Stock Market Business : Buying ans Selling

Querist : Anonymous (Querist) 14 October 2010 This query is : Resolved
Please advise rates and types of taxes applicable in this type of stand alone activity by an individual for himself. Also advise the income tax form number to be filed to the ITDept.

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R.Ramachandran (Expert) 14 October 2010
Dear Anonymous,
If you buy and sell shares in the Stock Market, you are liable to pay Securities Transaction Tax.
For the purpose of income tax, if there is short-term capital gains (i.e. if there any gain or loss arising out of sale of a share within 12 months of its purchase) then it will attract 15% tax. This is called income tax at special rates. This 15% tax rate is applicable only when the shares are purchased through stock exchange and STT has been paid on them.
However, if there is any long-term capital gains (i.e. if there is any gain or loss in selling of the shares after 12 months of their purchase) such gains are not taxable; rather they are exempt from income tax.
If the shares are bought and sold on the same day (trading), it is deemed as not 'investment in shares' but as 'business income' and is liable to be taxed in the normal way i.e. slab system (and not on special rates of fixed 15%).
There is no separate form for reporting the gains/losses from the share transactions. The same ITR form can be used.

Advocate. Arunagiri (Expert) 14 October 2010
Mr.Ramachandran had given elaborately.

There are two groups(types) of taxes.

one group of taxes (securities transaction TAX and service tax) are levied for trading activities and it is being deducted by the stock broker, you can see this in the brokers statements.

Another tax is income tax which has to be paid along with your regular IT, which was detailed by by Mr.Ramachandran.