A Day Traders Little Instruction Book: Wit and Wisdom for the Online Investor

A Day Trader's Little Instr A Day Trader's Little Instruction Book: Wit and Wisdom for the Online Investor avg rating — 3 ratings — published — 2.
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Do you find this to be true for yourself also? Do you listen to successful traders and use their experiences to identify with your own? But you will gain encouragement to hear about the failures and successes of these brilliant traders and investors. For me, I find it almost more valuable to learn from a successful persons failures that I do to hear about their successes. Their failures help me to identify with them because I have failed many times myself.

If the superstar traders done everything right from the beginning then there would be little hope of following in their footsteps. Because everyone fails along the way you can take comfort in encouragement in reading their stories and learning from their experiences. Here is an excerpt from the book that I thought you would enjoy reading and would benefit from. I then compounded the error by reversing my original position and losing again. To top things off, I then reversed back to my original position and lost a third time. He went on to say that if these rules had of been followed and the risk per trade had of been controlled then his most painful trading experience would have been avoided altogether.

And in this brief example there is a warning and an encouragement to you as a trader: Yes, you may make some quick gains, but if you are not careful a losing position or two could wipe out your entire account. This is not a place you want to find yourself in! Yes, I know this is a stock trading book, and you are concerned with the currency markets, but this is a very good book that can teach you a lot about yourself as a trader. What I wanted to share with you also with regards to this book is this video training which summarizes some of the points and lessons from the book.

It is recorded by a professor and a very successful trader also. It is a great overview of this book and its material if you do not have the money or time to purchase this book. Again, this is a stock market course and I do not mean to distract you in any way. I would ask you to review the material on the video link so you can learn from these good lessons. These lessons and this material will, I believe, help put your own Forex trading success or failures into greater perspective.

I think you will be able to learn useful lessons from the material in this book or in the video summary and from these lessons you will be able to make good strides in improving your trading business. If you have not yet identified your edge and have not yet solidified your trading strategy then this is the book for you. I believe it will help you to identify the mistakes that you are making with your own Forex business so that you can shore them up and move on to more successful trading.

Like me, you might also gain a new-found appreciation for the world of modern trading technology that we are now lucky enough to have. If anyone was successful in the past to the tune of millions of dollars in profit then you and I should be more than capable of creating a profit when we have access to computers and high speed internet accounts compared to the author who received his stock ticks via telegram. This is not a book that I have personally read but it is one that a lot of people talk about. I think you could learn a lot from the authors website at turtletrader.

This is an excellent reference for those who are seriously into alternative investments. This is especially the right book for those who not only have an experience in trading but also for those who are open to taking their chances beyond basic retirement account and mutual fund investing. All traders will definitely find this book very valuable as it is thoroughly researched and well documented. In this amazing book for traders, the author especially educates his readers regarding the little-known chances they are capable of taking through one reliably excellent hedge fund strategy.

Thus, this book is precious to every smart investor. During the crash, many incurred losses in their investment while the trend followers benefited a great deal from it.

Mebane Faber: "Global Value: How to Spot Bubbles, Avoid Market Crashes, and Earn Big Returns"

In this book, the author reveals accurately how they were able to come up with such amazing results. He shows the reasons why a single technical system that is based on just following the price trends is able to win over for a long period of time. He also shows the readers ways to follow the exact strategies in their own portfolio in order for them to keep on gaining profits regardless of the ups and downs of the market. Trend Following is a classic book on trading which is accepted by most professional traders.

This book is an interesting read recommended to all serious investors. There is a certain investment strategy which works in all markets and it is revealed in this book. Trend Following is a foundational type of book that describes in detail the concepts and philosophy underlying a certain trading system that is driven alone by price trends. The author uses both anecdotal evidence and hard data, emphasizing on concepts associated with behavioral finance throughout to put his message across. In this masterpiece, Covel informs the readers that even if they do not purchase everything, questioning their past actions, preconceptions and assumptions is always of value.

Not all trading strategies are perfect. This book will at least help the readers recognize the weaknesses and flaws in what they are doing at the moment. Michael is a believer in the Turtle trading system which you will see documented further down this list. He has a number of books available, and again, I cannot recommend this book from my own experience but only from the recommendations of others. One of the lessons I remember from a trading instructor was a reference to a very successful trader from the past.

I do not remember the name of the trader that was being referenced but the underlying lesson was that this trader never looked for the tops or bottoms in any market. If you think about that for a minute, it is astonishing and powerful. All you need to do is find a trend and trade with and that trend. Trading for a Living: Psychology, Trading Tactics, Money Management is an interesting book—excellent for beginner and intermediate traders written by Alexander Elder who is a Soviet-born practicing psychiatrist.

The author of this book also works at Financial Trading Seminars, Inc. As a practicing psychiatrist, Alexander Elder understands how psychological fitness and state of mind are important in facing the challenges associated with Forex trading. Thus, he formulates pragmatic ideas which help shun anxiety and improve performance. This book makes a complete guide for traders in understanding the psychology of trading to achieve beneficial results.

This book especially teaches the readers how to make the most out of understanding the behavior related to the market crowd. This book further informs the readers about the typical psychological behaviors that brought the failures of many traders and teaches tactics on how to focus their minds on the right track so they can be prevented from leaning towards the psychological pitfalls from which many traders fail. Elder also discusses some trading strategies for the traders to use while trading. He also developed and introduced 2 new indicators such as the Force Index and Elder Ray in this trading book.

There is such great information written about making the most of the computer in finding good trades and developing a very effective trading system. This basically helps traders find trades with excellent chances of success. Furthermore, as a technical analysis expert and a trader, Alexander Elder shares great insights.

