FY 23-24 ITR: What books of accounts should I maintain for my trading activity?

June 14, 2024

I understand that I must file an ITR 3 income tax return as I have trading income. However, while filing the form, I must choose whether I am eligible to maintain accounts and whether I am obligated to get an audit done. How do I know if this applies to me?

You are liable to maintain your books of accounts if your annual profit from trading is more than ₹2.5L or your trading turnover exceeds ₹25L.

Regarding audit applicability, since all transactions are digital in the case of stock market trading, the turnover limit for audit applicability is ₹10 crore. Hence, if your trading business turnover exceeds this limit, you must get a tax audit done.

If books are required, are the trading reports provided by my broker enough?

First of all, books of accounts include documents and books used in the preparation of financial statements like the P&L statement and balance sheet. According to the Income Tax Act, these include journals, ledgers, cash books, and expense receipts of a business.

Generally, stockbrokers provide users with multiple reports such as Tax P&L reports, trade books/order histories, holdings statements, contract notes, etc. These reports, along with your bank statements and business expense receipts, will help you furnish details and maintain your books of accounts.

For any business, a journal is a log of everyday transactions, while the ledger groups these transactions into different accounts or categories. Traders can use documents like bank statements, trade books, contract notes, and expense receipts to make journal and ledger entries. Note that different brokers may name their reports differently, but any report with trade-level data should help you out.

Lastly, a cash book is a record of cash transactions that come in and go out. This can be maintained using your bank statements.

These books of accounts, along with the tax P&L report from your broker, will help you fill in details of your balance sheet and P&L statement while filing your ITR.

Also remember, that these books need to be maintained for a period of six years from the end of the relevant assessment year, as the assessing officer may request them in case of a notice or scrutiny assessment.

How do I calculate the turnover of my trades? Which figure from my broker’s P&L statement should I use?

Trading turnover is calculated by taking the total of the absolute value of profits and losses.

Absolute value means looking at the number without worrying about positive or negative signs.

For example, if you have three trades with profits of ₹50 and ₹30 in the first two and a loss of ₹40 in the third one. In this case, your turnover will be ₹(50 + 30 + 40) = ₹120.

Zerodha’s tax P&L report mentions your intraday trading turnover in the ‘equity’ tab. For F&O, the individual turnover for options and futures trades is given in the F&O tab. Similarly, each broker provides this information separately.

To calculate your total trading business turnover, you’ll have to summate your intraday, futures, and options turnover.

If you have any tax queries, comment below, and we will get them answered.

The above questions are answered by Surbhi Pal from Quicko. This is for informational purposes only. Consult your tax expert for individualized advice.

 

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6 comments
  1. S Balasubramanian says:

    for Zeroda customers income tax filing through quicko link provided in the console should be free….
    but now it is asking for subscription ….. Why…..

    Please revert……

  2. Raj says:

    If I want to show equity as investment while filling ITR-3 than equity purchase value need to be shown in balance sheet under long term and short term investment and fill up the STCG,LTCG accordingly or won’t show it as investment in balance sheet.Which is correct way.

  3. Jayanta Kumar Nandi says:

    In FY 2023-24, I made LTCG loss of approx 2.32Lacs by selling my 1000 YES bank shares @18/- per share in Dec 23 which I bought long back during 2018 @250/- per share online using my India bulls trading account.
    Surprisingly, my AIS statement shows sale of these shares as STCG gain of approx 18000/- rupees and showing acquisition price as nil and off market acquisition.
    I have my P&L statement from Indiabulls(now Dhani Stock) which rightly shows LTCG loss of 2.32 Lacs for FY 2023-24.

    Please advise what to do when I file my ITR2.

    Regards
    Jayanta Kumar Nandi

  4. Vivek says:

    Hi Team, I use Zerodha’s Kite for trading.
    I have salary income + STCG(Turnover=1.88Cr, profit=2.7 Lakh) + Intraday(Turnover=92K, profit=84K)
    I am going for ITR 3, but here are some doubts:
    1) Since gross profit for STCG is less than 6%, but Turnover is less than 10 Cr, is tax audit required?
    2) For book keeping, is Tax P&L reports from Zerodha’s Kite sufficient? I don’t have any cash transactions.

    Thank you.

  5. Vyas O P says:

    I am a senior citizen. In current year my income is less than 2.5 Lac. My income consists of: 1. I am a guest faculty at an Engineering College and get remuneration on hourly basis. 2. I trade in stocks (delivery basis) 3. Interest from bank saving accounts and dividend income. Which ITR form shall I use?

    • Team Quicko says:

      This depends on whether the college is paying you remuneration in the form of salary or as professional fees. If it is salary, you can file ITR 2 to report the salary, capital gains from stocks and other incomes like interest and dividend. In case of professional income, you will have to file ITR-3.