I remember a time (maybe about 10 years ago) I had the opportunity to meet one of those hard to find Chartered Accountants who knew both taxation and markets quite well. It was at a friend’s party that I got introduced to him. He asked me what I do for a living, to which I promptly replied that I trade for a living. We immediately struck a chord and had a great conversation going. Somewhere during that engaging conversation, he asked me a few questions –
- How would I declare my Profits and/or Losses from my market activity?
- Do I bifurcate between speculative business income and non-speculative business income?
- Also, he asked me about the books of accounts that I’m supposed to maintain.
Thanks to my ignorance I had no answers to give him.
I was an eager learner, as I spent all my time learning about the markets and trading strategies but spent very little time learning about taxation and its relevance to market participants.
Probably the reason why I consciously ignored learning about taxation was that I always feared the heavy usage of jargon, random references to sections, subsections, circulars, and whatnot. To my defense – I once did honestly try to learn about taxation. I paid a visit to my broker’s office and met my dealer and questioned him on taxation. This is what he had to say – “Arre, why are you so worried? Long-term capital tax is 0% and short-term capital gains tax is 15%, that’s it, it is a simple matter.”
I for sure knew it was not just that, I insisted to meet someone more knowledgeable to understand the topic in greater detail. To my luck I got to meet the Regional Head of the stockbroking company, enthusiastically I picked his brains about taxation for market participants; unfortunately even he reiterated the same thing that my dealer had told me. It seemed even worse as the regional manager had a sense of pride while he gave me that sloppy answer.
Frustrated, I visited a CA and he essentially said the same thing that my dealer said, but he used fancy jargon and complicated the whole matter to no end. At that point in time, nobody had blogged about it online, no good articles were written on the topic, and thus my quest to learn taxation related to markets got squashed like a bug.
In retrospect, had I known more about this topic, had I got more information – I would have clearly benefited in multiple ways.
I’m certain there are many traders and investors in a similar situation as I was many years ago. In fact, this is true considering that our blog on taxation (which was put up a few years ago) has received over 10000 questions! This number is beside the numerous emails received and queries asked on Trading Q&A.
Keeping this in perspective, we are happy to introduce our new module on Zerodha Varsity aptly titled “Markets & Taxation”. The module deals with literally everything that you need to know about taxation related to markets – be it short term capital gains, or treating your intraday trades as speculative business income, or about Section 44AD & 44ADA – we have it all on Zerodha Varsity – in one place, concise, and simplified.
Now here is the best part – the whole module is authored by Nithin himself, which means that we get to learn about taxation from a trader/investor’s perspective and not really from the CA’s perspective. This makes a huge difference in terms of topic narrative. With a seasoned trader discussing taxation, we get to learn about the essential topics without digressing into the taxation wilderness.
Lastly, if I look back in time, I could not imagine brokers giving out such valuable information to clients. In fact, stockbrokers were always known to hoard information and pass it only to select clients. I’m sure you would agree with me on this, especially if you have been trading the Indian markets for a while now. Stock Brokers in India have always been snobby, expensive, and full of unwanted attitude.
However, the stockbroking industry is slowly waking up to the fact that the customer, irrespective of his size deserves the best. This change in attitude is leading to a revolution of sorts in the industry – and I do believe Zerodha is the epicenter of this revolution – changing the way the Indian broking industry functions. Be it providing you high-quality tools to trade, better trader education, or ready to use tax-friendly reports – Zerodha has it all for you.
So please do go ahead and explore this unique module on Markets & Taxation. I can assure you that the content presented here will make you more confident about matters related to taxation, and with that new-found confidence, you will never have to fear the taxman!
Stay connected, stay profitable.
– Karthik Rangappa
karthik that is nithin’s caricature right , with a tattoo on the hand …. good one mate (hahaha) :):):)
😉
Yup, that’s him teaching us all about taxation 🙂
can you made a sample ITR 4 return form video for those who has taken trading and investing as business ????? i have found but not found anything about our profession
Go to the last chapter of this module Sujay, there is an excel download of a sample ITR4. A video will be tough to make.