Elder also addresses crucial factors such as volume, open interest and time which are considered significant for Forex traders. What is represented in this book is the benefit of trading expertise and psychology. The author looks at two things. He gives emphasis on pragmatism and at the same time stresses on psychological strength which is vital for traders when the market is down.

Thus, this book teaches traders how to coolly and calmly deal with the world of trading. A good number of technical approaches are covered in the book related to investing in futures associated with Elliot Wave, Market Logic, moving averages, oscillators, etc. Traders are taught about entry points and exit points since these basically determine their performance in the trade, whether they will succeed or fail. This practical book which was written by an authority on such a complex subject is written in such a way that the author handles money management and technical analysis in a very delicate manner.

Traders who have already read the content recommend this book for their colleagues in the field who have little knowledge about money management and technical analysis. They regard the book to be very helpful in making the readers understand the topic with less stress to the brain. In short, this is a good book for those who are seeking content which weaves altogether the topics related to the psychological aspect of trading, protection of trading capital and market trading methods in an easy and readable way possible. Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude is a fascinating book for traders written by Mark Douglas who has been a trader, an industry consultant and a personal trading coach since Even a well-grounded, a highly motivated and an astute trader can encounter disaster due to the conflicts, paradoxes and contradictions in his thinking.

In this important trading book, Douglas tackles five very distinct issues to give insight to traders and to teach them how to understand themselves which will help them win consistently in the market. It reveals the real causes for inconsistency associated with stock pricing such as the lack of self-confidence and focus. In the course of time, the traders will also be able to gain significant insights regarding the entrenched misconceptions they have concerning the market.

By being able to understand themselves better and the realities of Wall Street, the traders will have the chance to make the most out of their psyche to achieve unprecedented profitability. The author takes on some myths associated with the market, then after which exposes such myths one at a time coaching the traders how to have an understanding of the true nature of risk.

This is a good selection for your library especially if you are into trading. This book proves how your beliefs, emotions and thoughts regarding the market more often than not, do not reflect what is being plainly, neutrally and unemotionally communicated by the market each moment. The ending of this book shows steps on how to build your own solid system as the initial stage of developing into an excellent trader. Level two refers to subjective trading which is mastered by only a few while the third stage refers to intuitive trading which is mastered by even fewer individuals. Like most traders, after their first losses they learn a better approach to market analysis.

After their succeeding losses, they learn how to manage risks. However, these are not enough since there is another significant challenge that needs to be conquered and that is, yourself. Conquering yourself is the basic aspect of this book as this serves as its major premise. This actually means that when you are able to successfully forecast the market there still remains some room to focus on other aspects. This ability to successfully predict the market is not the only thing that is necessary. How 23 Novice Investors Became Overnight Millionaires is regarded as an international bestseller which is based on a true story of Richard Dennis , a Wall Street legend along with his disciples referred to as the Turtles as well as the trading techniques they used in becoming millionaires.

This is a story of how ordinary people learned a system through training to make a pile. By investing with the use of a few basic rules, Richard Dennis was able to gain profit on Wall Street. The Wall Street Journal classified ad section was soon added with details of recruitments for novices to be trained. His recruits, which were later called the Turtles, did not possess any typical Wall Street background. The recruits included a pianist, a designer for a fantasy game, and a pro blackjack player, a Harvard MBA, an accountant, and a pilot of the US Air Force.

He narrates how Richard Dennis conducted the interview and selection of his students, details their experiences and education as they worked for him, and discusses the Turtle set of rules and system in full. He particularly reveals how they were able to make astounding fortunes, and makes a note of their lives from the commencement of the experiment to their present lives.


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The Complete TurtleTrader is a must read book for investors. It is a great story and truly eye-opening. There is no other book that brilliantly captures how the legendary Turtle investment system was formed and evolves than The Complete TurtleTrader. It is filled with fascinating anecdotal insights including lessons on life, risk and trading that are worth following. There is no other useful book that can turn your daily stresses into excellent behaviors and attitudes that bring success than The Disciplined Trader: With a unique insight learned from his actual trading experience, Mark Douglas explores why the individual beliefs learned necessary for functioning effectively in society often become formidable obstacles in trading since a great number of traders are basically emotionally unprepared in dealing with the trading environment.

Nothing can bring failure to successful trading like emotions. This is so since the trading environment requires individuals to disregard what they were taught to be relevant to effectively function in a typical society. It then shows the readers how they should develop and apply such behaviors and attitudes that surpass psychological barriers and help them achieve success as a consistently better and disciplined trader. This classic book helps the readers become one of those who have developed ways to control their behavior towards trading these are the few types of traders who are able to consistently make the most profit from the market through developing a step-by-step and systematic approach for making it to the top all week, all month.

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In a logical and comprehensive manner, the author teaches the readers certain ways to not only examine their trading behavior but also to limit those as well as to develop the kind of mental discipline the few winners possess in making money consistently yearly, monthly and weekly. More often than not, only very few traders consistently gain huge profits on the markets either in bear or bull market conditions, and these few ones are those that have the mental discipline needed to withstand even unpredictable, choppy markets.

The skills that are targeted in this book include: The four sections of The Disciplined Trader contain the following steps to eliminate the deeply ingrained, traditional thinking processes the readers possess. The first step reveals knowledge of what psychological requirements are called for in a trading environment. The second part outlines the obstacles and problems that are involved in achieving success as a trader, including a considerable number of usable, on-target solutions.

