InvestorQ : Can you throw some light on the difference between capital gains treatment and business income treatment of equities?
Maniish Lofar made post

Can you throw some light on the difference between capital gains treatment and business income treatment of equities?

Answer
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Nisha Chandani answered.
1 year ago


When it comes to shares we are aware that LTCG capital gains were fully tax free till March 2017 but are taxed at 10% from April 2018 onwards. On the other hand, short term capital gains are taxed at the rate of 15%. If you classify your income from shares as capital gains then these are the rates of tax that you need to pay. In this case, your exposure to stocks will be treated as your investment portfolio. However, in case your treat your income from shares as business income, then the short term equity holding will be treated as stock-in-trade. Stock in trade refers to the routine assets you maintain as part of your regular business. When it is classified as business income, then it will be taxed at the normal business income rate of 30%. If you feel this rate of tax is higher, remember that when you classify as business income you can also write off all your incidental expenses against your income from stocks and pay the tax only on the net income.