Tricky chat

Read more about Filing returns can be tricky if you play the stock market on Business Standard. O, intra-day trades are tricky chat Rs 20,000-30,000, it’s best not to claim them and opt for ITR-2If you are a salaried person who trades in stocks, filing income tax returns can be a tricky job.

Enter the characters shown in the image. If you are a salaried person who trades in stocks, filing income tax returns can be a tricky job. Depending on the instrument, frequency of trade and volume, you can either fill the ITR-2 form meant for the salaried with no business income or ITR-4 is for income from business and profession. Deciding which form to fill has always been a controversial. There have been multiple court rulings on this one. Yet, it still can be a grey area,” says Kuldip Kumar, partner-tax and regulatory services, PwC India. Take, the case of Ajitesh Pathak, a bank employee who also trades in stocks.

He has no fixed period of trading – makes investment as and when he finds a stock at an attractive price. Experts say if he has taken delivery of all the stocks, he can fill ITR-2. In this form, he can show the gains and losses he made, and in case of the latter, they can be carried forward to the next seven years to set them off against future capital gains. If the portfolio is purely delivery-based, the taxpayer has better chances of convincing the assessing officer it was for investment purpose and it’s not assessee’s business.

However, if Pathak went long or short on stocks, wherein he didn’t take the delivery, this would be classified as income from speculative business, and he will need to fill up ITR-4. This form will also allow him to claim expenses related to this business. For example, if he has a car and a computer that he has used for this, he can claim depreciation on them. All this sounds good as long as he has not made losses.

If he did and want to claim them, then he will need to maintain books of accounts and get them audited by a chartered accountant. If the income is more than Rs 1 crore, he will also need to maintain book of accounts and get them audited. Amol Mishra, head of tax at myITreturn. It gets complicated if the salaried is doing both delivery and speculative trading.