FY 23-24: I trade from my mother’s demat account. Should I pay taxes?

I have a salary income. I incurred capital gains because I sold some mutual fund units in FY 23-24. I trade once in a while (not a regular trader). I have neither gains nor losses from my trading activity. What ITR form should I use?

Individuals with salary and capital gains income are required to file ITR-2. However, you also have trading transactions, and you should report them when filing your ITR, even if you don’t have net profits or losses.

If your trading activity involves intraday or F&O trades, these are classified as business income. In this case, you’ll need to use ITR-3, which allows you to report all your incomes, including salary, capital gains, and trading income.

I am salaried, but I also trade every day. Which ITR form should I choose, and how should the trading income be reported? What if I have a net loss from my FY 23-24 trades?

A. In the case of intraday and derivatives trading, your income is classified as business income and needs to be reported in ITR-3. In the case of other delivery-based trades, reporting of those will depend on your intent. If you invest in stocks with the intent of capital appreciation, you can report them as ‘income from capital gains’ and file ITR-2. However, if you frequently buy and sell stocks, you can declare it as business income and file ITR-3. Talking about losses, you should ideally report them in your ITR, as this will allow you to carry forward your losses and offset them against profits you make in subsequent years.

I am a salaried employee. I used to trade from my mother’s demat account. My mother doesn’t have any income. I made some profit on trading. Is my mother obligated to file the income tax return? What if the profit exceeds the basic exemption limit of Rs 2.5 lakh?

A. Filing an ITR is mandatory when your gross income exceeds the basic exemption limit, which is ₹2.5 lakh for citizens below 60 years of age and ₹3 lakh for senior citizens. This includes all of your income, including capital gains, bank interest, dividends, rental income, etc.

Now, even if you make the trades, as the transactions are being made from your mother’s account, she’ll be liable to file the ITR if her gross income exceeds the basic exemption limit.

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.