GST on Investment, Sale-Purchase of Shares, Intraday Transactions, F&O and Mutual Funds:
First and foremost, GST is not applicable on sale-purchase or investment in Shares, Intraday Transactions, F&O and Mutual Funds in general but there are some special cases like Commission involved in this trade where the same will be applicable, details of this are as under:
- The GST Act specifically excludes Securities from the definition of Goods. As per Section 2(52), Goods means any movable property except money and securities.
- Therefore, it is certain that If you trade in Securities or shares be it CNC trading or Intraday or F&O or through mutual funds the same will not attract GST.
- But the Brokerage/commission involved in this trading will be covered under GST and if other conditions are satisfied such as threshold limit, or voluntary registration under GST regime, the person earning such commission has to pay GST.
Now there are some common questions related to GST in Securities which can be as under:
Is Trading Turnover included in my Aggregate Turnover for GST? Let’s clear some concepts here:
What is Aggregate Turnover and why you need to calculate it? Well, reference of Aggregate Turnover is very common in GST Act, but it’s most important use is in determining that whether GST has become applicable to you or not. i.e. have you crossed minimum exemption limit of (40 Lacs or 20 Lacs in special category states: for more details please see our post on When to and How to Register under GST?). So, as per GST Act: if your aggregate turnover crosses 40 Lac Rs. (or 20 Lacs in special category states) you have to register under GST.
So, what if? You are a freelancer and earning lets say about 38 Lacs per annum and you like to play around in share market and your annual trading is Rs. 10 Lacs (sale of securities). So is your aggregate turnover 48 Lacs? And you need GST Registration? Well No.
As per GST Act:
“aggregate turnover” means the aggregate value of: all taxable supplies (Excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.
So as the Trading in shares and securities is not even a supply, therefore its turnover is not included in Aggregate Turnover.
So, in our above example only supply is 38 Lacs and the same is out of gambit of GST, if you are not in special category state as it will reduce the limit to 20 Lacs.
Can I Claim ITC on GST paid on Commission or Brokerage?
ITC can only be claimed on Inputs that are directly attributable to your taxable supplies.
Since, in this case directly attributable supply is trading of shares on which GST is not leviable. Therefore you cannot claim ITC of GST paid on Brokerage.
If You have any other query relating to GST on Trading of securities kindly write to us @ [email protected] and we will add it to our blog.
Now what about Income TAX on Investment, Sale-Purchase of Shares, Intraday Transactions, F&O and Mutual Funds:
Let’s Split it into different questions that we will discuss here today:
- Taxation of Equity Shares in case of Cash and Carry, i.e. shares bought for investment and sold at least after the day you bought the same, and Dividend Income.
- Taxation of Intraday Trading: Shares, i.e. Shares bought and sold on the same day.
- Taxation of Intraday Trading of Futures and Options. (Derivatives).
Cash and Carry or in Income Tax Shares held for Long Term or Short Term
- If you buy Shares through your De-mat account and do not sell them on the same day you qualify for following taxation regime:
What about dividend received from Shares?
- From the FY 2020-21, shareholders receiving the Dividend Income are liable to pay tax on the same.
- First of all if your Dividend income from one company in one financial year is more than Rs. 5,000/-, the company paying you dividend will deduct your TDS @ 10% of the sum payable. You can claim the same in your ITR as tax payable.
- Well, taxation? It will be taxed at your normal slab rate of tax just like any other income. Either in the head Other Sources or the head PGBP depending on the nature of your trading.
Taxation of Intraday Trading?
First, let’s find out what is Interday.
What is Intraday?
So, the Income will be taxed as Business Income. Therefore there will be a P&L account with sale, purchase, Commission and other expenses related to this Income in P&L account.
There will be same Tax Rates in both the cases. The difference comes In setoff and carry forward of losses in between this two.
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