A Zerodha trader needs to file an Income Tax Return (ITR) based on the income earned from trading in equities, mutual funds, or derivatives. Zerodha offers a Tax P&L Report that summarizes all the trading transactions for the financial year. This report helps traders decide which ITR form to use and whether a tax audit is necessary. If you are a Zerodha trader preparing to file your ITR, follow the detailed steps below.
Tax P&L Statement Tabs in Zerodha Explained
Therefore, as you can see from your image, your Tax P&L Statement is broken down into 7 different sections:
Equity Intraday Equity intraday trading involves buying and selling stocks within the same day. This means that all transactions are completed by the end of the trading day.
Equity Delivery Equity delivery trading refers to buying stocks and holding them for a period of time, during which they are kept in your Demat account. This category is further divided into:
Long-Term Trades: Investments held for more than a year. Short-Term Trades: Investments held for less than a year.
Mutual Funds Tax P&L StatementDebt Funds: These mutual funds invest in fixed-income securities like bonds and treasury bills. Equity Mutual Funds: These funds invest primarily in stocks of companies, such as those in banking or FMCG sectors.
Futures and Options Tax P&L StatementEquity Futures: Contracts to buy or sell a certain quantity of a stock at a future date for a predetermined price. Equity Options: Contracts giving the right, but not the obligation, to buy or sell a set number of shares at a certain price before a specific expiry date, for which a premium is paid.
Commodity Tax P&L StatementCommodities Futures: Contracts to buy or sell raw materials at a specific future date for a set price. Commodities Options: Contracts giving the right, but not the obligation, to buy or sell a commodity, like metals or oil, at a specific price until a certain date.
Currency Tax P&L StatementCurrency Futures: Contracts to exchange one currency for another at a future date for a fixed price. Currency Options: Contracts giving the right, but not the obligation, to buy or sell a currency at a specific exchange rate by a certain date.
Other Credits and Debits This category includes charges and credits that are not directly related to trading activities.
Equity Dividends Breakdown Dividends are rewards paid to shareholders from a company’s profits.
Explanation of Sub-Tabs in Zerodha Tax P&L Report
Realized Profit Breakdown Realized profit comes from trades that have been completed and exited, with the profit typically deposited into the trader’s account.
Turnover Breakdown (Scripwise) Turnover calculation varies with the type of trading. For intraday trading, turnover equals the absolute profit, which is the sum of all positive and negative differences from transactions.
Other Debits/Credits Including Service Tax This includes charges and credits unrelated to trading activities, such as DP charges and payment gateway fees.
Account Head This term refers to the specific categories under which various transactions are recorded.
Short-Term Trades Short-term trading involves holding investments for a few hours to a few weeks.
Which ITR Form is Applicable to Zerodha?
Filing an Income Tax Return (ITR) is an annual responsibility for traders using Zerodha. Depending on their income, taxpayers must submit the appropriate ITR form. This process involves reporting all incomes, calculating and paying taxes, claiming TDS credits, and requesting refunds for any tax overpayments.
The Income Tax Department provides specific ITR forms based on various income scenarios. To determine which ITR form applies to your situation, you can use the following calculator.
For traders with income from trading activities, the relevant forms are ITR-2 or ITR-3, depending on the type of trading income:
ITR-2: For income classified as Capital Gains.
ITR-3: For income classified as Business Income.
Due Date to file ITR for Zerodha
Income Tax Return(ITR) filing is done after the completion of a financial year. So, the due dates for ITR filing are as per section 139 of the income tax act. Due dates for different category of taxpayers are as follows:
Category
Due Date
Individuals to whom audit is not applicable
31st July of the Assessment Year
Companies
30th September of the Assessment Year
Individuals to whom audit is applicable
30th September of the Assessment Year
Individuals/ HUF who are partners in a firm and firm’s accounts are subject to audit
30th September of the Assessment Year
Additionally: the above due dates can be extended by the IT Department via order.