Hi Nithin, just watched your session on taxation – https://www.youtube.com/watch?v=1p6tY3lelIY
It was brilliant. Although I had read the modules and was already aware of it, it was like very good revision and it would be extremely helpful for people who are beginners. So is any other module. Keep up the good work.
As you said at the end, it would be great if you can arrange for a session on filling ITR-4 form. Thanks.
Hello sir I am doing intraday mainly. I want open a proprietorship firm for this perpose for myself trading only.
What is procedure and I want continue use zerodha as trading account.
dear zerodha please translate this chapter in regional languages also (assamese ,bengali.hindi and south indian) very helpful documents
Thanks for the suggestion Sujay. We will certainly look into it.
i would like to inform that neither i made money nor i have filed returns since almost four years, now i would like to stream line so what all documents i can get from your office to update the records, if u can suggest good auditor please let me know
2014-15 FY TAX ITR 4S
FIRST TIME
I’ve Income from
Salary,
FD,
MF/SIP,
F&O trading activity,
To file and save tax for future.
Need help
Hi Zerodha, I’m salaried, I do have income from Fixed Deposits, and I do have Income from Equity MF through SIP, and I Do have Trading activity in F&O,
Question 1 -Do I need to file ITR separately for salary and FD, SIP, F&O returns?
Question 2- I do understated that last date for filing ITR for salary is on Aug31,
What will be the last date for FD, SIP, F&O activity to file ITR
Question 3- In my PAN I find few trading activities captured in income tax India website, What action do I need to take to resolve it?
Question 4- Do I really need to consult CA? Any nearby suggested contacts near to Whitefield?
Question 5- I’m doing trading from few years, and few years went through some negative values, coming days trading activities going to change to positive, and I may need to pay a tax,
I want to cover up my previous year negative years from around 5 years, Is there a way to file it now? And show as carry forwarded for future
Your response will be more valued on this
Firstly, do read through the entire module. All your answers are already answered. Anyways
1. No. Just one, ITR4
2. One ITR4 and one last date which is Aug 31
3. Resolve it?
4. Not really
5. If you file returns after due date, you cannot carry forward the loss. So you can take that benefit only for FY14/15 for which returns have to be file by Aug 31st.
Sir, Could you please tell me if I am classified as trader then I have to pay tax for long term (held for more than 1 year) capital gains on stock trading?
suppose i am a trader(buy and sell stocks in few weeks) lets say i bought 10 stocks worth Rs 10,000 then 15 stocks worth Rs 9000 then 5 stocks worth Rs 1000. and after sell all of them(worth Rs 20,000) i make a profit of say Rs 2000. (total now Rs 2,2000) and now again if i buy stocks worth 2,2000. and don’t liquidate the money… do i have to pay tax on the earned profit i.e Rs 2000 as the money is still invested in stocks??
You can file your returns either ways
1. Show your profit booked and don’t consider the profit/loss on your investment that you hold at end of year.
2. Add your profit to the marked to market value of your holdings on 31th march and pay taxes on the net profit/loss. Suggest you to go through this: http://zerodha.com/varsity/module/markets-and-taxation/
Hi Nithin
I have read all the modules, however was unable to get details on point 2 mentioned above. Can you please elaborate.
I think it can address the issue that I am facing as explained below
I purchased 1000 qty of Stock A at 100 Rs and after 3 months sold 1000 qty at 150 Rs. Hence STCG of 50,000/-. However within few days (within same FY) I purchased 1000 qty of the same Stock A at 150 Rs. However since then the stock has been facing LC and I am unable to exit with the current price of stock being 80 Rs. So can I use the point 2 mentioned above to save on STCG.
Hi karthik,
Thanks i have doubt,my friend is planning to start a derivative account in zerodha,the doubt is he is an NRI,he is planning to trade /investment in NIFTY FUTURES/OPTIONS segment,he is planning to start trading account using his old normal SB account,i just want to confirm whether any legal issues for doing trade with his sb account and taxation like normal income slab?if legally not possible for him can i collect fund from him as loan and do trade in my account in zerodha?can u please guide
I’d advise it is best not to open a trading account with a normal SB account mapped if he is a NRI. Yeah, you could take a loan, no issues with that.
