I am a retired person, dabbling occasionally in the markets, but not a serious trader. I place 30-40 trade orders per year. I need a few clarifications on the filing of income tax returns, involving my income/loss from day trading in equities and commodities. Should ITR 4 be used for filing returns? Is a tax audit necessary? What documentation is required for it? Is there any minimum turnover required to file returns? What amount is considered for calculating tax liability - gross value of contract or the net profit/loss? Last, I don't maintain trade-related documents. All the information is available on the broker's website. I show the short- and long-term profits from equity transactions in ITR 2 and not those of day trades.
Transaction from trading in equities/commodities without delivery is considered speculative transaction, taxable as business income.
Since day trading is without delivery of scrips, income/loss from it will be classified as speculative income/loss.
A tax audit is compulsory only in case the total sales/turnover/gross receipts exceed Rs 60 lakh. In day trading, a person trades in margin.
Therefore, if the difference of squared-off deals, without factoring in the positive or negative figure, exceeds Rs 60 lakh per year, tax audit is mandatory.
If the gains from day trading are Rs 25 lakh and the loss is Rs 55 lakh, then the gross receipts/turnover for this purpose will be Rs 80 lakh and tax audit will be compulsory.
However, the tax authorities may contend that the aggregate gross turnover should be considered for the purpose of tax audit.
You should maintain contract notes. If total income exceeds Rs 1.8 lakh, then you must file tax returns via ITR 4. In case your age is 60 or more, but less than 80, the exemption limit is Rs 2.5 lakh.
Can I seek deduction for stamp duty and registration fee paid for the purchase of a housing property?
Yes, Section 80C allows deduction for the amount paid towards stamp duty and registration fee.
The maximum deduction allowable is Rs 1 lakh.
Other than deductions under Section 80C, how else can one save taxes?
Under Section 80CCF, a deduction of up to Rs 20,000 is available for investment in notified long-term infrastructure bonds.
Under Section 80G, donations made to approved charitable institutions are deductible. Premiums paid towards health insurance for self and family are also deductible under Section 80D: Up to Rs 15,000 for self and Rs 20,000 for elderly parents.
Does one have an option of paying tax through advance tax? Who is eligible for it?
One is liable to pay advance tax only if the assessee has income other than salary, and the tax on such income exceeds Rs 10,000 per annum.
The writer is a tax partner at Deloitte, Haskins & Sells. Views expressed are his own. Send your queries at yourmoney@bsmail.in