The third section tackles more on the necessary insights into the behavior that may need some changes and how a framework should be build to accomplish such goal. The book ends showing how distinct trading skills are to be developed based on an objective and clear perspective regarding market action. This very informative book is always among the most highly suggested books for active traders and investors. Regardless of the new developments and market climate such as the increase of online investing, The Disciplined Trader remains significant to the present day and is still considered a must read book by major traders across the globe.

A considerable number of traders read this material in the early stages of their career and choose one or a couple of tools. Most traders even understand and benefit more from this book after their second reading or as they have been trading for some time and being able to recognize the behaviors that need to be changed as targeted in the book.

There is always a possibility for you to succeed at trading. It has always been true since before until now, for people across the globe. Come Into My Trading Room: A Complete Guide to Trading was especially written by a noted author and trader Dr. Elder teaches his readers to manage their time, money and strategy in order for them to identify new, rarely known indicators which could lead them to gaining huge profits.

It instructs the novice and strengthens the professional traders through tried and tested trading methodologies and expert advice. The readers are welcomed to visit his trading room by following his actual trades which illustrate most of the major concepts discussed in this book. This amazing book reviews the essentials of trading futures, options, stocks and important psychological tactics needed for organization and discipline, aiming to turn any individual into a successful and well-rounded trader.

As the readers are shown ways to utilize the elements of money, method and mind altogether, this book provides readers with the insight and knowledge to confidently join the market and considerably gain profits. A complete degree of coverage and unparalleled depth keep traders of all levels informed, engaged and coming back to this compelling trading masterpiece over and over. A practicing psychiatrist, professional trader and expert in technical analysis, Dr. Alexander Elder is also the Financial Trading Inc.

Just have a small clarification, suppose I receive 50k as rental income every year, and I have made a lost 1 lac can I set off every year against my rental income. If the loss is intraday equity trading then it is considered as speculative loss and that cannot be set off against your rental income.. This blog is really very informative, thanks to Zerodha for educating your clients and also for giving such a nice brokerage services in India.

A If we are filing IT Returns as business profession in current financial year as a professional trader and in the next year if we stop trading can we file a IT returns as salaried employee ITR 1 or as an investor if there is any small investment , is there any impact if we change our IT returns method year on year. How the losses of current financial year can be recovered in the future? B Can we adjust our trading losses for income from dividend and bank deposit interest.

Yes you can change yourself from a trader trading as a business to an investor or vice versa when filing your returns from one year to another. But to do this there has to be some kind of justification, in your case if you stop trading, definitely you can say that you have gone from being a trader to an investor.. Our advise is to not do it frequently and not to do it for mere tax planning, it will show up in the future.. Since you have already filed your loss, you can keep netting it off even when you convert yourself from trader to investor..

You anyways get the benefit for the next 8 years to set off your losses. If you make 12lks profit then it becomes your business income and you will have to pay taxes as per the slab provided above in the blog.. But while filing your return you can declare the various costs like internet, advisory charges, electricity etc any charge that you incur for trading in the markets.. I am a student, hence I have no source of income. I trade say, once a week and delivery based to make very small profits which I can spend as pocket money. Am I liable to pay any form of tax?

I have one query.. I am trading derivatives.. You have explained we can deduct our internet charges, software tool charges etc.. Is there any option to mention that while filing.. I mean this is not a business firm, but I trade from my home.

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So can I deduct my home net charges for the whole year considering it as my loss? Do we need to submit any proof for that? I have made some losses in previous years, but has not declared those while filing. Is it possible to do that this time?

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Any expense that is incurred for trading is a deductible. In ITR form there are specific exenditure like conveyance, telephone, internet, electricity and a complete list which is available. Even if there are expenses which are not on this list, you have a section called other expenses, mention it on them. Whatever you mention as an expense keep the supporting document or any further reference.

If you have not declared the losses in time for previous years, nothing much can be done about it. Make sure you start following it from this year, better late than never. I have few query. I doing intraday in equity. Now I want to know that 1. If my total income from salary and trading cross Rs.

Which ITR to be used? If your total income say goes to 2. But because you are doing intraday equity trading, you are doing trading as a business and hence can use business expenses to reduce your taxable income. Now your taxable income is 2. ITR4 to be used. Even if you make a loss and not under tax brackets, make sure to file your returns.. Thanks for the informative article and especially for your answers to all the queries.

I would just like to have a clarification, though it may have already been posted. My queries are as follows. How can a loss shown in previous years be offset against gain in subsequent years when declaring the IT returns for the current year where a gain has been made. Depends on interest from what, on Savings bank interest you have a deduction of upto Rs 10k under section 80 TTA, so what this means is that only interest above 10k is taxable from savings bank account.

No such deductions for FD Assuming you have a interest of Rs and loss of 20,, you can only offset of the gain and can carry forward the remaining Rs of the loss to the next year. In ITR 4 there are specific sheets for current year loss, brought forward loss and losses to be carry forwarded to next year. We send you quarterly statements from Zerodha and there are reports available on the Backoffice available all the time.

Will be running a blog on backoffice explaining this soon.. Got to say you guys are doing a fantastic job. I have been active trader on zerodha from last 6 months and my experienece is wonderful. I have one query related to tax filling. How much maximum limit is there for advisory charges mean can I pay unlimited advisory charges to my family members.

There is no limit on any expense that you show, just that if tomorrow someone questions it has to be justified. In past 2 month , i do intraday share trading sometimes. The total turnover in intraday is more than 2 crores of rupees. What you are considering is turnover of traded value.. Let me explain you the difference.. If you buy shares of RIL at and sell shares at All such settlement profits and losses together if exceeds Rs 1crore, only then is the audit required..