Nithin , thanks a lot for ur prompt reply,one more doubt plz clear it,I have lots of NRI friends,most of them interested in doing trade/investment in Indian market particularly derivatives m asking for them they know investment through PIS/Pms account,but have the doubt is same day square off possible for them in equity segment?can they trade in derivatives?what will be taxation slab for them?,if not possible in derivatives trading as per ur suggestions i can receive fund fund as loan from them and trade in my resident Indian account,is there any upper limit for receiving fund from them in my SB account as loan and use it for derivatives trading ?
I am a client of Zerodha.I only do Equity Intraday trading.This is the first time where I need to file ITR in my life or not I don’t know that why it would require your help.
I started doing trading from 7Jan,2016 and I dont have any other source of income other than Equity Intraday Trading.In Tax P&L statement calculations done by Zerodha it is showing INTRADAY GROSS PROFIT₹-14,526.05, INTRADAY TURNOVER₹24,760.75 and TOTAL CHARGES₹5,829.67. Now my actual question 1>Is all the calculations have already made by Zerodha? 2>Do i need to file ITR as my income is within the free tax bracket of 2.5Lakhs?
1. Yeah all P&L is already made by us. You can add other amounts that you have spent like internet etc to this. This loss can be carried forward to next year.
2. It is best to file ITR.
There should be an FAQ link on the first page/main page, the Knowledge base is difficult to find
We have linked all the chapter titles here – http://zerodha.com/varsity/module/markets-and-taxation/
Hello Karthik,
I’m a salaried person with no other income. I filed ITR-1 for the last year. It was easy as all I’ve to do was copy the digits from Form 16 to incometaxindiaefiling.gov.in website.
But this year, i had few FDs and RDs for around 50K. Also I am planning to be an investor in stocks.
I’ve two questions.
1. Do I have to pay tax on the gains from FD and RD? If yes, how do i file them? Which ITR form has to submitted for AY2016/17?
2. When I do invest (more than 1 year) in stocks, its tax free right? Then do I have file ITR for the same?
1. yes you have to pay tax on the gains (if your annual income is more than Rs 2.5lks). You can use ITR 1 or ITR 2 (2 if you are investing into stocks as well).
2. If you invest in stocks and book profits, yes whatever held for more than 1 year is tax free.Yeah good practice to file your ITR declaring all income.
Hello Karthik,
I’m a salaried person with no other income. I filed ITR-1 for the last year. It was easy as all I’ve to do was copy the digits from Form 16 to incometaxindiaefiling.gov.in website.
But this year, i had few FDs and RDs for around 50K. Also I am planning to be an investor in stocks.
I’ve two questions.
1. Do I have to pay tax on the gains from FD and RD? If yes, how do i file them? Which ITR form has to submitted for AY2016/17?
2. When I do invest (more than 1 year) in stocks, its tax free right? Then do I have file ITR for the same?
Could you please suggest me a accounting firm or CA who can take care of my auditing/filling. I am going to do in big volume but this 1cr limit always stop me. If I have a good CA then I can shed my those inhibitions. Please suggest me.
You could touch base with Taxiq – http://taxiq.in/contact-us/
thanks a lot for such a quick response.
Welcome!
Sorry this is little different topic. But since I can reach you directly so mentioning here. When I redeem my liquid fund (much before cut off 1:30 pm time), then zerodha is paying me amount towards END of T+1 day. Whereas for same scenario other brokers like fundsindia, hdfc securities pay me at START of T+1 day. This benefit me so that I can buy stock. But because of Zerodha unnecessary delay I miss one full day. In the world when SEBI and various AMCs are trying to instantaneous redemption for liquid funds, then why is Zerodha putting unnecessary and avoidable delay in crediting my account. hope you will look into this important matter. another suggestion is to provide me equivalent margin at start of day so that I can buy stock in delivery basis (CNC).
1)I AM MAKE TRADING TRANSACTION ABOVE 1 CRORE BUT all My profit include other is below 2. 5 lakhs may i need to pay tax?
2)I MADE EQUITY TRADING WITH 2.7 LAKH PROFIT AND 2 LAKH LOSS IN SAME YEAR THAT IS 70 000( NET PROFIT) include other,may i need to pay tax?
