space
space

Get in Touch

spacer(91)-20-30242014
Tuesday
Mar 31, 2015
subscribe
You are here article details
 

Speculation And Non-Speculation Income

| 9/6/2012 9:00 PM Thursday

Income from intra-day trading is considered as speculation income and taxed as such. While speculation losses can be set off only against speculation gains, non-speculation business losses may be set off against short/long-term capital gains.

KEY POINTS:

  • As per Section 43(5) of the Income Tax Act, 1961, intra-day trading shall be considered as speculation business transactions and the income therefrom would be either speculation gains or speculation losses. Income from speculation gains is taxed at the normal rates.
  • Speculation losses can be set off only against speculation gains and not against any other head of income or non-speculation business income.
  • Short-term capital loss can be set off only against income from short/long-term capital gains.
  • Non-speculation business loss can be set off against the Long Term or Short Term Capital Gains made during the said year.

Q 1) Are intra-day transactions in the share market considered while calculating short-term gains/losses?

- Arup Saini

A:
Intra-day trading is the trading of shares within the same day. Generally, delivery is not taken in case of intra-day trading, and thus, these are said to be speculative transactions. As per Section 43(5) of the Income Tax Act, 1961, the said transactions shall be considered as speculation business transactions and the income therefrom would be either speculation gains or speculation losses. However, if based the on facts and circumstances of your case, you can prove that though delivery was not actually taken it was within your normal business transaction, it could be treated as non-speculation business income or a short-term capital gain.

As regards taxation, the income from speculation gains is taxed at the normal rates. Your tax liability would thus depend upon your net taxable income. If the income is treated as non-speculation business income/short-term capital gain (Securities Transaction Tax not paid), the taxation is at normal rates. However, if the same is treated as a short-term capital gain and the STT is paid, the tax is chargeable at specified rate, viz. 15 per cent plus education cess/higher education cess as applicable.

It may be noted that in case of speculation loss, the same can be set off only against speculation gain and thus cannot be set off against any other head of income or non-speculation business income.

Short-term capital loss can be set off only against income from capital gains, whether long term or short term.

Non-speculation business loss cannot be set off against salary income.

It may also be noted that trading in derivatives (futures and options) is treated as non-speculation business even though delivery is not effected in such transactions.

Q 2) In FY2011-12, I sold some immovable property from which I have earned capital gains. During the same year, however, I have also incurred a business loss. Can the said business loss be adjusted against the capital gains on sale of property to save on my tax liability? Please advise.

- Pritesh Parulekar

A: As per Section 70(3) read with Section 71(3), a Long Term Capital Loss can be set off only against a Long Term Capital Gain and no other source or head of income.

As per Section 70(2) read with Section 71(3,) a Short Term Capital Loss can be set off either against a Long Term Capital Gain or Short Term Capital Gain only and no other head of income.

As per Section 70(2A), loss under the head ‘Income from Business’ (not being a speculation business loss) cannot be set off against Income from Salaries. However, the assessee can set off the loss against any other head of income. Speculation business losses can be set off only against speculation business gains.

In view of the above, if you have incurred a non-speculation business loss, the same can be set off against the Long Term or Short Term Capital Gains you have made during the year.

Find More Articles on: Personal Finance, Tax, DSIJ Magazine, Tax Queries

Related Readings

Information Requested is Not Found

Top 10 companies with Lowest Foreign Institutional Investors (FIIs) Holding in BSE 100 Companies

DSIJ.in Exclusive

LatestMost PopularMarket Action

Index Trends And Stocks In Action March 31, 2015

Indian benchmark indices ended on an upbeat note on Monday, lifted by strong sentiments in global market. Capital goods, Realty, Automobiles, FMCG, Metal and Power stocks posted strong gains.  Nifty index in today session opened with a gap up and posted a higher top higher bottom pattern on 30-Min intraday chart.

