Comment on Zerodha - your tax aide while you trade

Ranjan commented on 13 Sep 2015, 04:44 PM

Hi Nithin,

I was going through the study material-markets & taxation under the varsity section and would like to thank you for sharing such an important piece of information. Although I feel I have understood the topics, I am reiterating the points below and request you to confirm if my understanding is correct? My understanding takes a perspective of a trader and an investor, both. What I understand are in points 1-4 as below, for which I request your confirmation.

1.) LTCG for shares held more than 12 months is always exempt (where STT is paid) for every individual be it trader or investor or both.
2.) Intraday equity in cash segment is speculative business income and would be taxed as per slab rate. We can claim business expenses against the gains.
3.) Intraday F&O or positional is non-speculative business income and would be taxed as per slab rate We can claim business expenses against the gains.
4.) It’s the shares held less than 12 months where there is a bit of subjectivity involved as in it can be either treated as STCG or be treated as non-speculative business income depending on whether you have classified those transactions as investment or trade, respectively. And this subjectivity revolves around the “FREQUENCY” of such transactions. However, if an individual’s bread and butter activity is shares trading only then this would necessarily be treated as business income.

I have a query on the LTCG/STCG computation as follows:

Suppose, I have two demat accounts, one classified as investment and another termed as trade. Further suppose I hold 100 shares of Infosys each in both accounts. Now, If I am selling from any account, how would FIFO be calculated. Will FIFO be based on transactions from respective demat accounts or would it be based on my PAN. I am asking this as this would affect my LTCG and STCG/ non-speculative business income calculations. Additionally, what’s your advice on how to keep investment and trading separate? Should we have two separate accounts? Should we trade in the stocks which we also have as investments?

Look forward to the answers.

Many thanks in advance.

Regards,
Ranjan

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