Comment on Taxation for Traders - Introduction

Hi,

I have a question related to profit/loss accounting with a mixture of intra-day and regular (delivery based, or extra-day) trades:

I want to know if the “FIFO rules” for profit/loss accounting and taxation are different for the following two scenarios, since my own accounting and that of my broker are differing on this:

Scenario 1: I buy 100 shares of a stock on day T; buy and sell 100 shares of the same stock on day T+1, and sometime later, say on T+30, sell the 100 shares that I took delivery of.

Scenario 2: I buy 100 shares of a stock on day T; buy and sell 100 shares of the same stock on day T+N (N>2), and sometime later, say on T+30, sell the 100 shares that I took delivery of.

I see that my broker is applying the 0.1% STT rate for the transactions on day T and day T+30, and 0.025% STT for the sell transaction of the intra-day trade, for *both* the above scenarios.

However, for profit/loss accounting, they are being treated differently: in Scenario 2, the “intra-day FIFO” and the “extra-day FIFO” do not interfere, but in Scenario 1, they seem to do. I suspect this has something to do with the “T+2” settlement cycle policy, but I’m not very sure – can you please clarify?

Also, what is the speculative/non-speculative partitioning of the profit/loss from the transactions above (for both scenarios)?

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