I am a retired govt employee and do share trading. How income tax is calculated?

The short term capital gains on listed shares are taxed at flat rate of 15%. Whether a particular income from listed equity is to be treated as business income or capital gains has been subject matter of huge litigation. In order to reduce such litigation, the CBDT has issued a circular in February 2016 stating that whether the income from listed share should be treated as business income or capital gains, the first choice is with the tax payer and the assessing officer is bound to accept the choice so made. Such choice can only be made in case the shares are held for more than 12 months. However, this circular does not cover your case. So whether your trading income would be treated as business income or capital gains will depend on various factors like the average holding period, quantum of transactions, source for making the investments etc. However, in case the volume of transactions is not very huge and you have used your own money, the same can be treated as short term capital gain. Please note that the same has to be decided on the basis of assessment of all the facts taken together.

Any profit made on transactions squared off on the same day are treated as speculative income and any profit/loss of that nature will have to be segregated. In case the net result of such transactions is profits, it will be treated like your regular income and will get taxed at slab rate. In case it is loss the same cannot be set off against any other income except speculative profits during the same year. Such loss can however be carried forward for four years to be set off against speculative profits only future.

Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on Twitter.