I have started trading from this financial year i.e. 2016-17.
I have bought some shares and received dividend against them.
I have not sold any share till now as I want to hold them for more than one year.
I wanted to ask about the ITR form I should be filling and where to show the dividend income.
The Long-term capital gains declaration comes only when we sell the stock/shares after a year / two right?. Do we need to declare the stocks if we are still holding it or its declared only after selling it.
How is cost basis taken into consideration? We have LIFO and FIFO. For ex, if I buy 1000 stocks at 50/- and 500 stocks at 55/- I will have 1500 stocks at 83.33.. Now if I sell some 700 stocks at 60/- and keep rest as such then 2 scenarios I can assume.
1) 300 stocks at 50 and 500 stocks at 55 will remain with me..
In this case profit is 700 x (60 – 50) = 7,000
2) 800 stocks at 50/- will remain with me..
In this case profit is 200 x (60-50) + 500 x (60-55) = 2,000 + 2,500 = 4,500.. Which case will be assumed for taxation?
I m a salaried person working in a private organization. I also have a demate account in zerodha. I do intraday , short-term traiding, f&o and made profit in equity and loss in f&o in FY 2016-17 . I want to know that which ITR I have to file for assessment year 17-18.
dear sir ,
no words to describe the zerodha platform , excellent is the word
one request is there if the P/L STATEMENT OFR THE CURRENT YEAT CAN ALSO BE SHOWN IT BECOMES EASY FOR US TO CALCULATE OUR PROFITS AND LOSSES , AS THEY ARE BASED ON INTRADAY AND SHORT TERM
TILL A FEW DAYS BACK BACK OFFICE WAS GIVING US THE 17/18 STATEMENT . HOWEVER IT IS STOPPED NOW
KINDLY ADVICE
Hi Team,
I am holding zerodha since 2014.why P&L statement showing wrong details in q.zerodha.com.is there any issues in q.zerodha or any modification happen to get the P&L statement pls let me know we heve very short time to fill returns..I raise a complinnt on 19th july regarding this.still i didn’t get response..could you pls short out the issue..
Karthik –
I read some of the modules and have been impressed – job well done!
About taxation:
I live in the USA and pay taxes here(of course). I have never calculated/filed my taxes on my own and for years now I have been looking for GOOD sources to learn from. Would you know any reputable site(like yours) that can provide detail info on trading & taxation for USA taxpayers?
Thanks in advance!
George K.
George, thanks! Glad you liked the content here.
Babypips in US is good for the trading related information, however, I’m not too sure about content related to taxation.
Hi Karthik,
Just wondering, shouldn’t this module on Taxation be updated according to latest tax slabs and info, if it is not already, would be of great help.
Thanks.
Hi Team Zerodha,
I am beginner in investment and trading, my focus is on intraday trading, I use both “CNC” and “MIS”. Need some clarity regarding the use “MIS” because it allows us to buy more number shares,
Will this affect my taxation?
Pls give me a note how this works?
There is no effect of leverage you get on MIS product type on your taxes. Profits arising from the trades will be treated as normal speculative gains
Hi Karthik,
Can you please send out an explanation of how the new LTCG has to calculated for shares we are already holding in our portfolio.
It would be of great help to us small investors 🙂
Here you go Avinash – https://tradingqna.com/t/what-will-the-impact-of-long-term-capital-gain-tax-ltcg-of-10-on-gains-of-over-rs-100-000-also-what-does-gains-up-to-31st-jan-2018-will-be-grandfathered-mean/32436
Hi Team,
you’ve been doing a great work! I understand my doubts are similar, but i need a little more clarity..
1. The purpose of declaring the gains from equity trading as a speculative business income and not as STCG is to avail the benefits for the expenses incurred in terms of internet etc. Is that right?
2. I’ve been trading in CNC and MIS both. In this case, I’m not sure if I’ve to show this as STCG or spec biz income.
3. And, as I went through the modules, it was written for all STT paid transactions, we can declare that income while filing ITR. But when I see my transactions at Zerodha, the STT is shown as 0. (I’ve been trading both on IntraDay and short-term). Could you please clarify me if for these transactions if there is no STT.
