Participating in stock market trading is fascinating. Increasing numbers of Indians are now either full-time or part-time traders. But alongside gains comes obligation—that of paying taxes. If you routinely buy and sell shares, you have to be familiar with Indian trader tax laws.
Who is Considered a Trader?
You are seen as a trader rather than an investor if you buy and sell shares regularly with an eye toward quick gains. Two generally accepted forms of traders exist:
- Intraday traders: Buy and sell shares on the same day.
- Short-term traders: Rely on delivery and own shares for a few days or weeks.
Both have to properly report their income and follow trader tax guidelines.
Types of Income Available to Traders
- Business income (speculating): From intraday trading (no delivery noted) – taxed as business income.
- Non-speculative commercial revenue: From short-term, delivery-based trading (held) – taxed as business income as well.
Both types are taxed according to usual income tax slabs and constitute part of your overall income.
What is the Trader Tax Rate?
No set trader tax rate exists. Your total income plus your trading profits are taxed based on your slab:
- Up to ₹2.5 lakh: No taxes
- ₹2.5 lakh to ₹5 lakh: 5%
- ₹5 lakh to ₹10 lakh: 10% to 20%
- Above ₹10 lakh: 30%
Should your income come from trading only, the same slabs apply.
Additional Taxes
- Securities Transaction Tax (STT): Paid automatically when you trade, this is another tax traders must know.
- GST: Usually not relevant unless you are offering advice or stock tips.
- Advance Tax: If your annual tax due is more than ₹10,000, you will have to pay it in installments.
- Tax Audit: Should your turnover be high or show very low profit, a tax audit could be called for.
ITR Filing for Individuals in Trade
- Use ITR-3 or ITR-4 based on your income and trading approach.
- Keep up appropriate accounting books.
- Even if you lost, declare all of your trading income.
Can You Claim Trading Expenses?
Indeed, as a trader, you can lower your taxable income by claiming expenses, including:
- Internet bills
- Broking fees
- Trade’s software
- Laptop or cell used for trading
- Fees for advisory or research projects
These help under trader tax rules to lower your taxes.
Last Thoughts
Although the stock market offers rapid gains, neglecting the trader tax laws could lead to problems down the road. Record your information, properly file your return, and pay advance taxes if necessary. Trading is a business; the taxman also sees it that way. Be smart, informed, and trade with peace of mind.
