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  Tata Motors   (Stocks)  
bounceback
Dear Mr. Sodhan,

I am happy you are asking this question.

1. Delivery based trading will be rightly classified as short term when held for less than one year. You can pay concessional rate of 15% as tax on such short term gains.

2. Shares held for longer than 1 year are of course tax free. Situation may change after 1.4.2011.

3. Margin trading (without taking delivery) will be classified as speculative transaction and will be taxed at maximum marginal rate applicable to the individual. The losses can be carried forward only for four years and can be adjusted only against speculative gains.

4. Even though derivatives trading too involves no delivery or even intention of delivery, such transactions are treated as `business profits` by a special provision made in the Income Tax Act, 1961.
These gains will be added to other income of the individual and will be taxed at maximum marginal rates applicable to the individual. However, losses under these transactions (total to be netted for one whole financial year) can be carried forward for EIGHT years and can be adjusted against ANY other income except salaries income. Another condition to be satisfied is, such transactions should be carried out through normal brokers/stock exchanges and securities transaction taxes must have been paid on them.

For a definition of turnover, please, visit my homepage and read the caselaw indicated there. Total value of derivatives transactions will not be taken as turnover and Rs. 40 lakhs limit will be applicable only on the premium amount made or lost.		   
Posted By     subasu

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