Tax Query: Which ITR for those getting income from stock trading?

Sanjiv Chaudhary | Updated on: Mar 05, 2022

Tax forms, close up | Photo Credit: FabrikaCr

I am getting some income from buying and selling of shares. Kindly let me know the following: 1. Which ITR should I file. ITR 1 or 2.; 2. I am a senior citizen. I prefer to file online. 3. Whether my accounts should be audited? My turnover last year was around ₹1.5 crore. and income around ₹2.4 lakh.

TR Anandakrishnan

1. It is being presumed that you are not in the business of buying and selling of shares and the transactions do not cover speculative transactions (i.e. intra-day trading) or derivative trading. As the income from buying and selling of shares (other than intra-day) is in the nature of Capital Gains/ Loss, you will be required to file your India Tax Return (ITR) using ITR-2 form and make appropriate disclosures therein.

In case you are into the business of buying or selling of shares, the same will be considered as business activity and the form applicable for filing of ITR would accordingly change.

Also, please note that if you are trading in futures and options or have intra-day trading, the same will be treated as business income and then, you may be required to file ITR using ITR-3 or ITR-4 form as may be applicable.

2. Yes, it is mandatory to file the income tax returns online for all the registered taxpayers whose taxable income exceeds INR 2.5 lakhs/ 3 Lakhs (for senior citizen). However, paper returns (offline mode) can be filed by those individuals of age of 80 years or above and are required to furnish return in Form ITR-1 or ITR-4.

3. As per the provisions of Section 44AB of the Income-tax Act (‘the Act’), Every person, carrying on business shall be required to get his accounts audited for such financial year by a Chartered Accountant before the specified date under the below scenarios

• If total sales, turnover or gross receipts (as applicable), in business exceed or exceeds INR 1 Crore in any previous year. The said limit of INR 1 Crore is substituted with INR 10 Crores in case the cash receipts do not exceed 5% of the total sale/ turnover/ gross receipts and the cash expenditure does not exceed 5% of the total payments.

• The assessee declares profit as per the presumptive taxation scheme in any of the last 5 previous years but does not opt for the same in the current year and his total income exceeds the basic exemption limit.

As per the provisions of Section 44AD , in the case of an eligible assessee engaged in an eligible business (turnover not exceeding INR 2 Crores and not into the business of plying, hiring or leasing goods carriages), a sum equal to 8% (6% in respect of amount received by way of A/c payee cheque/ A/c payee bank draft/ electronic clearing system) or a sum higher than the aforesaid sum shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession".

As per the guidance available on portal of income tax department, a person can declare income at lower rate (i.e., at less than 6% or 8%), however, if he does so and his income exceeds the maximum amount which is not chargeable to tax, then he is required to maintain the books of account as per the provisions of section 44AA and has to get his accounts audited as per section 44AB.

You may get covered under the above provisions if you are trading in shares that are treated as business income i.e., trading in futures and options (derivatives) or Intra-Day trading or if you are in the business of buying or selling of shares.

The writer is a practising chartered accountant.

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Published on March 05, 2022
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