ZenIT || How to Fill Intraday and Speculative Business Income
What Is Intraday Trading:
Shares bought and sold (long trades) or sold and bought (short trades) within a single trading day are known as intraday trading. The trader’s purpose in intraday trading is not to own the equity shares but to take advantage of short-term price movements and make profits the same day. These profits are taxable. There is no separate speculative income tax rate in India, as such profits are taxed according to your income tax slab.
Understanding Capital Assets and Trading Assets:
A share can be called a 'Capital Asset' or 'Trading Asset or Stock-in-Trade' depending on whether you are identified as an investor or a trader:
A) Investors: are those who invest in stocks or other securities for the long term with the intention of holding them for a considerable period. They aim to earn returns through capital appreciation (income on the sale of shares) and dividends. The income generated from the sale of shares is taxed as 'capital gains.' It is further classified as long-term and short-term capital gains based on how long the shares are held.
B) Traders: are those who buy and sell stocks or other securities frequently with the intention of making a profit through short-term price movement. Their income from trading is treated as business income, and they are required to file their returns under the head "Profits and gains from business or profession." Their profits are taxed as per the applicable slab rates, which can go up to 30% depending on their income level.
In short, investors are taxed on their capital gains, while traders are taxed on their business income.
Capital Assets:
Long-Term Capital Gain (LTCG) or Loss.
Short-Term Capital Gain (STCG) or Loss.
Trading Assets:
1) Speculative Business Income: Intraday transactions are speculative in nature, and hence, the income from these trades is called speculative business income. Income tax on intraday trading profit in India falls under this category.
2) Non-Speculative Business Income: All share transactions that are not speculative in nature fall under the category of non-speculative transactions. These include delivery-based equity trades, equity futures and options, commodity trades (both delivery and futures/options), and currency trades (both delivery and futures/options). Hence, the income from these transactions is called non-speculative business income.
What Is Turnover For Intraday Trading:
Turnover for Intraday Trading = Absolute amounts of Profit/Losses
Absolute turnover means the sum total of positive and negative differences (the loss amount will not be deducted but added to the profit amount). Trading Turnover can be calculated either as a scrip-wise or a trade-wise method.
Example of trading turnover:
Mr A buys 1000 shares of ABC LTD at ₹75. he sells them at the end of the day at ₹80. On the next day, He buys 2000 shares of XYZ LTD at ₹500, which she sells at ₹460 at the end of the day.
Profit from 1st Trade = (80-75) * 1000 = ₹ 5000
Loss from 2nd Trade = (460-500) * 2000 = ₹ -80,000
Absolute Turnover = 5000+80,000 = ₹ 85,000
How to Enter the Intraday Trading Business Income In Software:
To enter intraday trading business income, follow these steps:
Step 1:
Go to Transaction >> General Information /BS/ P&L >> Profit And Loss a/c:
Step 2:
Go to Point number 12a and b in P&L a/c:
A) 12a: Enter the Turnover From Intraday Trading.
B) 12b: Enter the Income From Intraday Trading - Transferred to the Profit and Loss account:
After entering the intraday trading turnover and profit & loss, click on "Save" to save the P&L account.
Here, normal business and intraday business profits are shown in point number 53 of the P&L account. Therefore, we need to bifurcate the profit into the related heads of income Manually.
Step 3:
Go to Transaction >> Business and Profession Income >> Ordinary/ presumptive:
Click on "From Gen. Info P&L(53)" and then the profit/loss from point number 53 of the P&L account will populate automatically. You will need to bifurcate the normal business profit manually.
Example:
A) Point Number 53: Net Profit before Taxes (50 - 51iii - 52)
B) Point Number 12b: Income from Intraday Trading - Transferred to the Profit and Loss account
{The formula to Calculate the Normal Business Profit = A-B}
Step 4:
Click on Speculation >> Enter the same turnover and profit/loss as per point numbers 12a and 12b of the P&L account:
After that, generate the computation.
How to Enter the Speculative Business Income:
Click Here to Find How to Enter the Speculative Business Income.
Hope this helps.
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