Tax Audit Applicability for Zerodha
Stock traders typically engage in trading shares, securities, commodities, and currencies through online platforms. For income tax purposes, profits from Equity Intraday, Equity F&O, Commodity Trading, and Currency Trading are considered Business Income. Hence, it is crucial to understand the applicability of a Tax Audit according to the Income Tax Act provisions.
Tax Audit Applicability under Section 44AB
The turnover limit for requiring a tax audit under Section 44AB is generally Rs. 1 crore. However, under the Budget 2020 amendments, this limit has been raised to Rs. 5 crores if the following conditions are met:
Cash Payments do not exceed 5% of Total Payments: Cash transactions must be less than 5% of all transactions in the financial year.
Cash Receipts do not exceed 5% of Total Receipts: Cash income must also be less than 5% of the total income in the financial year.
Calculating Trading Turnover for Zerodha
For individuals earning income from trading shares and securities, this income should be reported as income from business and profession. The turnover needs to be calculated to determine if a Tax Audit is required under the Income Tax Act. Remember, tax liability is not based on turnover.
Trading Turnover Calculation:
Equity Intraday: Turnover is the sum of absolute profits from all trades.
Equity F&O: Turnover includes the sum of absolute profits plus premium received on sale of options.
Commodity Trading: Similar to Equity F&O, includes the sum of absolute profits.
Currency Trading: Also follows the same principle as Equity F&O.
It is important to calculate trading turnover only when the trading income is considered business income, not when it is considered capital gains income. This distinction helps in determining the applicability of the tax audit.
Important Keyword: F&O Trading, P&L Statement, Speculative Income, Trading Income.
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Download Tax Profit and Loss report from 5Paisa
At 5Paisa, traders can easily download their Profit and Loss (P&L) Report online, which serves as a vital document for calculating income tax on trading activities. Similar to a Tax P&L Report, this document consolidates all financial transactions undertaken by the trader across different segments during a specific period.
Components of the Trading Statement:
The Trading Statement provided by 5Paisa includes detailed information such as:
Date: The date on which the transaction was executed.
Time: The precise time at which the transaction occurred.
Script Name: The name of the security or financial instrument traded (e.g., stock, commodity, currency pair).
Purchase Price: The price at which the asset was bought.
Sale Price: The price at which the asset was sold.
Segment: Specifies the category of trading (e.g., Equity, Futures, Options).
Quantity: The number of units or contracts bought or sold.
Steps to download Tax Profit and Loss Report from 5Paisa
Follow these steps to download your 5apisa Tax P&L
Important Keyword: Due date, ITR Form, Kotak Securities, P&L Statement, Tax Audit, Trading Income.
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How to File ITR for Kotak Securities?
As a trader with Kotak Securities, it’s essential to navigate the complexities of filing your income tax return (ITR) correctly, especially if your earnings stem from equity trading, mutual funds, or derivatives. Kotak Securities facilitates this process by providing a Tax P&L Report summarizing your trading activities throughout the financial year. This report serves as a crucial tool in determining the appropriate ITR Form to use and assessing whether a Tax Audit is necessary.
For traders, understanding which ITR Form aligns with their income profile is key. The Tax P&L Report from Kotak Securities consolidates all trading transactions, offering clarity on gains, losses, and overall profitability. This detailed breakdown simplifies the filing process, ensuring compliance with tax regulations while maximizing potential deductions and exemptions.
Tax P&L Report Tabs Explained
When managing your taxes as a trader with Kotak Securities, it’s important to understand the nuances of filing your Income Tax Return (ITR) correctly. Kotak Securities provides detailed segment statements rather than a consolidated Tax P&L Statement. This means you’ll need to download statements for each segment separately, such as equity, derivatives, and mutual funds.
To determine the appropriate ITR Form for your filing, consider the nature of your income:
Income from Trading:
If your income primarily consists of capital gains from trading, you should file ITR-2. This form is suitable for reporting income from investments, including gains or losses from equity trading and mutual funds.
