In an interview with News9’s Biplob Ghosal, CA Manish Mishra, Founder, GenZCFO, discussed how the Stock Market earnings could impact a taxpayer’s ITR. The founder of one of the leading financial advisory firm suggested some tax-saving tips to people engaged in the buying and selling of shares, besides guiding market players about stock market gains taxation.
Biplob: Is it mandatory to file an ITR for stock trading?
Manish Mishra: Yes, if your total income exceeds the basic exemption level or if you have traded stocks, particularly intraday or derivatives, you must file an Income Tax Return (ITR). Trading income is considered business income under current regulations and must be filed on an ITR-3 or ITR-4. Filing an ITR enables you to carry forward losses to offset future profits, even in the event of a loss. Active traders and investors must transparently file returns to avoid fines or notices because the Income Tax Department has also intensified monitoring through AIS and TIS reports.
Biplob: How to file ITR for income from the stock market?
Manish Mishra: Classify the type of income before filing an ITR for stock market income: delivery-based trading can result in either short-term or long-term capital gains, derivatives are classified as non-speculative business income, and intraday trading is classified as speculative business income. For commercial income, use ITR-3; for capital gains, use ITR-2. Keep accurate trade records, broker summaries, and Demat statements. If turnover thresholds are surpassed, you could also choose to have a tax audit. To avoid penalties, submit the return via the Income Tax e-filing system before the deadline. New AIS tools guarantee that more data is pre-filled for correctness in FY 2024–2025.
Biplob: How are stock market gains taxed, and how to declare them in ITR?
Manish Mishra: Gains from the stock market are taxed according to the length of time held. Gains from equities held for more than a year are referred to as Long-Term Capital Gains (LTCG) and are subject to 10% yearly taxation if they reach Rs 1 lakh. Stocks that are sold within a year are subject to 15% tax on short-term capital gains (STCG). Gains from intraday trading, futures, and options are taxable at slab rates and considered business income. Report them under “Capital Gains” in ITR-2 or “Business & Profession” in ITR-3 to make them taxable. For smooth reporting and audit compliance, make sure that trades and broker statements are accurately documented.
Biplob: How do you view this concept of the government imposing tax on people while buying shares as well as on profits earned from the equities, but they are not given any tax concessions if the stocks are sold in losses?
Manish Mishra: Investors have frequently expressed worry about this dual taxation, which is imposed through the Securities Transaction Tax (STT) on purchases and the capital gains tax on profits. Although STT cannot be prevented, an imbalance results from insufficient compensation for losses. Although investors can deduct capital losses from gains, the system does not provide incentives or refunds for persistent losses. This disparity deters taking risks and ought to be reexamined, particularly for individual investors. The introduction of loss-adjustment benefits or STT rebates may help increase participation and establish a more equitable tax environment in a dynamic market like India, where equity investment is being encouraged.
Biplob: Would you like to suggest any changes in the current tax system in regards to the stock market?
Manish Mishra: Indeed, changes to the tax code that encourage market participation and investor growth would be beneficial. First, the burden on ordinary investors might be lessened by rationalizing the Securities Transaction Tax (STT) and thinking about eliminating or reducing it. Second, encouraging long-term equity investing would be achieved by allowing stronger carry-forward choices or even partial deductions for long-term losses. It can also be beneficial to simplify tax slabs for varying investment lengths. Furthermore, compliance would be easy if broker data were directly integrated into ITR forms. Aligning tax laws with investor demands is essential for long-term growth as India seeks to increase financial inclusion and stock market participation.
Biplob: Please suggest some tax-saving tips to people engaged in the buying and selling of shares.
Manish Mishra: When exchanging shares, take into account the following advice to legally reduce your taxes:
● To avoid paying taxes, record long-term capital gains up to ₹1 lakh each year.
● Within the same or the following eight assessment years, balance capital losses against gains.
● If you qualify, use Section 44AD’s presumptive tax method for small business owners.
● For precise tracking, invest using a Demat account.
● Keep thorough records to receive audit exemptions.
● Submit trading-related internet and brokerage costs as business income.
● To recover losses for tax offsets, choose tax harvesting, which involves selling and repurchasing shares.
● For the best tactics, always seek advice from a tax adviser.
Biplob: For tax purposes, do you need to report only gains made in stock trading or also losses?
Manish Mishra: In stock trading, you are required to record both profits and losses. Because losses can be used to balance taxable profits and lower your tax obligation, reporting losses is essential. For eight assessment years, both short-term and long-term capital losses can be carried forward to offset future capital gains. It is important to record both speculative and non-speculative business losses, including intraday and F&O losses. With automatic data matching via AIS and TIS, accurate reporting guarantees compliance and helps evade the Income Tax Department’s scrutiny. Better financial planning and audit preparation are supported by the transparent reporting of all trade outcomes.
Biplob: Are intraday losses taxed too?
Manish Mishra: Although they are not subject to direct taxation, daily losses need to be disclosed. Only speculative gains can offset this, which are regarded as speculative business losses. They cannot be compared to other forms of revenue or salaries. On the other hand, you can carry over intraday losses for four years to offset future speculative profits if you report them. Ignoring these losses could cause problems when they are being examined or audited for taxes. Traders must make sure they account for all speculative transactions, whether they involve gains or losses, as the government is pushing for correct tax disclosures through broker-reported data and AIS.
CA Manish Mishra of GenZCFO explains the complexities of ITR filing for stock market income, highlighting the mandatory filing requirement exceeding the basic exemption limit. He clarifies the classification of income types (short-term/long-term capital gains, business income) and their respective ITR forms (ITR-2, ITR-3). Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