Zerodha is doing best working for trader and investor for many issue. Hi, I have to say this is one best thing you did as this is one confusing and tricky matter. Hats Off to Zerodha. I am a salaried person. I have profit of in equity short term. Currently, I have invested in equity for more than a year and its current value stands at Since October I have been trading in Options and have loss in that. My queries are 1. No loss whatsoever can be netted off against my salary, am i right? All the profit and loss I mentioned will be business income, am I right?

If its a business income, then can I add purchase of laptop, internet device etc in expenses? Is there any difference between intraday and positional Option trading? Is there any loss i can net off against salary? As a business when you buy laptop, internet device etc ,it is an asset for you and not expense. Hi One more query i have. My friend bought shares and took delivery from my demat account. He made profit in that as short term capital gain. I am an active trader.

I would not like to pay tax on his behalf. So what procedure can i follow in this scenario? Amit, this is a tricky situation and upto you on how you would want to take it forward. In your case if the other guy transferred money to you which was invested into stocks then it is alright, but in any case try to refrain from such activity. Best thing would be to tell your friend about Zerodha and get him to open an account with us, which we will in a jiffy.. Hi Zerodha, I have incurred loss of more than Rs.

I am a salaried employee. I have only done long term equity trading shares held for more than 1 year. My doubts are 1 Since I am a central govt. Kindly clarify my doubts. If you have been investing into the markets long term, holding for more than 1 year you ideally should not suddenly declare yourself as a trader just because there was a loss that you want to adjust with your other income. As a trader you can set off the losses against interest income, but as an investor if this is your long term loss you cannot set it off against anything else. Hi Zerodha, Thanks a lot for this extremely useful blog regarding taxation.

I truly appreciate your efforts for traders. I am an options trader. Can I show my home use as business premise expense and how much? Is there a limit to these expenses? I had purchased a laptop 3 years ago for rs. I did not knew this rule then. ITR 4 is what you need to use. Transport, construction contractors, small retail shops. You as a trader still need to use ITR4. Yes you can show whatever is the cost for your trading as a business expense.

If you are using an entire room for trading, there is a cost for keeping that room, so yes that much of the rent could be an expense. There is no limit to the expense, as long as it is related to your business of trading you can claim as an expense. Typically how depreciation for computers is calculated is this. You cannot go back and claim for the first 2 years now.. Hi Team, Excelent initiative from your side… I am a full time trader with no other source of income. I have 2 queries: Can i deduct EMI on home loan as an expense for calculating taxable income? But you are an individual right??

So you get the benefit of tax slabs as an individual conducting trading business. You can use the home loan to deduct your taxable income as per section 24 and section C. Your home loan EMI will have 2 components to it, a. Every year you can show upto Rs 1. Every year you can show upto Rs 1lks which you pay as principal as a deduction to reduce your taxable income under section 80C. If you want to know how much of your EMI is going for principal and how much as an interest, ask your bank for the home loan statement..

So you can take benefit of upto Rs 2. You guys are doing the best work. You have really made it very simple for taxation. The related tax consultants costs too much for the points you have discussed here. I appreciate your efforts and hope that you would continue this blog. This is a wonderful initiative from your end to educate investors on Tax Matters. Thanks a lot and keep up the great work. Thanks a lot for the informative article and your patient responses. I have some questions for you as well on full time trading.

I am planning to take up full time trading as a Business from Apr 1, I would not be earning a Salary on the side. Are there any benefits to registering as a business in terms of tax rates? If I trade in my own house on an already available laptop can I still claim deductions towards expenses depreciation on comp, trading software, rent etc? You can consider you trading as an individual or as a business. Yes you can claim deductions like what you have mentioned as an expense as long as there is a logic behind it if tomorrow questioned.

It is upto you. You can take the gross profits and show expenses like brokerage, turnover charges, other expenses and then deduct it from your gross profits or just take the net profit and deduct your other expenses. Yes subscription charges are a definite expense you incur while trading. So all charges like data feed charges, subscription, advisory etc can be used as expenses. Our Backoffice itself has comprehensive reports which can be exported to excel and analysed.

If you are looking at outside vendors, Direct shares , Mprofit etc are the options available. If you are doing trading for a living and in profits, it is best to start paying advance taxes. You are allowed to trade currency pairs that trade on recognized Indian exchanges. Do consult your CA on this, because this is not allowed legally.

Point 1 The total of positive and negative differences , plus Point 2 Premium received on sale of options is also to be included in turnover ,plus Point 3 In respect of any reverse trades entered, the difference thereon. Option shorted at Rs. Hi, Premium received on sale of option Point 2: Sorry abrar about the previous answer, the turnover on that particular trade would be just your settlement profit which is Rs It has been answered wrong on this question.. Last date for tax payment online? Chalan no for online tax payment? Though I m a Trader, but can I show as investor while filling Returns?

A very interesting tool to calculate taxes on income tax website: Chalan numnber for online tax payment: Use challan for your tax payment and make sure to select the right asessment year. Did my profits come under short term capital gains covered under section A Ex: All profits that you make is added to any other income of yours and then you have to pay according to the slabs as mentioned in the blog. Is it ok or any illegal issue? I have a query. Do I need to get my account audited?

Books of accounts need to be audited only if turnover crosses Rs 1 croreSo audit is not required in your case. But do make to file your returns on time and declare these losses so that you can set off against any future profits. As per your blog above no matter what size small or big everybody should get accounts audited. Correct me if I am wrong. The answer to this question was given before adding the new changes on the blog.