Business Income:
If your trading activities are substantial and qualify as business income (such as frequent trading in derivatives or speculative activities), you should file ITR-3. This form is designed for individuals and Hindu Undivided Families (HUFs) who have income from business or profession.
Key Components of Tax P&L Statements:
Cost Basis: The original value of assets for tax purposes, adjusted for factors like stock splits and dividends.
Proceeds: Cash received from selling assets, categorized as gross or net based on transaction details.
Square Off: A trading strategy involving the purchase and subsequent sale (or vice versa) of assets within the same trading day.
Due Date for Filing ITR:
ITR filing deadlines are specified under Section 139 of the Income Tax Act and vary based on the type of taxpayer. Generally, for individuals and HUFs not subject to audit, the due date is July 31st of the assessment year following the financial year.
Ensuring accurate and timely filing of your ITR is crucial to compliance with tax regulations. By using the segmented statements provided by Kotak Securities and understanding the distinctions between ITR-2 and ITR-3, you can effectively report your trading income and fulfill your tax obligations efficiently. Due dates for different category of taxpayers are as follows:
Category
Due Date
Individuals to whom audit is not applicable
31st July of the Assessment Year
Companies
30th September of the Assessment Year
Individuals to whom audit is applicable
30th September of the Assessment Year
Individuals/ HUF who are partners in a firm and firm’s accounts are subject to audit
30th September of the Assessment Year
The above due dates can be extended by the IT Department via order.
Tax Audit Applicability
For stock traders engaged in various types of trading activities such as Equity Intraday, Equity Futures & Options (F&O), Commodity Trading, and Currency Trading, it’s crucial to understand the tax implications, particularly whether Tax Audit under Section 44AB of the Income Tax Act applies.
Nature of Income:
Income derived from trading in shares, securities, commodities, and currencies is treated as Business Income if:
Equity Intraday: Buying and selling of stocks on the same day.
Equity Futures & Options (F&O): Contracts traded on the stock exchanges for futures and options.
Commodity Trading: Trading in commodities on recognized commodity exchanges.
Currency Trading: Trading in foreign currencies through recognized platforms.
Applicability of Tax Audit:
Tax Audit under Section 44AB becomes applicable if the turnover from these trading activities exceeds certain thresholds:
Turnover Limit under Sec 44AB:
The turnover threshold for applicability of Tax Audit is typically Rs. 1 crore.
However, Budget 2020 increased this threshold to Rs. 5 crore, provided certain conditions are met:
Cash Payments should not exceed 5% of the Total Payments in the financial year.
Cash Receipts should not exceed 5% of the Total Receipts in the financial year.
Calculation of Trading Turnover:
Definition: Trading turnover refers to the total of the amounts received or receivable from the sale of goods or services in the financial year.
Importance: It’s essential to calculate trading turnover accurately to determine whether Tax Audit is mandatory under the Income Tax Act.
Distinction between Business Income and Capital Gains:
Business Income: Income from trading activities as part of a business or profession.
Capital Gains: Income from the sale of assets such as stocks or securities held as investments.
Important Keyword: Due date, ITR Form, Motilal Oswal Trader, P&L Statement, Tax Audit, Trading Income.
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How to File ITR for Motilal Oswal?
For traders with Motilal Oswal, understanding how to file their Income Tax Return (ITR) is crucial, especially when income arises from trading in equity, mutual funds, or derivatives. Motilal Oswal provides a detailed Tax P&L Report summarizing all trading activities conducted throughout the financial year. This report serves as a pivotal tool, guiding traders to determine the appropriate ITR Form to file and whether a Tax Audit is necessary.
The Tax P&L Report simplifies the process by consolidating trading transactions into a comprehensive statement. This statement not only helps traders in assessing their taxable income but also aids in identifying deductions and exemptions applicable under the Income Tax Act.
