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Income Tax Guide for Share Market Profit & Stock Trading Income in India - By Assetyogi - YouTube
Channel: Asset Yogi
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Income tax from stock market income
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This topic becomes a bit complicated,
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in general, when we have multiple sources of income,
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such as salary income,
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we may have income from business or profession,
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many times we invest, we get capital gains,
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there can be some income from them too.
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That is, if some people trade in Intraday,
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futures and options or do positional trading,
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some income can come from that too,
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there is a lot of confusion in it, after all, first we can reduce our tax liability
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either how or which ITR file.
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We are going clear all the confusion here,
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we will be in the video detail,
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we will also see how we can make our ITR file easy.
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stay tunned
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To see the latest finance videos, subscribe this channel
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and press the bell icon and click on all
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so that you will get the notification of the latest video.
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So friends, first of all, let us talk about how we can reduce our tax liability.
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In this, first of all, we must know that Tax Evasion,
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does not mean to reduce the tax liability.
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That is an illegal method,
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that is, if you used to pay some tax, if you did not pay it,
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then it is definitely illegal.
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But if we are tax planning
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then it can be a completely legal way,
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the government tells us that we should do maximum tax planning,
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many provisions have been given for that
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so that our tax liability can be minimized.
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And what are its ways,
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if someone is a salaried individual, then we have talked about it in many videos.
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We can make tax saving investments which reduce our tax liability.
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you can watch that video too.
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If we talk about stock market income then
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then our income comes either in the form of capital gains
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or it comes in the form of trading i.e.
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our profits from trading.
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it is counted as business or professional income.
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In that how we can reduce our tax liability,
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we are going to know that in this video,
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along with what provisions are applicable, we will also understand in details.
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If we want to reduce our tax liability as much as possible from the stock market
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then it will play a big role that how we plan our business expenses.
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Or how to plan your capital gains
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If we understand all this rules,
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then whether our income from the stock market is 10 lakhs or 15 lakhs or 20 lakhs
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then our liability can be very less in fact in some cases it can also be zero.
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So let's know how it is possible,
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So friends, first of all we will talk about investing
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that if we invest money in mutual funds in stocks somewhere,
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then what kind of our taxes are?
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And what ways do we have to protect those taxes?
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First if we talk about asset class Equity
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i.e. if we are investing in Stocks or investing in equity mutual fund
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i.e. which mutual fund mostly invests its money in stocks
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or if we are talking hybrid equity oriented Mutual funds,
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hybrid means some money is invested in stocks,
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some money is invested in debt instruments ie bonds etc.
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Where most of the money is invested in equity i.e. stocks
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which we will call Equity Oriented Mutual Funds
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then their treatment is same,
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if in this type of instrument,
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if we take holding period of more than 1 year
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that means whatever profit is made After 1 year,
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we will call it Long Term Capital Gains,
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whatever profit we make, we will be taxed at 10%
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and it is not that your profit of 50000 is within the whole year then it will also be taxed.
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If your total profit from stocks or equity mutual funds
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is more than one lakh, then only you are taxed.
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And whatever amount is above one lakh, there is a tax of 10% on it,
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but here we also have some provision to save it,
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if we had a long term capital loss in the past few years,
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suppose you lose 10 thousand last year.
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that 10,000 you can minus from your gains this year.
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So this is the long term capital loss, it can be carried forward for 8 years.
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But we have to keep one thing in mind,
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That which is the long term capital loss,
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we can set it off from the long term capital gains.
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We cannot set it off Short term capital loss with short term capital gain
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Now let's talk about short term capital gain.
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if our investment is less than 1 year,
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i.e. we have sold some stocks or some mutual funds within 1 year.
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then we will call it short term capital gain as much as profit we have.
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We will be taxed on it at 15%
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wherever short term capital loss can be set off any short term capital gains.
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and can be done up to 8 years.
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So it is a matter of Equity.
