Filing income tax returns (ITR) can be a complex process, especially for traders and investors. To ensure compliance with the tax regulations and to maximise benefits, it is crucial to have a clear understanding of the requirements. In this blog post, we will discuss five key requirements of ITR filing specifically for traders and investors in India.
- Categorisation: Determining your status
As a trader or investor, it is important to determine whether your activities fall under trading or investment. If you buy and hold shares for a certain period before selling, it is considered an investment. On the other hand, intraday trading and F&O trading are treated as business activities. Understanding this distinction will help you categorise your income correctly for tax purposes and this decision will apply in subsequent years.
- F&O reporting: Including gains in your ITR
For traders engaged in Futures and Options (F&O) trading, it is vital to report the gains from these transactions in your income tax return. The income from trading derivatives is treated as business income by the tax authorities, regardless of your employment status. Such gains are added to your total income and taxed at the applicable slab rate.
- Dealing with losses: Reporting and adjusting losses
When traders incur losses, they need to understand the rules and provisions for reporting and adjusting these losses in their ITR. Traders can offset their losses against other income sources such as rental income or capital gains. However, losses cannot be adjusted against salary income. If you choose not to adjust the losses, they can be carried forward for up to 8 years. To carry forward losses, ensure timely disclosure and filing of the income tax return.
- Deductible expenses: Maximising tax benefits
Traders can claim deductions for expenses incurred in their trading activities. Common deductible expenses include brokerage fees, interest expenses on loans and professional advisory fees. Since F&O income is considered business income, traders can claim these expenses at the time of filing their income tax returns. It is important to keep proper records, and documentation to support these deductions.
- Trading disclosure: Reporting intraday trading details
The latest ITR forms require separate disclosure of intraday trading details in the Trading Account section. This includes reporting the turnover from intraday trading and disclosing income derived from intraday activities. It is essential to accurately report this information to ensure compliance with tax regulations.
Filing income tax returns can be a complex process, especially for traders and investors. But Upstox has your back! We have partnered with ClearTax and Quicko to provide you with easy and fully automated solutions to simplify your tax-filing experience. The best part? Upstox customers can access the basic services of ClearTax and Quicko for free!
To make tax filing hassle-free, explore these automated solutions:
Quicko: It’s a one-stop solution for all your income tax filing needs for traders and investors. Whether you are an equity, intraday, F&O or commodities investor/trader, the Quicko platform can help you to automatically calculate your Tax P&L and file your return online! There are a range of self-filing and expert-assisted plans depending on your needs. Visit www.upstox.quicko.com to learn more.
ClearTax: Check out: https://cleartax.in/s/partner-upstox to discover the benefits of using ClearTax. With ClearTax, you can file taxes for various income sources, including stocks, bonds, crypto, real estate, mutual funds, and ESOP buybacks. It supports over 30 investment brokers and 20+ crypto exchanges, wallets, and blockchains. ClearTax also allows you to carry forward losses across assessment years, helping you save taxes. Plus, their efficient platform processes thousands of transactions within seconds, with complex tax calculations completed in just a minute, ensuring maximum tax savings with 100% data accuracy.
With these automated tax solutions at Upstox, you can streamline your tax filing process, ensuring accuracy and maximising your tax savings. Don't let tax woes stress you out; take advantage of these convenient options and simplify your tax filing journey!