Hello... I am a salaried professional and do not find much time for intraday trading (nor do I have much inclinations)... In light of recent Covid-19 lockdown, I managed to get some time and tried learning intraday, with turnover of 52k and intraday losses of about 45k, which have further dented my ambitions of intraday trading... I don't want to carry forward losses as I will never venture into intraday again (and without speculation business I cannot overcome losses, so I would rather forego losses and focus only on longterm shareholding) It is also to be noted that my gross income is around 4L and net taxable income is around 1.7L... Though I don't have tax liability, I have filed ITR1 for the last 2 years (there was no trading involved then). Please clarify the following points: 1) Since I don't want to carry forward losses, do I really need to file ITR3 or only ITR1 would suffice? 2) My concern lies against tax audit - is it necessary even for a small amount of 50,000/- turnover? 3) Another important point is that intraday trading has broker margins involed, which makes trading volume look very high... Is it a cause for concern? 4) If you suggest ITR3 and I fill ITR3 this year, can I go back to ITR1 the next year as I don't see any trading being done? Please guide accordingly
Hi
First point of consideration is to decide whether the share trading transactions shal be taxable under the head capital gains or business income. Considering your case, I would suggest showing it under capital gain head.
1. ITR 2 shall have to be filed. If you consider under business, then ITR 3 would be applicable.
2. Not required on both cases above.
3. Not in your case.
4. Yes, you can file ITR 1 next year.
a) ITR 3 would be mandatory
b) No need of audit unless it corsses the limit of Rs. 2 Crore
c) No but it will be reported with income tax department by your broker so better to dislcose all the transactions in your income tax return
d) Yes for next year again on the basis of your income compositin you can file the return
Intraday trading is a business income and not capital gain income. It is a non-speculative income. In case of intraday trading, turnover is absolute sum of profit and losses and premium received.
1) Use ITR-3 and not ITR-1 for salary and business income.
2) Tax Audit is not applicable as the taxable income is less than Rs.2.50 lacs.
3) No. Prepare Profit & Loss account which will ultimately shows the loss from the intraday trading.
4) Yes you can file ITR-1 later on.
Dear Sir,
Hope you are doing well !!
1. Intraday income must be reported as a business unless you have only a few trades (say if only 2-3 trades) in the financial year. ITR-3 needs to be filed intraday trading income/losses.
2.Tax audit is not applicable.
3.No.
4.You may have filed ITR-1 or ITR-2 before but you must check ITR form applicability every year based on each income earned in that year.
Hello,
1. You will have to file ITR-3 if you declare such income as your business income. ITR-2 if you declare it as Capital Gain.
2. No. Tax audit won't be required.
3. No.
4. Yes, you can change ITR next year.
I hope that this answer satisfies your requirements.
Regards,
CA Hunny Badlani
If you are filing your return of income it is advisable to show everything properly.
No need for tax audit.
You said the volume is 50k is that the total turnover or is it something else?
Yes you can go back to ITR 1 next year.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you
You will have to mandatory use the correct ITR ie 3 to report the transaction. Unless you disclose the transaction, the department does not have any way to scrutinise it. You may not want to carry forward the loss, but the point is they may want to see if the income/ losses are reported correctly.
The tax audit limit is when the turnover is 50 lakhs / 1 crore. For 50,000 there is no tax audit required.
In case, you are reporting your transaction accurately, there is nothing to worry. Maintain adequate documents for showing income earned by you.
The government keeps changing form every year. Depending on your situation, you have to select the correct form. You can definately file 1, it you just have income from such sources.