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Now let us talk about Non-Equity
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what happens in non-equity,
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Gold can be mutual funds can be debt mutual funds,
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or can be Hybrid Debt Oriented Mutual funds.
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That is, where maximum money is invested in bonds or in debt securities.
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Here, if our holding period is more than 3 years
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Only then it is consider as long term capital gains.
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if we have long term capital gains then within a year,
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we will be taxed at 20%
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but here we get indexation benefit.
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about Indexation Benefit I will talk to you in detail soon,
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Here also the long term capital loss which occurs
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can be set off from the long term capital gain.
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And it can be done for 8 years.
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now if we talk about short term capital gain
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if we remit this investment in less than 3 years
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then we will call it short term capital gain
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and our tax on it will be as per individual tax slab Accordingly,
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whatever our income has come, this income will be added within that year,
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suppose we have 20% slab, then 20 percent tax will be levied
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and if there is 30 person slab then 30 percent tax will be applicable
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and here Also short term capital loss can be set off from short term capital gain
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and can be done up to 8 years
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and this is our taxation on investing.
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now we talk about an inflation index in this
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what is this indexation benefit,
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then See this means very simple,
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suppose I put ₹ 100 in an investment today,
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but after 10 years that amount becomes ₹ 200,
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then it is not that I have made a profit of ₹ 100, and on that I have to pay tax,
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somethings can increase because of inflation,
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then the government says that you have to pay tax on
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top of inflation.
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You will get the Cost Inflation Index from the Income Tax website,
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so it has been given from 2001 to now 2021-22,
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Suppose, if someone would have put ₹ 100 because of the inflation,
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then 2021-22, then due to 317 inflation,
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the amount is 317. Whatever amount will be above,
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we will have to pay tax on the same, the government means to say
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that how is it calculated,
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we bring which is our purchase value in today's date,
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suppose, I did investment within 2015-16,
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and I sold it within 2021-22,
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what you have here in 2015-16,
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I am taking it within 2021-22,
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then the index will be the purchase value,
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what will be my purchase value as of today's date,
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then the purchase value in to cost Inflation Index Sale Year
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317 Divided by Cost Inflation Index Purchase Year
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i.e. Divided by 254
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So here, if I take a example,
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let's take the purchase price let's assume an investment was 1 lakh,
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in 2015-16
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Let's assume my sale price in is 1.5 lakh in 2021-22.
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So how much has my index purchase value become one lakh
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i.e. this is the amount of 100000, I will divide it by 317,
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which is my CI in today's date i.e. the CII in the sale.
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I will divide it 254,
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with This will come to my amount of Rs 1,24,803
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and my long term capital gains tax will be applicable basically,
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this is my sale price 1.5 lakhs out of that I will remove this amount
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which is my index purchase value.
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After that I will multiply it by 20%,
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then see my long term capital gains tax, in this case it will be only 25,000.
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Otherwise actually how much was my profit I had a profit of 50,000.
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so if I get 20 percent tax then my tax will be about 10,000.
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In this case, my tax is getting close to 5000, my direct tax liability becomes half.
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to take the benefit of indexation very important to us,
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now let's talk about taxation on trading.
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So far we have talked about all the investing,
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normally trade in people trade in Intraday.
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Intraday trading is counted under speculative Business Income.
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Whatever income comes in, it will first be counted for within the business Income,
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in that too a head will be formed, which we will call speculative business income.
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Whatever will be the tax rate, according to the income tax slab, you will be taxed here accordingly.
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But even here if all the losses in our past we have bear,
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Can set them off against gains.
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But all the speculative losses that have happened i.e. any losses you have
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incurred on account of intraday or any other speculative income
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can be set off against speculative gains.
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And how long this set top can be carried forward till 4 years,
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now if we talk about futures and options,
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Whether we are trading in Equity or Currency or Commodity in Futures and Options.
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It is counted for in non-speculative business income.
