Taxation Simplified for Traders

Taxation Simplified for Traders

by | Jul 9, 2018 | Circulars & Updates, SAS Updates

Taxation Simplified for Traders: It’s Time To File Your Tax Return Taxation in leu of gains from trading or investing in shares is somewhat complex. SAS Online has made an attempt to simplify it for the taxpayers. Before you can figure out how much to shell off as the tax you must first decide whether you are a trader or an investor. Trader or Investor If you buy stocks with an intention to earn from dividends then you are an investor. A trader buys stocks to profit from price rises. Long-Term &Short-Term Gain If a listed security is held for less than 12 months and then sold, the consequent gain/loss is considered to be short-term capital gain/loss. If the holding period is above 12 months, long-term capital gain/loss arises. Speculative and Business Income Intra-day trading or same day buying and selling of any share is interpreted as speculation income.It involves no actual deliveries of stocks. Trader can gain or lose. Loss can only be offset against speculative gains. Income from trading F&O(futures and options), intraday as also overnight, on all the exchanges is considered as non-speculative business income. How to Calculate Turnover Turnover refers to the profits and losses that are incurred after the settlement of the trading account. In a financial year, if your turnover is over Rs.1 crore, then your books of accounts mandatorily have to be audited  Audit Requirements An audit is mandatory if you have business income and the yearly business turnover crosses Rs. 1 crore. For digital transactions, this limit is Rs 2 crores. All equity transactions are digital. For equity traders, an audit is mandatory(sec...
“Do Not Exercise” Option’s

“Do Not Exercise” Option’s

Dear Trader, If you are active in the F&O segment of the stock market you must be knowing that you have to pay higher STT on options that are In The Money (ITM) on expiry.  A call option is said to be In The Money when its strike price is below the market price of the underlying asset. The reverse is true for a put option – strike price exceeds the market price of the underlying asset. How much do you pay as STT? Take the example of a trader who bought a call option with a strike price of 600 @ Rs.2.50 as he expected that the underlying security will close above 600 for the day and suppose it did close above 600 say at 603. Suppose he bought 2000 units of the call option at Rs.2.50, shelling off Rs.5,000 as premium. By normal calculation the profit should be Rs.{ (603-600)*2000 ( QTY bought) -5,000(premium paid to buy) }= Rs.1,000. However, when he received the contract note, he will see that the actual profit received by him is much less than this. The reason being higher Security Transaction Tax (STT) being charged on exercised options. The rate of STT on exercised options is 0.125% of the full value of the contract. STT on Exercised options on Expiry of Options = 0.125 % * (Strike Price + Premium) * Quantity So in the above mentioned example, the STT would be Rs. 2000 x (600+2.50) x 0.125% = Rs. 1,506.25 So he actually ended up making a loss of Rs. (1506.25-1000) = Rs. 506.25. Such huge differences in STT were troublesome for...
Pre-open Session . How is the equilibrium price determined ?

Pre-open Session . How is the equilibrium price determined ?

If you are a trader you must have seen that there is a pre-open session from 9 am to 9:15 am for both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). It is basically the period of trading activity that takes place just before the regular stock market session. Traders keep a close eye on this Pre-market session to guess the strength and mood of the market while looking forward to market opening. Let us try to understand how things work during these 15 minutes. At the outset let me tell you that you can place two types of orders in the stock market – market order and limit order (refer to the following graph). The 15 minutes of pre-open session consists of 3 time slots Now that we know the activities carried during these 3 time slots belonging to the pre-market session, let us take a look at how the equilibrium price determination or the call-auction session functions. Case I Say for example, previous day closing price of Stock A is Rs. 200. The following table gives the price and quantity figures during the pre-open session Share Price Order Book Demand & Supply Quantity Maximum Tradable Quantity Unmatched Orders BUY SELL Demand Supply 202 1000 985 3400 985 985 2415 204 1275 1161 13600 22000 22000 -8400 205 5000 4300 10000 10500 1000 -500 207 4000 7500 4000 6250 4000 -2250 199 2000 10000 27000 37000 27000 -10000 Share price Rs.199 corresponds to the highest tradable quantity of 27000 and hence will be considered as the equilibrium or call auction price. Case II Let’s have a look at another possible...
JS Bin