Gains arising from the sale of shares or securities can be treated either as capital gains or business income. Know more on treatment, restrictions, risks
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Now a days, most of the people are investing in shares/securities either as investment or full time trading. The gains arising from sale of shares or securities can be treated either as capital gains or business income. Determining the gains from shares/securities as capital gain or business income is a fact specific and it has led to a lot of uncertainty and litigation in the past.
Based on the period of holding, the taxable income arise from the sale of shares or securities can be considered in three different ways 1. Long Term Capital Gains, 2. Short Term Capital Gains, 3. Business Income (uncommon)
There is no universal principal to determine gains from shares/securities as capital gains or business income. The taxpayers find it difficult to prove their intention of acquiring such shares/securities. Hence the taxpayers or Assessing officers needs to take the following parameters into account while determining the gains from shares/securities as capital gains or business income.
Ultimately, one need to prove that the intent with which one operating the trading as a business activity.
The above principles shall not apply in respect of such transactions where the genuineness of the transaction itself is questionable such as bogus claims of long term capital loss or short term capital loss
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