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Although many people will think that why does it is not put in speculative,
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then it is definitely debatable,
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but as per law, it is considered as non-speculative business income
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and tax rate will be as per income tax slab
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what will happen to Non-speculative loss,
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in this case, it can be set off with any business income,
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Whether it's Rent or whether it's Bank interest
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or whether it's your capital gains or any kind of business income.
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it can be set off in every case,
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But if it's speculative gains i.e. suppose you have some loss in futures and options
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then it cannot be set off against speculative gains.
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That is, suppose you have gained something in Intraday.
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The loss on the futures and options thereof will not be set off.
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So its loss will be all set off only in the non-speculative business income.
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which we have have talked about
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and how long it can be set off, it can be set off till 8 years
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Let us now talk about another scenario,
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suppose you traded within a few Stocks within less than 1 year,
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suppose you sold a stock only after 2 months,
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then it is not even intraday.
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But it is not even a long term investment,
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so what will be the treatment in such a case,
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see here there can be two types of treatments.
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First of all, it can be treated as business.
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Someone might say that this is my business. i do this everyday,
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then it's a way too,
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Secondly, it can also be considered as Short term capital gains.
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Some provisions have also been given to clear this confusion,
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First of all, how have you kept the accounting treatment,
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are you considering it as a capital asset,
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whichever has bought your stock or is it a stock-in-trade
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that I bought today and sold tomorrow like every commodity is trading,
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like if a clothes trader or toy trader
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then they maintain stock-in-trade.
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also similarly, are we considering stocks as stock-in-trade.
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So, what treatment are we using in accounting?
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If you declared that this is my business,
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then this is go on in future
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Then, how many frequency of trades are there,
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Many people will say that I have to pay only short term gains tax
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because that is only 15% of my business income,
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if I accept this in business income, then I will have to pay 30% tax.
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You will say that I will treat it as a capital gain.
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But it is not necessary and the Income Tax Department will see your frequency of trade,
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that is, how often you are trading more,
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if you are trading very less, say you are doing less than 10 or less than 2 trades.
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Within a whole year, the income tax department can accept capital gains.
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Then how much has been your holding period, generally
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are you earning dividend income or are you earning mainly profit,
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what is your motive?
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It also becomes very important
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It is very important that you should treat it right,
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if you do trade very frequently,
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that is your main business, then you should show it as business income.
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Let us now talk about what is the treatment of dividends of dividends.
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See, earlier dividends used to be taxable under the hands of the company,
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then the company was already paying dividend distribution tax,
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but now it has changed,
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according to the income tax slab, your rate will be charged.
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Whatever dividend you get in the year, it will be added to your income,
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then if we talk about securities transaction,
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then when we take delivery of any stocks,
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then we get 0.1% securities transaction tax.
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So here one thing we have to keep in mind
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when we are talking about Capital Gains we do not have to include STT in that,
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We do not have to add STT to the value of whatever stock we have buyed or sold.
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Second, we can consider STT as an expense within business income
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i.e. we can subtract that amount,
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So it was a matter of all the taxes,
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how is the tax applied on Investors and traders,
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now we will talk about which ITR we should fill, in which cases.
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First of all, talking about ITR-1, it is for salaried individuals or those who get pension.
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Income from one house property is included in it,
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Interest income i.e. fixed deposit
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or all the interest in the savings account, all the dividends you get,
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family pension, all that is included in it.
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But your total income should be less than 50 lakhs,
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So, this is ideal for Salaried Individuals.
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In which case you should not use it,
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if you are a director in any company,
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that is, you are doing business,
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then you do not have to use this or you are equity shares holder
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in any unlisted company then you don't have to use ITR-1.
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If we talk about ITR 2, then all ITR-1 cases are salary income from
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house property interest dividend, all this is included in it.
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But if you get more than one house property in house property,
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if you get any income like rent, then you can include that too
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there is no limit of income.
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but the most important thing here is that
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You can take capital gains here,
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if you are an investor,
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if you take salary and also an investor, then this is the ideal ITR for you to file.
