The deadline for filing income tax returns (ITR) 2024 is July 31. As a result, numerous taxpayers have started the filing process, with many having already filed their returns. However, some are waiting until the last minute to complete this financial task. Personal finance experts recommend filing the returns as soon as possible to avoid last-minute hurdles.

Understanding the income tax implications of investing in the stock market is crucial for traders and investors. Here is a quick guide for traders and investors.

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Income categories

Stock market activities can be divided into capital gains, operating income (speculative and non-speculative) and income from other sources, such as dividends.

Which ITR form should I file?

Salary recipients with investment income use ITR-1.

ITR-2 includes capital gains.

ITR-3 is intended for trading profits and business income.

NRIs use ITR-2 and ITR-3 in case of business income.

Speculative and non-speculative income

Speculative and non-speculative income are reported separately in ITR-3.

Business expenses can be deducted from income in ITR-3.

Losses resulting from trading and investing must be reported.

The Annual Information Statement (AIS) reflects the transactions on the stock market.

Long-term profits were taxed at 10% (above ₹1 lakh) for 12 months.

Short-term capital gains are taxed at 15% for investments up to 12 months.

Settling and passing on

Losses can be offset within the same item or carried forward.

Specific terms and rules apply depending on the type of income.

Keeping records

A profit and loss account and a balance sheet are necessary for an audit if the annual trading profit is higher than ₹2.5 lakh or turnover exceeds ₹25 lakh.

If applicable, you must report foreign assets and income on Schedule FA, even for acquired ESOPs in foreign corporations.

Knowledge of these aspects ensures compliance with tax regulations and effective management of stock market investments.

Please note: This story is for informational purposes only.