This year between June to now, many people received notices from the IT department and we found that this is because of change in section 44AD. Nithin — you are maintaining a very good blog. We find it very informative and useful. Please keep up the good work. I have a couple of questions as below:. I am trading in options. My turnover is below Rs. Or am I required to maintain books of account, calculate actual business income and file ITR4? I also have pension income and bank FD interest. I will have to take a further opinion on this. The best option would be to calculate actual business income and file ITR4.

Also add your other income and get benefit of respective deductions. Hence turnover is 20k … am I right? Sir can you please answer each of these 3 cases for going long on options separately and clarify what the turnover in each case would be? I guess your query on option turnover is for knowing whether you will have to audit the books or not. If your option expires at 0, then you have made a loss of Rs and this would be considered as turnover.

For the same query, if we had sold the option in first place, then covered it by buying, what would be the turnover, because in one earlier reply you said that sale premium received plus difference between sale and buy. Now this is really confusing, to my same question in another reply you have mentioned turnover as , just an hour ago Now here you are replying as Which one is true. Had replied back to the earlier post also saying it is Rs and was answered wrong earlier search for ethan hunt, it is in the thread to his query.

I was going to fill ITR online but got confused. ITR 1 is for income and interest earning people.

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I have regular income from job and interest and i m active trader in equity and options. Which form will i fill? Is saving bank interest taxable? Saving bank interest is taxable but you get the benefit of deduction of upto Rs on Saving bank interest under section 80TTA. So technically you would have to pay taxes only if your SB interest is above It is very confusing. Is it possible for you to provide me sample excel sheet for a salaried person who is active trader in equity and options and has investments held for more than a year?

I found the details for filling up ITR4 form for futures and options trade on a website and have posted the same. Can zerodha confirm if it is the right way of filling up the form, where books of accounts have been maintained. Here the gross receipts mean the net profit. My gross receipts absolute value of total profit plus total loss was about 2,50, only and so audit is not required.

This will be a great help to small part time occasional traders like me. Thanks Sir and hope to get some positive response. Let me see what can be done about this, it is pretty tricky though to put this up. We will try what can be done on this and post on Zconnect in the next couple of days. I am trying to get more clarity on it from my CA friends, but the reason why the automated notice received seems like because of section 44AD. So this would mean that if you have a loss than you will have to compulsorily have your books audited. Dear Nithin, Thank you for writing a very informative artcile on taxation for stock market transactions.

Please share your views on this thought as it would help many people get their confusion clarified. I contacted CA guys. They have absolutely no clue why this notice is for!!! Even they were clueless. They too have no answer for the reason of the notice. They do not offer any solution and just told me to revised the return in 15days. Dear Nitin- Please try to get some answer from IT official and a way out for this…I think there must be many persons who would have received these notices… Thanks in advance for your effort….

Dear Zerodha Team, Thank you for checking on checking on applicability of section 44AD for small traders. Could you please comment on my observation above so that many small traders having both salary and trading income can avoid an unnecessary audit? These sections except 80U are for export promotion business and 80U is for physically handicapped people. So I would say that this will be not applicable for individuals like me and you, but you could consult a CA to double check this.

I read the latest update regarding section 44AD. I am an engineer and have no accounting knowledge. As per your post I understand books of accounts include contract notes, bank statements and DP statements. Are only these 3 things enough I assume these are electronically generated and I can get this through back office. Also could you specify more precisely what all DP statements are required is it only PL statement and ledger or are any other statements required.

Also as per 44D calculating turnover has basically become mandatory for everyone. So with respect to turnover calculation, do I have to painstakingly calculate by hand the gross profits and gross losses? If that is the case it is a nightmare because I may have averaged or added to positions and exited them in 2 or 3 parts and traded the same share many times a day… but the average price and quantity of buy and sell for the day are only given which does not constitute turnover.

So how do I go about calculating my turnover in such daytrading of a single share? Thanks for this support on taxation. This article and thread is the best resource available online for taxation on trading yet! Would it become invalid and losses carried forward over the previous years lost because of this audit issue? And finally, would you like to provide any opinion on error 32 mentioned above? The notice that you have received right now is for defective return and yes you can file a revised return. Yes the audit report date will be a present date which will mean a delayed penalty of 0.

But this way you will atleast be able to carry forward your loss and also not worry about any other penalty from the Income tax department. About the last 2 points, they seem to be errors made while filling up the ITR4 forms. Only pdf form is available at http: Hello Team, I have a query. This means that I have premium present in my account for selling that option. Going per that logic, based on the short nifty option being in profit or loss you can deduct the premium.

If it is in loss then deduct as per the purchase price and if in profit then as per present price. Considering the entire rent of the house as your business expense, especially if you are living in the same place is not really playing by the books. You could firstly put part of this rent, which you consider is what you are using up for your business of trading as a business expense.

Yes even though the rental agreement is not in your name, you could show this as an expense when you are paying it. On wrongful advice of my CA, I filed the returns using ITR-1 and showed the loss as short-term capital loss and also offset it against other short-term gains. After reading this blog, it seems I should file a revised return using ITR For financial year , you will have time till 31st March to file revised returns.

You need to choose revised return under section 5. Presently there is no guide as such online, but you can ask us any queries and will be able to help you out. For declaring loss, i would need consolidated statement of FY But I have one area of concern: As in my personal case, I have bought and held shares for more than three years. I sold them last month and got a capital gain of 6 lacs. But I opened zerodha recently and traded for couple of months heavily.

In that process I have netted 50, loss. Now, Ideally I should be treated as investor for the 6 lacs profit I got from the shares, right? I have been holding that for much longer than a year If that is the case, then the tax will be zero for that share sale. Long term capital gain. But because, I traded recently, why should I file ITR4 and show the 6 lacs from sale of shares as profit in business?