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But if you have any type of business income then you should not file this ITR
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then if you have any type of business income in which trading income
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is included or F&O income is included
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then you should file ITR-3
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This is the main ITR for you,
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If you have confusion anywhere then you can
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file ITR-3 blindly there is no problem
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because here all your heads are covered
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salary also covered income from house property is also covered,
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Interest, dividend covered and Capital gains are also covered,
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business income is also covered i.e. speculative and non-speculative
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intraday, f&o everything is included, there is no limit of any method here,
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whether you are an Salaried, investor, a trader or a business man,
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there is any combination of them, even then you can use ITR-3.
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i.e. it can be used in all individual cases
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but if you are a private Limited form or LLP,
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then you do not have to use it,
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in that case your ITR 6 is used in case of private limited.
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ITR 4 is also one here,
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But here there is confusion to many people that,
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if my business income is from futures and options or
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from intraday then I can use it
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defintely you can use it here
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but here it is said that,
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This method has been made for small tax payer,
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here your income which comes from salary from single house property
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or interest of dividend and business income is prisomtive
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i.e. it is assumed that suppose you have a business,
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what happens in the case of business,
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you have to do audit,
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you have to do bookkeeping, you have to maintain all the accounts.
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But for those who are small business man,
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this very simple ITR has been made for them,
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which means that if you have an income of less than 50 lakhs
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within 1 year then you can use this form.
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It is assumed that your total turnover,
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you should consider your profit as six or seven percent.
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You pay tax on it,
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it is assumed as your margin.
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But you should not use it for tax Evasion at all,
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and secondly, it also comes with a problem that these Capital gains are not included in it.
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In general, those who trade or invest in the market
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have capital gains in some form or the other,
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then we should as traders and investors avoid ITR-4.
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This is for small businesses and salaried men,
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so if you have any kind of capital gains then don't use it.
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And do not use it to reduce the tax liability forcibly,
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then friends, we have talked about all the tax provisions,
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which ITR should we use for traders for investors Ideally
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but still can be quite complicated
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when We have multiple sources of income,
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we have capital gains, somewhere there is so much trading income, we have multiple Demat accounts,
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and most of us do not even have expertise or time,
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so most of the people use software.
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So there seems to be a lot of easy to use software here. that is Quicko.
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I have tried many softwares,
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I will tell you why I am recommending this to you.
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Its main reason is that they have done multiple integrations
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with most of the Demat accounts i.e. most of the stockbroker's Integration,
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so wherever your P&L is it Instantly Pulls it,
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I have given a link for Quicko in the description below,
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then you can login by going here, you can also login with Google
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or if you want, you can also login with broker account,
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whichever broker you have an account with, after that Enter your PAN,
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after that your dashboard appears in front of you.
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So all your details are available in your dashboard.
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Then you can plan your taxes,
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you get to know how much ta is generated in your old regimen or New regime
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then you get to chose.
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You get the P and L summary
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that how much your capital gain is now you can see capital gain can see business income
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you can also login here through multiple stockbrokers,
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i.e. all the accounts you have with all brokers and your P&L.
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So I haven't seen such Integration in any other software so far,
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then if you want to file then you can also file directly with this software.
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your ITRs.
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So friends, this was our income tax guide for stock market income.
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I'm sure you must have got to learn something new from this.
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Somewhere, if you find this use again, then definitely like and share it
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with your friends and family members.
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Those people who invest or trade in the stock market,
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or get extra business income of any kind,
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then this video is going to be very useful for them.
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If you have any suggestion, you have any query related to channel related
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to this video, then you can do it in the comment section below.
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In fact I also try to reply after reading all the comments in 1 hour.
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And if you have not subscribed this channel yet,
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then subscribe from below and press the bell icon on your phone.
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So that you will get notification of latest finance videos.
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So see you in the next finance informative video like this,
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Till then keep learning, keep earning and be happy as always
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