FY23-24 ITR: What expenses can I deduct from my capital gains and trading income?

While reporting my trading income in the ITR-3 form, should I report the trading turnover scrip-wise or trade-wise?

Trading turnover can be calculated in two ways, either trade-wise or scrip-wise. To understand the difference, let us take an example: you make the following trades for companies A and B.

Company A

Trade 1: Profit of ₹1000

Trade 2: Loss of ₹500

Company B

Trade 1: Profit of ₹2000

Trade 2: Loss of ₹3000

Turnover is calculated as the sum of absolute profit and losses, i.e., we’ll add all the values irrespective of the sign. Now, to calculate trade-wise turnover, we need to do the summation of every trade done during the year.

Trade-wise turnover = ₹(1000+500+2000+3000) = ₹6500

To calculate scrip-wise turnover, all trades on a particular scrip are collated, and net profit/loss is determined.

Company A: ₹1000 – ₹500 = ₹500

Company B: ₹2000 – ₹3000 = -₹1000

Now, we will do the absolute summation of the net profit/loss of each of these scrips.

Scrip-wise turnover = ₹(500+1000) = ₹1500

Yes, the difference between the two calculations can be a huge difference. Remember, turnover is only useful to determine whether you need to get a tax audit done, and it does not affect your tax liability in any way. 

When I trade or invest, I pay many other charges in addition to brokerage, such as STT, GST, transaction charges, SEBI charges, and stamp charges. What expenses can I claim as deductions while filing my tax return?

All of these expenses, including STT, transaction charges, stamp duty, GST, etc., can be claimed when you report your trading business. You can read this thread to know more about the different expenses you are allowed to claim as deductions: 

https://qna.tax/t/list-of-expenses-a-trader-can-claim/3945

For capital gains from delivery-based transactions, you can claim all these expenses except STT.

Can I claim depreciation on my laptop as an expense? If yes, how much can I claim?

If the laptop is being used for trading purposes, you can claim depreciation. The depreciation rate for computers and laptops is 40%, calculated based on the written-down value.

For example: If you purchased a laptop for trading worth ₹1L, in the first year, you could claim ₹40,000 as depreciation expense, and in the following year, you’ll be able to claim 40% of the remaining value (₹60,000) which is ₹24,000, and so on.

How about the rent paid for my house? How is it when my only profession is trading or when I am a part-time trader?

Ideally, rent paid should be claimed as an expense only if a separate workspace or office has been rented for the trading business, irrespective of whether you trade full-time or part-time.

PS: 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.