calculated for each trade separately. It is called tradewise turnover. However, many brokers provide only scrip wise data. In that case, you can calculate absolute profit for each scrip which is called scripwise turnover.
Ask us as many questions you want on our Tax Q&A, we would love to answer them - support.quicko.com/hc/en-us/community/topics
@@Quicko thanks for the response. Can you pls tell , which method (trade or scrip) is mentioned in the income tax law for calculating the turnover ? Tradewise or scripwise. As per income tax provisions
The Income Tax Act does not specifically mention whether to use scripwise method or tradewise method for calculation of turnover. However, the most accurate method is to calculate tradewise turnover.
@@Quicko but when I tried filing return from your website through linking zerodha account. Your website calculated turnover on the basis of scrip only and not on the basis of tradewise. Whereas zerodha in its FAQs claims that it provides data on the basis of both scripwise and tradewise.
Hey Sarthak,
While Zerodha provides tradewise details, the Tax P&L Report from Zerodha reports turnover calculated on scripwise basis. Further, many other brokers provide scripwise details instead of tradewise details. To keep the turnover calculation consistent for taxpayers having trading income on multiple platforms, we calculated scripwise turnover.
You can refer to the steps to download a tradewise tax p&l report from Zerodha and view the scripwise turnover for each trading segment here- learn.quicko.com/download-tax-pl-report-zerodha-account
i am new here not filled itr before ... i dont have any salaried income. i have started doing intraday trading but am confused should i have to file ITR ?? Is it mandatory ? What are the advantages ? If i have a profit of 1 lakh rs in a year then i have to pay some more tax ?? or i just have to file itr and will get a return....
please help me out i dont know anything about tax n all.
Hey Krutik,
It is a good practice to file ITR and avoid the chances of getting a notice from the ITD. After the SEBI and ITD collaborations for data exchange, the income tax department can now have details of your trading activity.
If your income is below the basic exemption limit, you can file a NIL return.
You can drop your contact details here so one of our experts can get in touch with you - quicko.com/contact-us :)
Read more about Income Tax on Intraday Trading - learn.quicko.com/income-tax-intraday-trading
If you need any further assistance, leave your number here. I will contact you.
One thing I didn't understand. How can we show Turnover in schedule Trading ac or PL account in ITR 3.
Normally Sale - purchase = Gross profit.
But in case of intraday or derivative.. Turnover is absolute profit..which is too high.. how to get actual Gross profit or loss.. even if we claim expenses, we won't get actual profit or loss.
We do not show turnover. We start with gross profit/loss in Schedule Trading Account. Then add expenses in Schedule PL to get net PL.
I am govt employee and did trading in equity which itr i had to file ?
My turnover is less than 1 crore
Should i have to go tax audit ?
Hey Manish,
Check out our tools to :
Know your ITR Form- tools.quicko.com/know-your-itr-form
Determine Tax Audit Applicability- tools.quicko.com/determine-tax-audit
No
I have incurred loss however I want to show more than 8% of profits is tax audit required??
Hey Rahul, If you have incurred losses but want to opt in for Presumptive Taxation Scheme under Sec 44AD, you can do so by declaring minimum 6 or 8% profit of turnover/ sales and pay tax dues on the same. No tax audit will be required in the said case. Please refer to the below article for more details.
Please refer to the below article for more details - bit.ly/3tpe1dk
@@Quicko Thank you so much
If somebody sold shares of any company today and then from the same amount buy shares of other companies does he have to pay stcg
Hey,
Capital Gains is applicable when a Capital Asset is sold. If you have sold equity shares then capital gain is calculated as = Sale Value - Buy Value - Transfer Expense.
If you have bought shares of another company, STCG is still applicable.
@@Quicko sir If anyone is unemployed not having income through job but he is still investing and having stcg how can he file the itr plz elaborate
Hi,
You can report your trading gains under the Income head- Capital Gains. In case you have capital gains, you need to file ITR-2. Read more about it here- learn.quicko.com/capital-gains-and-tax
Ask us as many questions you want on our Tax Q&A and we will answer them in the simplest way possible :) support.quicko.com/hc/en-us/community/topics
@@Quicko Sir if anyone does not have income through job only having short term capital gains does he still have to upload form 16 and form 26AS
Plz elaborate
Hi,
If there is no salary income, Form 16 is not required. However, Form 26AS has details of any TDS deducted on any of your incomes, details of significant financial transactions and taxes paid if any. Thus, you must check Form 26AS before filing your ITR. You can read about it here - learn.quicko.com/form-26as-tax-credit-statement
In case you need assistance, feel free to get in touch with us :)
quicko.com/contact-us
Hi sir,
I have a query, I am very grateful if you answer me this query.
If the total expense is 7000 intraday(4000) and short term(3000).
Where we have to mention while filling the itr.
Do we have to show this expense?
If yes then how much in intraday expense or how much in short term expenses or both expense together.
expenses like (stt, brokerage, exchange transaction, GST, sebi, stamp etc)
Thanks
Hey, this article explains the answer to your question - learn.quicko.com/expenses-trader-claim-income-tax-return
@@Quicko
This is really not expected, well thanks for giving me your time.
I openly wants to clarify that I am looking for your paid services but now I have decided not to buy.
Hey Manish, we are sorry to hear that.
You can claim any expense directly related to your business income while filing your ITR. To learn more about the list of expenses you can claim, how to claim and more, you can refer to the above article. Also, feel free to shoot your tax related questions on qna.tax/ and we'll make sure to answer them in the simplest way.
My fno profit is 40k & turnover is less than 1 crore
Should i have to file itr?
Hello Niladri, it is always a good practice to file your ITR and report all your financial transactions to avoid notice from the Income Tax Department. Especially after the SEBI and CBDT's data partnership. (Know more - blog.quicko.com/cbdt-sebi-partnership-curb-tax-evasion) If your total income is below the basic exemption limit, you won't have any tax liability.
So i don't have to return any file
So even if a day trader is in loss, he has to pay income tax on his loss?
The trader has to file the income tax return to disclose his/her trading data to be able to carry forward or set off losses in the future.
What form should one fill if one has intra day income and some small business at the side.
ITR 3 or ITR 4?
I want to avail presumptive scheme.
Pls also tell about the difference between the two choices.
Hey Ajayraj,
Based on your Income situation, Quicko automatically chooses the right income tax form for you. ITR-4 (SUGAM) Form should be filed for presumptive taxation scheme u/s 44AD, 44ADA, or 44AE of the Income Tax Act.
You can use our tool to know which ITR to file: tools.quicko.com/know-your-itr-form/
Learn about the difference between ITR forms: learn.quicko.com/which-income-tax-return-itr-should-i-file.
@@QuickoI think we cannot specify details of speculative business in ITR 4 right. So how is ITR 4 suitable?
Hey @@ajayrajsharma2650, That's right, when you opt for the presumptive taxation scheme, in such case you can file ITR 4. However, if you do not wish to opt for the presumptive taxation scheme, you can file ITR 3.
Under ITR 3, you can report both speculative business income and presumptive income.
@@Quicko I would like to re-frame the question. Is it mandatory under Income Tax Act, to show business from speculative business separately, ie use ITR 3. Or can I just file ITR 4 and not worry about providing info that my business is speculative..
Hey @Ajayraj Sharma,
As per the IT Act, the taxpayer needs to report his/her income correctly while filing ITR. Hence, it is required to show business income from intraday trading is speculative, and in that case, you have to use ITR 3.