Motilal Oswal: Tax P&L Statement Tabs Explained
For Motilal Oswal traders in India, the applicable Income Tax Return (ITR) form depends on the nature of income earned from trading activities:
ITR-2: This form is used if the income is from capital gains. Capital gains can arise from the sale of securities such as stocks, mutual funds, etc. Therefore, if you are trading and earning income primarily through capital gains (short-term or long-term), you would file ITR-2.
ITR-3: This form is applicable if the income is from business or profession. If your trading activities are substantial, frequent, and qualify as a business activity rather than just occasional investments, you would file ITR-3. Business income includes profits or losses from trading activities where there is regular buying and selling of securities with the intent to earn profit.
Key Points Motilal Oswal:
Capital Gains (ITR-2): If you primarily earn income from the sale of securities and it qualifies as capital gains (whether short-term or long-term), use ITR-2.
Business Income (ITR-3): If your trading activities are extensive, frequent, and you consider it as a business where you actively buy and sell securities, use ITR-3.
Due Date for Filing ITR:
The due date for filing Income Tax Returns for individuals, including traders, is typically:
31st July of the assessment year for non-audit cases (where audit is not required under any law).
Due dates for different category of taxpayers are as follows:
Category
Due Date
Individuals to whom audit is not applicable
31st July of the Assessment Year
Companies
30th September of the Assessment Year
Individuals to whom audit is applicable
30th September of the Assessment Year
Individuals/ HUF who are partners in a firm and firm’s accounts are subject to audit
30th September of the Assessment Year
The above due dates can be extended by the IT Department via order.
Tax Audit Applicability
To determine whether a tax audit is applicable under Section 44AB of the Income Tax Act for traders engaged in activities like Equity Intraday, Equity F&O, Commodity Trading, and Currency Trading, you need to calculate the trading turnover. Here’s how you can approach it:
Calculation of Trading Turnover:
Equity Intraday, Equity F&O, Commodity Trading, and Currency Trading are considered as Business Income:
Income from these activities is treated as business income, not capital gains.
Definition of Turnover:
Equity Intraday: Total of positive and negative differences resulting from transactions in the financial year.
Equity F&O: Absolute value of sum of both positive and negative differences on settlement of contracts.
Commodity Trading: Absolute value of sum of both positive and negative differences on settlement of contracts.
Currency Trading: Absolute value of sum of both positive and negative differences on settlement of contracts.
Conditions for Tax Audit Applicability (Budget 2020 Amendment):
The turnover threshold for applicability of tax audit under Section 44AB has been increased from Rs. 1 crore to Rs. 5 crores, provided:
Cash payments do not exceed 5% of the total payments in the financial year.
Cash receipts do not exceed 5% of the total receipts in the financial year.
Calculation of Turnover:
Calculate the total of positive and negative differences from all trading activities (Equity Intraday, Equity F&O, Commodity Trading, Currency Trading) over the financial year.
This turnover figure is crucial for determining whether the trader exceeds the threshold requiring a tax audit.
Example Scenario:
Suppose a trader has the following turnover figures for the financial year from Equity Intraday, Equity F&O, Commodity Trading, and Currency Trading:
Equity Intraday: Rs. 3,00,00,000 (absolute value of differences)
Equity F&O: Rs. 1,50,00,000 (absolute value of differences)
Commodity Trading: Rs. 80,00,000 (absolute value of differences)
Currency Trading: Rs. 2,00,00,000 (absolute value of differences)
Since the total turnover exceeds Rs. 5 crores, a tax audit would be mandatory for this trader unless the conditions related to cash transactions (not exceeding 5% of total payments and receipts) are satisfied.
Important Keyword: Due date, ITR Form, P&L Statement, Tax Audit, Trading Income, Upstox Traders.
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How to File ITR for Upstox?
