16th September: Is the return from share market being shown as business income or capital gains?
Well, to remain safe, you may opt for having a separate trading account.
Share trading income—Capital Gain or business gain?—Any income from trading of stocks needs to be treated wisely. Share market does appear to be a good means for making some big bucks quickly for many these days.
But the fact is that one needs to be act cautiously with regard to showing his or her stock income or stock returns as business gain versus Capital gains. One needs to know the vital difference since the tax liability of a person simply depend on the way the stock market return is shown(as capital gain or as business income). Any wrong characterization is going to affect your tax liability. So, act accordingly to safeguard yourself from paying extra income tax.
What is business income?—Business income, as per the income tax department, is any shares purchased with the motive of reaping profits.
What is capital gain?—Capital gain means any money invested with the sole purpose of getting income through dividends.
Subjective issue—As per Rakesh Nangia (Nangia and Company), any income from share market transactions needs to be considered by several cumulative trades undertaken as well as the intent(whether motive was business or otherwise).