Comment on Classifying Your Market Activity

Sudipta commented on 08 Jun 2017, 09:02 PM

Hi Nithin,
I am a regular trader in Zerodha. I have LTCG, STCG and FnO trading activities. I need your help with respect to the following suggestion you made: “you can have stocks meant as investment for long term, and stocks meant for shorter term trades. Just because you indulge in a lot of shorter term trades, wouldn’t necessarily convert all your longer term holdings or investments into trades and therefore bring those long term gains under business income. But it is important to clearly demarcate your trading and investment portfolio while filing returns.”

I understand this and I want to apply this for my taxation because I want to show my STCG as Business Income, without impacting the zero tax on my LTCG. But the CA who is working on my case (mine is Audit case, hence I had to take a CA) is of the opinion that I can either show the capital gains as LTCG-STCG, or I have to show both of them as business income. He said, the moment I show the STCG as business income, it will convert the LTCG also into business income. I have told him about your article, and he happens to know you as well. But he categorically mentioned that the concept which you explained is wrong. Now I am in a fix. I have already paid 50% of his fees as advance and I cannot come out without forfeiting my money. Moreover, it is very difficult to find a CA who even understands these terms. At least this CA understands it clearly although he has a different opinion.

I have told him about the circular but in vain. Can you please help me how I should handle it ? I do I convince him ? Can you refer any CA who agrees to your concept, and may be I can have my CA speak to that CA. I will have to incur huge tax if my LTCG is shown as business income. On the other hand, I can save good amount of tax if STCG is shown as business income because then I will remain under Rs. 2.5 lakh slab, hence zero tax on short term trades.

Thanks in advance,

View the full comment thread »