Market Likely To Open Positive

Asian stocks rose across the board on Tuesday after a rally on Wall Street overnight after Beijing unleashed new policy moves to rejuvenate a wobbly property market, while Greek debt worries again haunted the sagging euro. SGX Nifty is up by 15 points. Indian markets are likely to open positive. The market will remain open for trading up to Wednesday only this week as it will be shut on Thursday and Friday for holidays on account of Mahavir Jayanti and Good Friday, respectively.

Markets Recover, Small Caps Outperforms

The Indian markets saw superb recovery in today’s session. The Capital Goods and Bankex stocks pulled the benchmark indices on the higher side. Mid-Caps and Small-Caps also outperformed and closed up by 199 points and 354 points respectively. All the scetoral indices closed on positive mark. As a result the Nifty ended today’s session with a gain of 150 points and closed at 8492 whereas Sensex closed 517 points up and closed at 27975.

Index Trends And Stocks In Action March 30, 2015

Indian benchmark indices slipped below crucial level of 8300 but bounced back as the index trim early morning losses. The recovery was led by the banking, capital goods and the auto stocks. Technically index saw a good buying from lower level with good volumes.

Markets Are Likely To Open Positive

Asian markets, with the exception of Australia, turned positive by mid-morning trade on Monday, as a modestly positive lead from Wall Street offset the impact of sliding oil prices. SGX Nifty is up by 24 points. Indian markets are likely to open positive. This week is a holiday-shortened one as the market will remain closed on Thursday, 2 April 2015, on account of Mahavir Jayanti and on Friday, 3 April 2015, on account of Good Friday.

Indices Closed Flat, Bharti Airtel Down By 5.7 %.

The Indian markets witnessed some sideways session in today’s trade after sharp fall witnessed in yesterday’s session. The sectoral indices like Bankex and Capital Goods recovered from their lower ends and were up by more than 200 points each. However Healthcare and Oil & Gas continued with the negative scenario and were down around 130 points each. The Nifty closed flat and was down by 0.75 point at 8341 while Sensex was up by 1 point and closed at 27458 at the closing bell.

Index Trends And Stocks In Action March 27, 2015

Indian benchmark indices ended with huge losses on account of global sell-off triggered by new tension in the Middle East and unwinding pressure on account of March Series Future and Options Expiry.

Nifty may flat at opening bell

Asian equities were mixed on Friday as fears over Yemen and weak data from the world's third largest economy weighed on sentiment. SGX Nifty is marginally up by 3 points. Indian markets are likely to open flat. The next major trigger for the Indian markets is Q4 results which will start during second week of April, 2015.

Sensex, Nifty Tanks, Bankex Falls By 528 Points.

The Indian stock markets witnessed a perpendicular fall after mid-session in today’s trade. The sectoral index like Bankex and IT has been hammered badly and were tanked by 528 points and 303 points respectively. Metals, Oil & Gas, Mid-Caps and Small-Caps also surrounded under selling pressure and were down more than 100 points each.The Nifty was down by 188 points and closed at 8342 level, while Sensex was down by 654 points and closed at 27457 level. 

Index Trends And Stocks In Action March 26, 2015

Indian benchmark indices ended lower extending losses to a sixth successive session. Investors and trader’s prefer to adopt caution approach, in absence of any major trigger. Capital goods, Power and Metal stocks declined. Technically, index is flirting around its important support of 8480 as defined by 100-day EMA and rising trend line joined from swing low level of 6639.

DSIJ Breakfast News

Start your day with DSIJ Breakfast Roundup, wind up with DSIJ Market Roundup. Register now to get the day’s market outlook, global cues, economic trends, top corporate news delivered straight to your inbox.

mail to

Start your day with DSIJ Breakfast Roundup, wind up with DSIJ Market Roundup. Register now to get the day’s market outlook, global cues, economic trends, top corporate news delivered straight to your inbox.

mail to  *
 *
 *
 *
 *
 *
Content

WE VALUE YOUR FEEDBACK

(* No Research/Stock Queries)
Name :
Email ID :
Cell Number :
Message :
Content