Taxation Simplified for Traders

Taxation Simplified for Traders

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...
Share buybacks: Should you participate in them?

Share buybacks: Should you participate in them?

Strap: The answer depends on a variety of factors such as the buyback mechanism adopted, the premium offered, and the acceptance ratio When companies reach the mature stage of their life cycle, they turn into what the BCG (Boston Consulting Group) Matrix refers to as a “cash cow”. These companies are profitable. The growth stage of their life cycle is behind them, so they don’t require the cash to make fresh investments, and hence are able to generate regular free cash flows.At this stage, companies can do one of three things: distribute dividend to investors; buyback shares from the markets; or use the money to fuel inorganic growth. Many IT companies in India have in recent times opted for the Share buybacks route. Share Buybacks is one way through which a company tries to reward its shareholders. When a company buys back shares from the market, its total number of outstanding shares reduces. For the same level of earnings, if the number of outstanding shares has declined, the company will enjoy a high earnings per share (EPS). A higher EPS will in turn translate in a higher price for the stock even if its valuation (PE) remains unchanged. Sometimes,buybacks signal that the management thinks that the stock’s price is lower than its intrinsic value. The share buybacks is one way through which the management tries to improve shareholder value. One negative of buybacks is that it signals that the company doesn’t see business opportunities for deploying its surplus cash, as is indeed the case with IT companies, owing to the ongoing slump in the sector’s prospects.   Buybacks have also...
  It’s Time to be cautious in the markets

  It’s Time to be cautious in the markets

Valuations within the Indian equity markets have turned expensive. The Nifty 50 is currently trading at a PE of 24.43, way above its long-term average. The Nifty Midcap 50 is trading at 55.22, and the Nifty Small cap 50 at 44.21.When valuations are so stretched, there is always the risk that any adverse news from within the country or abroad could cause the markets to tumble. Here are points you can follow that will help you to navigate your way safely towards your goals in these markets. Use SIPs: One precaution that mutual fund investors must exercise in expensive markets is to take the systematic investment plan (SIP) route for investing. This is not the time to make a one-time, bulk investment in equities, unless you are prepared to invest and forget the money for at least 10 years. The risk is making a bulk investment in an expensive markets is that if there is a correction, and you purchased units at the current high levels, it could take several years for your investment to recover their current value. With the SIP route, on the other hand, your investments tend to be staggered and you get the benefit of rupee cost averaging. One more point to keep in mind regarding SIPs is that if you are using them to meet long-term goals, such as your child’s education or your own retirement, you should not stop them because the markets are expensive. If you do so, you may not be able to achieve these goals. Build a diversified portfolio: One mistake that investors make when investing in a bull market...
What is Technical Analysis: An Introduction

What is Technical Analysis: An Introduction

Analyzing securities and making investment decisions is complex and there are several methodologies to do so. Among the primary methods, technical analysis is the most used method in case of forecasting the price movements of market-based on already reflected past data. What exactly is Technical Analysis? Technical Analysis is a technique to forecast the direction of price movements through the use of actual price behaviour of instrument or market based on the price reflected in past in all the relevant publicly available information. Unlike the fundamental analysis, technical analysis does not determine accurate future of the market. Technical Analysts predict how the market “might become”. Various types of charts are used for technical analysis. Technical Analysis is used for various financial elements like stocks, commodities, indices etc. Basically, it is applicable where the price and market is influenced by ‘supply and demand’. It works based on price range like ‘high’, ‘low’, ‘open’ or ‘close’ and that within a provided time frame which can be like intraday, daily, weekly as well as monthly data. Why it is beneficial to use technical analysis? Technical Analysis gains the majority of upvote in comparison to the fundamental analysis and it is quite a debate. But in general technical analysis is beneficial for short term trading like day to day to intraday trading. Main benefits of technical analysis are: Technical Analysis works with current price and current price holds all the current information about any asset. So, investors use all the past information of “current prices” during different point of time and create charts. Thus the future trend of the price can be foresaid...
What is Cyclical Sector and Defensive Sector in Stock Market?

What is Cyclical Sector and Defensive Sector in Stock Market?

Cyclical Sector and Defensive Sector Have you ever noticed that as the economy fluctuates, some stocks react extremely, while a few others remain unaffected! Called as Cyclical Sector and Defensive Sector, knowledge about these stocks can help you plan your investment portfolio. Let us understand them in detail. What is a business cycle? Have you ever sat on a roller-coaster ride? You feel good while going up. As it comes down with faster speed, you experience panic and fear. The occurrence of ups and downs in an economy over a period of time is called as business cycle. This cycle causes similar reactions like the roller-coaster. As the economy grows, the employment level, production, sales, income grow as well. The opposite is true during an economy’s decline. Decoding cyclical stocks Stocks that are affected by a business cycle are termed as cyclical stocks. Thus, as the economy grows, their price increases. And as the economy slows down, their price falls. Let us take an example of automobile companies. If the economy is booming, you have good savings. You would consider changing or buying car. So, the demand for cars will go up. The sales will increase. The profits will rise. The stock prices will also move up. On the other hand, during an economic slowdown, when your job security is low and you are not earning enough, buying a car is a luxury. So, the stock prices of automobile companies will fall. Such stocks are called cyclical stocks. Investing in cyclical sectors is risky due to the significant ups and downs. Although they carry the risk of loss, you can...
Thinking about Bottom Fishing ? Here are the details

Thinking about Bottom Fishing ? Here are the details

How to learn Bottom Fishing? You must have noticed that many stocks such as Sri Adhikari Brothers Television Network Ltd (SABTN), Dr,Reddy’s and Coal India are trading below or near their all-time low prices and you might think to yourself that this would be the best time to enter such stock since you will be able to make big bucks when the market and/ or the stock’s turnaround. What you are doing here is what is called bottom fishing. What is bottom fishing??? Bottom fishing refers to investors scouting for stocks that have reached rock bottom prices owing to some temporary issues either with the company or the sector or with the economy in general. It’s somewhat like fishing. But the whole thing rests on investor’s perception that the stock price has hit rock bottom temporarily and will bounce back, both of which are never guaranteed. Bottom fishing, therefore, involves a lot of risks. Investing in banking stocks during the financial crisis is an example of bottom fishing. Simply speaking, an investor construes such low price of stock as an opportunity for picking up good stocks that are trading at such low prices due to some issues that are of temporary nature. Stocks such as NMDC and Aban Offshore that got badly battered fall in this category. To do or not to do bottom fishing Central to bottom fishing is an investor’s perception or belief that the stock is undervalued, which makes him pick up badly battered stocks especially in a bear market. The investor believes that when markets move the investment will turn profitable. But you must understand...