Markets
BSE See NSE See 27,803.24
92.72 (0.33%)

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

collapse Related Readings collapse

DSIJ
Mindshare

Tata Metaliks QoQ results drop; BSE revises circuit limit

Tata Metaliks QoQ results drop; BSE revises circuit limit

Tata Metaliks, a subsidiary of Tata Steel is a manufacturer of foundry grade pig iron in India. The company has posted its quarter ended June 2016 results with mixed topline and bottomline numbers.

Must watch: Cairn -Vedanta merger by the year end

Must watch: Cairn -Vedanta merger by the year end

Vedanta, Cairn India and Vedanta Resources plc have declared their revised and final terms to the recommended merger between Vedanta and Cairn India. The deal status has come after trading hours on Friday.

Indices close on upper hand;Tata Motors up by 3.2 %

Indices close on upper hand;Tata Motors up by 3.2 %

The Indian markets pulled up after the mid-market session in the end of July's fourth week. Auto and Capital Goods provided handsome support to indices and both were up more than 150 points. The Sensex recovered over 150 points from the day’s low and ended 92 points up at 27803. The Nifty ended 31 points up at 8541.

Axis Bank results fail to impress in Q1FY17

Axis Bank results fail to impress in Q1FY17

Axis Bank post market hours on July 22 has declared its Q1FY17 results. The bank has posted a timid result in this quarter. Bad loans have been the major reason for such devastating results in this quarter.Bank has reported a net profit of Rs 1560 crore in Q1FY17.

Overnight Digest – Stocks to look out for on July 25

Overnight Digest – Stocks to look out for on July 25

The stocks which could witness a significant movement on July 25 are Ponni Sugars (Erode), Bajaj Corp/Canara Bank, Bharti Airtel/Idea Cellular/Reliance Communication, State Bank of India and L&T Finance Holdings.

Bharat Financial Inclusion surges over 11 per cent on superb results

Bharat Financial Inclusion surges over 11 per cent on superb results

Bharat Financial Inclusion, formerly known as SKS Microfinance has posted remarkable financial results in Q1FY17.Total income from operations stands at Rs 368.96 crores. Total income has increased by a whopping 53 per cent as compared to Q1FY16.

Ashok Leyland posts blockbuster earnings in Q1FY17

Ashok Leyland posts blockbuster earnings in Q1FY17

Ashok Leyland has declared its Q1FY17 results on July 21. The company’s revenue has increased by 10.87 per cent to Rs 4259 crore in Q1FY17 as compared to same period in previous financial year. 

Mid-market commentary July 22

Mid-market commentary July 22

Indian markets remained subdued where the benchmark indices, Nifty and Sensex traded absolutely flat. Broader markets outshined the benchmarks where both Midcap and Smallcap increased by 0.68 per cent and 0.72 per cent respectively.

Weak Q1FY17 results fail to dampen Cairn India's spirits

Weak Q1FY17 results fail to dampen Cairn India's spirits

Cairn India has declared its Q1FY17 results on Thursday. The company’s revenue has decreased by 28.24 per cent to Rs 1885 crore in Q1FY17 as compared to same period in previous fiscal year. 

The three musketeers for Mutual Funds

The three musketeers for Mutual Funds

Are you interested in knowing the top three picks by mutual funds in the banking space? These three banks are the hot favourites with the mutual funds as is seen by the amount of money being invested in these stocks, viz., HDFC bank, Axis Bank and ICICI Bank. 

Subscribe to
Newsletter

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

Market
CHIT CHAT

What is your view on markets today?

200  Characters Remaining.
Please LOGIN  to post your comments or Click here to go back.
Nirmal Srinivasan Jul 23 12:05PM
Buy Pennar Ind good profit Target 66rs
king maker Jul 23 11:16AM
hello all, i will come back soon n help u with stocks...just busy with my personal works,will join u soon
Arnab Mandal Jul 22 10:53PM
Buy NBCC. It will get double
Harshil sanghavi Jul 22 03:58PM
mahindra finance will fall by 4-5% tomorrow
Sonal Verma Jul 22 03:49PM
Biocon India bought at Rs. 711.30 and sold at 816.95 Rs.