Thanks 🙂
Hi,
Another frantic Zerodha customer here! :’)
So I’ve read alot of stuff before leaving a comment here.
My short story-
21 years old. Intra-day, Delivery, Mutual Funds (All EQ ONLY). 22k Invested. Down by 4k. Non-salaried/student. Trading is only source of income.
Questions.
1. For AY 18/19, where do I show MF investment, on yet to release ITR3 form.
2. I have speculative business income right? I mean I do high frequency Intra-Day, also I invest in Delivery & MF.
3. What are the due dates? 31st July?
Then who is liable to file taxes every 3 or 4 months?
4. Since I am to file before 31st July should I include income of May & June as well or is it strictly 1st Mar to 31st Apr for each year.
Thank you, for this varsity.
Peace.
Hi,
I was totally unaware of taxation on buy & sell of equity shares. I recently start trading or investing in share market to acquire knowledge about share market and how it’s work. Today morning I got to know that I need to pay tax on my profit. So help me on this
There is problem of downloading the pdf of module 7
It works fine, Amol.
The Backoffice Reports are incorrect.
@Zerodha
FnO turnover has to be calculated as absolute sum of Profit Loss each contract pricewise.
Buy = 200 Bank Nifty Options xyz strike at Rs.20.
Sale= 40 at Rs.25, 40 at Rs.30, 120 at Rs.12 (avg=18.20).
If all Sale is taken as avg the the T.O. = 360 (this is what Zerodha does) > Incorrect.
Each sale (and buy) has to be calculated separately pricewise & absolute Profit or Loss figure thus arrived has to be added, in this case correct T.O. is = 1560 !
+ Add sale premium to abs P/L figures for T.O.
Zerodha, right ?
Hi,
This is URGENT. If anybody reading this kindly respond. I have a particular fixed monthly income (salaried class). Going by the definition I have some short-term Capital gain. But sometimes I just experimented doing intra day and incurred a loss (very nominal amount of 2500 NET). Should I fill ITR 2 or ITR 3? Given that I have speculative income (net loss). (AY 2018 -19, FY 2017-18)
Respected Nithin Sir,
I started Stock ( only equity trading, no F & O ) trading with some 60000/- amount from my savings.
And trading through whole year I lost 30000/-.
I don’t have any other sources of income.
Sir, please suggest, which ITR form should I fill up to carry forward my losses….
ITR3.
Very good information. Appreciate.
Happy reading!
HI, I would like to know how to file tax returns for a company registered under companies act, which has speculative(F&O) income from Stock Market. Please guide me in detail.
Is it also available in hindi in “Varsity” mobile app?
If yes, how can I change chapter in hindi?
Not yet, but hopefully soon.
Hi,
I was reading all your courses and knowledge given here is great. I on Module 7 that itself shows how much i like the content.
But this chapter specially got my attention i was literally had a good laugh. Sorry to bust your bubble but Zerodha is now a greedy venture not sure how it was before.
I was tried to open an a/c since last year i paid 500 rs upfront till date my a/c is not open nor i am getting my money back so Zerodha is not revolution or anything. It just another brokerage firm who does not care about small player.
Anyway you guys can keep my money as donation consider as my gift to your knowledge.
Thanks !!!
Samir, I’m really sorry about this. Why did your account not open? Was there any reason for quoted for this?
Hi Karthik,
Thanks for your reply.
My experience with Zerodha turn bad into nightmare.
I received a call from some guy i didn’t get his name. In our 15 min conversation half of the time the guys keep yelling me like i did some sort of crime.In the end he did provide me workaround but i am definitely not going to use it nor i am going to opening an A/c.I have blocked his number on my phone.
A humble request please do not try to contact me i will not entertain anyone from Zerodha and sorry for my earlier post.
Thanks
Hey Samir, I’m really sorry about this. Let me escalate this and figure what’s happening.
Hello sir! I’ve demat account in zerodha and I’ve completed all the modules till options Strategies and I’m not able to access from 7 onwards as it’s mentioned as coming soon. Could you please look into it. Advance thank you sir!!
We are working on these remaining modules.