As a trader using Upstox, your journey in filing your Income Tax Return (ITR) revolves around the comprehensive Tax P&L Report provided by the platform. This report amalgamates all your trading activities across equities, mutual funds, and derivatives throughout the financial year. Understanding this document is crucial as it determines which ITR form you should file and whether a Tax Audit is applicable.
The Tax P&L Report serves as your compass in navigating the complexities of tax compliance. It outlines your gains and losses from trading, essential for accurate reporting to the Income Tax Department. Based on the report’s insights, you can ascertain the appropriate ITR form that aligns with your trading income profile.
For those new to the process, filing taxes can seem daunting, but with Upstox’s intuitive tools and guidance, the journey becomes more accessible. By leveraging the Tax P&L Report, you gain clarity on your financial obligations, ensuring compliance while maximizing your returns.
Upstox Tax P&L Statement Tabs Explained
For Upstox traders, the applicable Income Tax Return (ITR) form depends on the nature of income earned from trading activities:
ITR-2: This form is used when the income from trading includes capital gains income. Capital gains can be either short-term or long-term depending on the holding period of the assets traded.
ITR-3: This form is used when the income from trading includes business income. Business income typically arises when the trading activity is frequent and substantial, resembling a business operation rather than mere investment.
Key Points Upstox:
If your trading activities result in income categorized as capital gains (whether short-term or long-term), you should file ITR-2.
If your trading activities qualify as business income (due to frequency, volume, and intention to earn profit), you should file ITR-3.
Due Date for Filing ITR: The due dates for filing Income Tax Returns are specified under Section 139 of the Income Tax Act and are typically:
31st July of the assessment year for individuals (unless extended by the tax authorities).
It’s important to file your ITR within the due date to avoid penalties and interest on late filing, if applicable.
Due dates for different category of taxpayers are as follows:
Category
Due Date
Individuals to whom audit is not applicable
31st July of the Assessment Year
Companies
30th September of the Assessment Year
Individuals to whom audit is applicable
30th September of the Assessment Year
Individuals/ HUF who are partners in a firm and firm’s accounts are subject to audit
30th September of the Assessment Year
The above due dates can be extended by the IT Department via order.
Tax Audit Applicability
When determining the applicability of Tax Audit under Section 44AB of the Income Tax Act for income derived from trading in shares, securities, commodities, and currencies as business income, it’s crucial to calculate the trading turnover accurately. Here’s how you can approach it:
Definition of Trading Turnover
Trading turnover is computed based on the total of the following:
Total of Positive and Negative Differences:
In case of trading in derivatives (like Equity F&O, Commodity Futures, Currency Futures), turnover includes both positive and negative differences.
Speculative Transactions:
For equity intraday trading (where delivery does not happen), the total of both buying and selling transactions is considered as turnover.
Gross Total Income:
The aggregate of income under all heads like salary, house property, business or profession, capital gains, and income from other sources.
Conditions for Tax Audit Applicability (Budget 2020 Amendment)
According to the Budget 2020 amendment, the turnover limit under Section 44AB has been increased from Rs. 1 crore to Rs. 5 crore for traders in shares, securities, commodities, and currencies, provided the following conditions are met in the financial year:
Cash Payments: Cash payments do not exceed 5% of the total payments.
Cash Receipts: Cash receipts do not exceed 5% of the total receipts.
Steps to Calculate Trading Turnover
Equity Intraday Trading:
Sum up the total of all buying and selling transactions (including turnover of shares where intraday trading has occurred).
Equity Futures & Options (F&O):
Include the absolute value of both positive and negative differences i.e., the sum total of all profits and losses.
Commodity Trading:
Compute the total of all transactions (buying and selling) including both profit and loss.
Currency Trading:
Similarly, aggregate all transactions (buying and selling) across the currency pairs traded.
Example Calculation:
If you’re trading in equity futures and options:
Total of all positive and negative differences (absolute value) across all contracts traded during the financial year.
For equity intraday:
Total of all buy and sell transactions where shares were traded on the same day.
