1 week ago


Short term capital gain or business profit? (As per new guidelines of SEBI I.e. e-equity margin effective from Sept. 2020 an investor/traders in shares and securities can buy shares by paying 20% to 40% margin money and square up these shares within 90 days. This appears little better trading/investing proposition then FNO because in FNO one has to trade with particular lot size only whereas under e-margin an investor/trader can buy any quantity(even 1 share). Under e-margin trading is done under cash/delivery segment and not FNO segment whereas the nature of transaction is just like FNO. As we know that under FNO segment the turnover will be profit and loss taking together and not the value of transactions (particularly for determining turnover for the purpose of audit u/a 44AB) Now for e-margin equity transactions my queries are:1) what will be the turnover for the purpose of audit u/a 44AB whether total value of transaction or the margin money paid or only profit or loss of each transaction as in the case of FNO. 2) what would be the nature of profit/loss on these transactions, whether speculation profit/loss or trading profit/loss or short term capital gain/loss. It is important to note that the shares purchased under e-margin are not transferred to Demat account unless these are converted into delivery segment by making full payment of shares. Since these are not transferred to dmat account, whether profit/loss can be termed as short term capital profit/loss or it will be business profit/loss only.)


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