Is there any solution for this? This is very disadvantageous. If your delivery based is not active and is just like an investment like in your case , you can have 2 portfolios at a same time, one as a trader and one as an investor. So in your case, you can show your investment from before as long term holding of equity, hence long term capital gain and claim complete exemption. The short term trading loss can be shown as a business loss in ITR4 and if you have any other business gain you can set it off against it either this year or in the future anytime in the next 8 years.

But do make sure to not forget anything, the times are changing, the IT department is going online and getting more teeth. Yes firstly your net profit for the year is Rs as per your calculation. You can add all of these expenses and reduce it from the net profit and pay tax only on that. This is how all of us had considered until now. Do read this blog and you could probably get your CA to read it as well. There has been a change made to Section 44AD and you will see a few people who have received notices because of this also in the same blog.

How do I declare all the three segments in ITR 4? I do trading full time from home. Can I add my house rent, electricity expenses, broadband charges, advisory charges etc to my loss while filing the returns? Also, I work from home and is it possible to take the full value of electricity charges and rent for adding the loss or I have to work out some pro rata value for it? About your expenses, as long as you can justify that it was used for business it should be alright.

Turnover of 1 crore is to be taken only for FNO segment or will it be applicable to all segments? Should the turnover be calculated on all segments like the FNO segment example given above, club them all together to arrive at actual turnover for all segments put together? Since I have made only losses in all segments last year, is it really necessary to show the loss in the returns?

I have accounts with more than 5 brokers for various segments and most of them do not even have the basic financial reports in their back office, I will have to compile everything from the contract notes which will take a lot of time. Read this blog for more. An added benefit is that if you declare this loss, which will add up if you are considering the expenses that you have incurred, it will be a sizable amount that you can carry forward for the next 8 years and net off against any future business profit not just trading and avoid paying taxes then.

Can you give sample ITR-4 form? Read this on why: In such a case, the books has to be audited by a CA. For No account case I have to fill these details:. Amount of total sundry debtors 2. Amount of total sundry creditors 3. Amount of total stock- in-trade 4. Amount of the cash balance. Suppose I have 90K in my trading account as on 31st march And I have 1 lakh cash in my saving account as on 31st march I have no open position in FNO as on 31st march I have sold an option contract on 29th March and collected a premium of 5k. This position is still open as on 31 march Hi, I use my computer for trading purpose.

Its hard disk got crashed and I had to replace the hard disk and reinstalled all the software again.

Thoughts on 10 of the Best Trading Books for Foreign Currency Traders

Yes you could, as long as you can justify that the computer is being used for your business of trading. I have two demat account and one is not operated since it is opened. You are requested to guide me, how to show these losses. You cannot go back and file for all the years from before now, it is too late. But what you can do is to ensure that you start following it from now. The reason you need to show is 1. IT department is going online and they can track all your activities linked to your PAN very easily.

Their powers are increasing. Not showing a particular activity could lead to penalty. If you declare you trading losses, you can set it off to any business profit you make in the next 8 years and eventually save taxes because of that. Most of your queries are probably answered on this blog, if there is something which is not, ask me for it.

I have 1 query: When filing long term loss as a trader, can I net it off for the next 8 years? If you are showing yourself as an investor and claim long term gain exemption, in that case your long term loss cannot be net off against anything else.. I want to learn from it. This is first time of filing. I am a full time trader. Is the AY is ? Yes this would be Financial year or AY Hi Zerodha, First of all I would like to thank you people for providing such trading platform and also this blog relating to taxation. I have opened trading account in my wife name and trading behalf of her she is a house wife and no source of income So, I transfer the fund to her account and start trading..

Your wife can show her trading activity as a business. In a business whatever is the related expense that you incur for trading can be shown as an expense like your internet cost, system depreciation and etc. If you have made profits, the expenses would reduce your profitability and hence the taxes, if you have made a loss the losses get increased because of the expense. This initiative is to educate our clients and we are providing only online support. You can ask us any question here and we will answer it for you. Both would ideally have to be considered as a business.

It is also best to be ready with a bank book explaining if any expense on your bank account is for the business of trading. If it is then your net loss would increase and you can use this to net off any other future business income when I say business income, it is not just trading profits, it could be any profit she makes in future doing any business. If you find any mistake, comment. If the words are not clear, right click and open the image in a new tab.

It is all correct, small addition is that as a trader in the current year the loss can be adjusted against any income other than salary. However the losses brought forward from the previous year can be net off only against business income. Do note that there is an AND in between all the clauses. So tomorrow you might get a notice and then you can clarify saying section 44AB as you have mentioned above. The trick to making money in the markets is predict what can cause you a big loss and take that small one to be safe than sorry. What I mean to say is it is much better to take the 4 to 5k audit today rather than risk the notice which can cause you potentially a lot more in terms of time and money.

I have a follow-up question to my last query. Hi, i am a salaried person. Please let me know which ITR form is applicable to be filled. ITR IV doesnt have provision to show salary income. You can also show all your business expense and hence reduce your net tax outgo. Hi, Since I incurred only losses, I have not filed for any of the year, which I am planning to do now. Can you suggest any CA in Bangalore or Hosur to assist in filing the returns.

It is advisable to not ignore this as it can have implications in the future. You could use any CA, we have practically covered everything in this blog. If you are looking at someone in Bangalore you can look at http: I am a housewife and my husband is a government salaried employee. I am using his fund for trading in future and option, equity, commodity and get loss 1. Income tax is charged on his salary. Another question is this, if i get benifit 2 lakh on my trading and his savings are 1. Firstly, if you make a loss trading, this cannot be used to set off against salary income of your husband.

