Are you a salaried employee and trading in stock markets as well? While the Income Tax Return (ITR) is not going to be extended this year, you cannot set off your stock trading losses against salary income, according to a tax expert.
The ITR filing due date for Financial Year 2021-2022 (AY 2022-2023) for salaried employees whose accounts don’t need to be audited is 31st July 2022. The Government is not planning ITR due date extension this year as it expects that most of the returns would be filed by the deadline.
Revenue Secretary Tarun Bajaj on Friday said that the Government has no plans to extend the last date for filing ITRs.
Salaried employees who have not filed their ITRs yet can still set off their losses from stock markets and file their returns before the due date.
As per the Income tax rules, stock market transactions are grouped as either ‘Capital Gains’ or ‘Business Income’ based on various factors, like trading, investment, volume and frequency of transactions, their period of holding, etc.
Capital gains are further classified as long-term and short-term capital gains based on their holding period.
Business can also be further classified as speculative income for example in the case of intra-day trading. Therefore, the trading/stock market losses are allowed to be adjusted based on the rules applicable to these income heads.
If it is a long-term capital loss, it is allowed to be adjusted only against the long-term capital gains. However, a short-term capital loss is allowed to be adjusted against both short-term and long-term capital gains.
“Suppose such loss could not be adjusted during the current year, then it can be carried forward to the following 8 Assessment Years only if the ITR is filed timely by the due date,” Archit Gupta, Founder and CEO of Clear, told FE PF Desk.
If you incurred a loss in intra-day trading, it could be adjusted only against speculative income from commodities or intra-day trading in the current year or the next four years.
“Any business loss from shares other than intra-day trading can be adjusted against all other incomes except salary income. Therefore, the taxpayers cannot set off their trading/stock market losses against their salary income,” said Gupta.