– and I do believe Zerodha is the epicenter of this revolution –
i agree with you on this and am really grateful to u for bringing this change. Also , even now, zerodha is the best trading platform besides having some minor issues like basket orders, not allowed to trade OTMs.. am still happy with what i got provided with. especially, i have to say that, varsity is where i got started and learned my basics and i referred again and again on some topics when i got confused.
Thanks Karthik.( You and zerodha are one of the game changers in the last decade).
Thanks Lokeshwar. We are continuously working to make the experience better. Thanks for the kind words.
I have two queries
1 Which ITR have to file if an individual having following income from different head for AY 2021-21.
Salary Income
Income form other sources (FD INTEREST)
Gain loss from selling of equity (STCG/
LTCG)
F&O gain loss Business profession
2. Whether individual merge gain loss from selling of equity with F&O Gain loss as income from business profession or both should show separately.
Hi Manmeet,
I have two queries:
AA] Which ITR have to file if an individual having following incomes from different head for AY 2021-21.
Salary Income
Income from other sources (FD INTEREST)
Gain loss from selling of equity (STCG/LTCG)
F&O Income
You need to file ITR-3 for above incomes.
BB] Whether individual merge gain or loss from selling of equity with F&O Gain loss as income from business profession or both should show separately.
You need to show Capital Gains or Losses and FNO transactions separately.
Wish I had read this module 6 months ago. I did intraday option trading without thinking about tax consequences instead of considering intraday equity or intraday future trading. Selling and buying options contracts made my turnover whooping 1.5 Crore now. Luckily a tax audit will save me for now.
there must be changes in the tax rules since 2015 so should I follow this module before filing my taxes or not
I too came to this section now and wondering if the content was updated taking into consideration of the recent changes.
@Karthik Rangappa if you can provide an update in the beginning of the model, will address the queries most of the new comers will have in their mind.
I am salaried employee, trade regular in F&O, turnover around 3 crores, made loss of 4 lakhs in FY 2020-21, as per my knowledge i may have to file ITR-3, i am filing ITR-3 only last four years, this year in incometaxindiaefiling portal, ITR Form-4 is disabled. What to do please suggest.
Hope to receive and listen to this type of hidden taxation angle on share market transactions both equity and F&O to improve our knowledge on stock market transactions for better compliance.
hi
Can you tell me the scope of Audit for Share Trading ..
Do i need to get my total income sources like FD/NSC.Bank AC etc audited or only the bank and demat account i use for trading ?
My Late Father was holding Debt MFs with Zerodha.
He had below nominees to his account
Myself (25%)
Brother (25%)
Mother (50%)
Now,
Me and my brother want to transfer them ( our 25% + 25% stake) to our Mother’s account.
Query –
We would like to know if this will attract any IT taxation on any one of us.
HI Shashank,
My Late Father was holding Debt MFs with Zerodha.
He had below nominees to his account
Myself (25%)
Brother (25%)
Mother (50%)
Now,
Me and my brother want to transfer them ( our 25% + 25% stake) to our Mother’s account.
Query –
We would like to know if this will attract any IT taxation on any one of us.
Gifting between relatives won’t attract tax.
There is something wrong in PDF & Web version. I think PDFs are not updated. I am seeing here “short-term capital gains tax is 15%” but in PDF still its showing “short-term capital gains tax is 10%”. Kindly look upon this bug. I think few more might be there even from other modules as well.
I’d suggest you consider just the web version.
dear zerodha please translate this chapter in hindi
plz provide hindi pdf…thanks
Sir now the LTCG is taxable at the rate of 10% over rs.100000 ryt sir ?
Sir.. Is ko bhi hindi me translate karwa dijea.
This module was previously available in Hindi. But, now I could not find the Hindi version of this module.
Can you please make it available in Hindi?
Checking on this.
Sir will section 10 (26)(a) be valid for an individual who is a daytrader and investor in stock market?
Tax system me jo changes hua hai kya wo sab is blog me updated hai????
LTCG IS NOT ZERO ANYMORE ITS 10% AND IF I AM WRONG PLEASE CORRECT ME
THANK YOU
Yes, that’s correct.