But to do this in the future, you need to declare your trading losses while filing your returns this year. Secondly, if tomorrow you make profit of 2lks after showing all expenses that you incurred for trading and if your husbands taxable income is 1. Anish, on your post of 10th July, i have another view — it is of intent backed by proportional claim on expenses.

Obviously, that all your expenses should also be proportioned in the same ratio. I contacted another CA who told me that last date for filing revised returns for FY was and it is late for any corrections. Is this report correct one to find out the turnover or any other facility available zerodha? And, I bought few FNO contracts in earlier financial year before 1st april and sold in the april I sold some contracts in this year before march 31, and bought back in the april And, I have deleted some of the contract notes got through mail. Is there any place to download these contract notes in the zerodha.

And also, i have a confusion, at one point. My turnover is less than 1 crore. So, Still Do i need to get my books audited by CA for returns??? For the open positions coming into a financial year, consider the opening price as on 1st April as the opening price of the contract for calculating taxes for this year. Similarly if you have not closed a position, consider the closing price of 31st march as the closing position.

Thanks a lot… Can you advise me where can i find opening price of the contracts for the old contracts, I searched in the zerodha but did not found any where. You will not find it on Zerodha, You could look at the closing price as on that particular day by visiting NSE website and looking at the bhav copy there. You will get the price of that contract as on that day. Exact figure is 7. It is best to keep all related questions in one query, I have deleted your separate post and made it part of this thread.

When I consult some CA, they are saying their professional charges for auditing is 10k. Can you tell me tentative auditing cost for the traders? But the thing is, you would have declared wrong information and there are chances of this coming back to you, very little but definitely a small chance which is best avoided. If you have not filed for last year, you can still file it now, but you will not get the benefit of the losses being carry forwarded. Nitin, I have another question, regarding my personal ITR. Which ITR form should i use to file such thngs.

I met 2 CA guys to get my tax filing done. ITR4-S should be used for the people whose books need not be audited i. In that PNL report that you are looking at, the bottom of the page you will see net payable or net receivable, sum it up and that will be your net turnover for the year.

Q1 The above article says: A person trading derivatives is automatically considered as a person who is an active trader or trading as a business. Q2 The article also states.. From AY , this was made to include all businesses including the business of trading. Basically when you get your books audited, you cannot keep trading and other income as separate. Everything gets combined and you need to have this audited. Dear Nitin, Could you explain, based on which report from zerodha total turnover will be computed?

In Profit Loss report, each contract profit loss is listed monthly. Can you please guide me in filling 51a, 51b and 51c i. Gross receipts, gross profit and expense? Understand that 51b doesnt take negative values, and 51c would include brokerages. Do read this blog first, there has been a change in section 44AD which has brought a lot of businesses under its umbrella including trading the markets. In your case since it is a loss you fall under this category. You can show your losses and carry forward this loss to set off against any business profit in the future.

Commodity trading be it intraday or carry forward similar to equity futures is considered as a business income. So you need to add profits to your other business income or debit losses from other business income. You can also debit all expenses incurred towards commodity trading, after all of this you have to pay tax according to the slab you are in as mentioned on the blog. Zerodha , as I have understood for calculating turnover of future and options procedure is absolutely same i.

And this is what you said should be used to calculate the Turnover i. Also he is asking for all contract notes from which he will copy the tradewise data to arrive at dialy turnover on Fifo basis. You could give him all the contract notes and let him calculate turnover that way, but our opinion is that it is not required. How do we treat this in our returns. For these cases where you were holding contract before APR, you can use the opening price of the contract on April 1st to be your purchase price.

Hi, I have trade in equities where I have mad intraday loss so I have to show it and what is the last date to file itr with showing it, and also having query for cash transaction, as I have did this loss for my friend, he was played in my account and incurred loss for that he gives cash which i deposit in bank and transfer to company.

Last date is 31th July for those without audits and 30th Sept for with audits. In your case since you have done active equity trading and also made a loss, according to section 44AD you will have to get your books audited, so you will get time until Sep 30th. Also I dont have any other source of income, is it mandatory to e-file and if I dont what is going to happen.

What is consequence if I get notice from the IT department. I am a student and dont have income over 2lk. What is going to happen if I neglect the notice in case I receive the notice, is any thing serious. Can you see the last query on the blog just put up, gb Guess he has just received notice for not declaring. IT department in India is going online and all transactions are linked to your PAN and to your bank accounts. Advise would be to file your returns. What I meant to say was that the consequence could be anything, you might get a notice or may not get notice tomorrow.

Chan Aug 5 , But this is not something which is advisable. Hi, I do have the following sources of income. Salary from Job 2.


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Interest income from Fixed Deposits 3. I have filed my return through a tax consultant. Since it is a business loss, you can set off the loss from any gain other than your salary. Hi, I went back and asked my tax consultant to file for a revised return show it as business loss to get a refund. Is there anything that you can help me with the details. Section 43 5 of Income tax act.

I have received a letter from IT department. I have not filled the IT return from onwards. They give me 10 days time to proceed with the details for FY , , This is the message that we are trying to tell fellow traders today, IT department is going online and these kind of notices will only go up in the future. As far as your notice goes, meet a CA and firstly ask for extension in time, because 10 days may not be enough time for you to get 3 years details.

Your CA can file for your 3 years as delayed returns. If you have taxable income during this period, then there could be a penalty in terms of interest on taxes you are due. How much it will cost for consecutive 3 audits. You would anyways need help of a CA because you are filing delayed returns. Around 10k should be a decent price per audit, but since you have 3 years, you might be able to push for a better price.. Yes Girish, you can use the ITR4 and since you have made a loss, you will need the books to be audited by a CA as well, in which case the last date is 30th Sept..

Assuming that she has no income and the margin requirement for the transactions are with money given to her by her son and her husband and she has only overall loss in each year whether she it is still mandatory to file the return? If no return is filed for the earlier years whether can it be done now?

What are the legal implications involved? What is the last date for filing the return for the assessment year ? Firstly the biggest mistake people do is to assume that no profits means no need of filing your income tax returns. It is mandatory to file your returns even if you are making losses year on year. You get a notice tomorrow asking you for the returns based on the turnover you have done on the exchange.

We will be moving the blog into a completely new format very soon, zconnect was initially setup to train people within Zerodha and had not anticipated the popularity. And Sold 5 in But I get the point you are mentioning, if you are holding shares from before. In such a case you would have to manually do this, atleast for now. Let me speak to the CA and find out if there is anyway to provide more than 1 years in one statement, I doubt it though.

For example with opening price as purchase price I may have 0 profit whereas with original purchase price I may have Rs. Since we need to know what thumb rule income tax department is following and we need to adhere to the same else there could be a tax default. But I have initiated the process to find out if it is allowed to do so, if we you are holding an open position.

Bhavesh, this can be done both the ways, considering original purchase price or you can take the value of all your holdings as per 31st March and then for the present year see your profitability based on that of 31st March. The reason we have mentioned this way is because it is the easiest way to file. Both the methods are alright, remember there is no guidelines from CBDT on all of this, we have to use a method which we find it easy and be consistent to it.

Thank you Zerodha, this blog is invaluable and has been of immense help to us, really appreciate this effort!! I think professionals are exempted from newly introduced Sec 44AD. The thing about notice again is that it is not a guarantee, last year apparently 10lk notices were sent and this year it should be higher. So you getting or not getting a notice is again a chance.

Hi, I had very tough time in e-filing tax this year so I herewith request you guys to give step by step procedure in e-filing that helps in filing independently for those who have turnover less than 1crore and also dont need CA Audit Please post in perspective of whose income is less than 2lakhs. During the course of this year, we intend to introduce a tool to help benefit all of you in terms of filing returns.

Also i have 2 lacs equity derivatives loss this year so can i adjust it against commission income this year? Losses once you have declared while filing the returns can be carry forwarded for 8 years and can be net off during this period. Also to let you know that i bought another property for 35 lacs agreement in joint with my wife with half of proceedings coming from her account, so can i buy another property against sale of the 1st property?

As long as you sell the property after 3 years from purchase it will be considered as a long term asset. Out of this 1. Intraday equity trading loss is considered as speculative loss and can be set off against only speculative gains intraday trading. So this loss you can carry forward by declaring and set it off in the future years whenever you make a profit.. I have been investor buying equity shares only from public issue for last 30 years. Since last June I started delivery trading from some other broker Religare and since 17 th July I started Intraday trading.

I started trading from Zerodha. In june I sold shares of Suzlon Rs. These share were purchased 2 years back Rs Now suppose I want sell ITC shares purchased in year at face value. So please let me know how the loss in case of Suzlon and the profit in case of ITC times of face value before indexing will be treated for income tax purpose. After reading your blog I thought I should stop trading as a trader to get the benefit of long term capital gains. This could be still kept separate, just make sure to clearly mention what is your long term portfolio and what are your short term and keep all contract notes etc handy to prove this if required in the future.

If you are actively trading, you can keep a short term trading portfolio, so this loss on suzlon can be showed as a loss on your short term portfolio and net if off against any gain you make which is short term. Keeping your long term trades and short term trades separate is very tricky and if tomorrow the taxman calls you for an audit, might be very tough to explain. A lot of traders keep separate trading accounts one for long term investments and one for short term trades to keep both the accounts separate.

This is a very tricky subject and since there are no hard and fast rules given by the IT department, tough to explain. Thanks, I already have two seperate accounts. I should use only one account Zerodha for intraday trading. From i am Senior Citizen. Intraday trading is considered as speculative business and comes under the head of business and profession only. If you are doing this as a regular activity, you need to get your books audited.

By not declaring loss, you have forego the benefit of carry forwarding the loss and netting it off against future profits. File the returns now and whether penalty or not will be dependent on the Income tax officer, but as long as you have not tried to hide anything in terms of profits, you should not have a penalty.

File all the returns from previous years from right now and since there is a loss you will not have any tax as such to pay. Each person is an individual assessee and he can get benefit of upto the extend of investment. Is there different criterion for audit and mandatory keeping of books like cash book and ledger? I mean when is keeping of books mandatory? Is my understanding correct. For turnover calculations long term delivery buys which will not be sold which will be kept for more than one year is not considered? Or We have to take the rate as on closing of 31 Mar to calculate the profit and loss?

If that is the case how can we claim benefit of 0 tax under Long term cap gains? The turnover calculation comes into play only for deciding if your books need to be audited or not. Since there is no clear rule on how to calculate turnover, my advise would be to keep your books and have it audited to avoid getting blanket notices that IT department has started sending from this year, especially if you are an active trader.

Yes you can keep your long term buys in a separate ledger and not consider that for turnover calculations for your active trading portfolio. So you need to clearly demarcate between the trading and investment portfolio. Yes speculative losses can be carried for 4 years.

Suppose I trade in Oct nifty futures contract, say I have traded 4 times in it on different dates trade 1 profit 1 oct trade 2 profit 3 oct trade 3 loss 4 oct trade 4 loss 4 oct Thank you for the prompt reply. This amount paid by cash. A What will be the capital gain tax on this amount 10, Whether it will be short term or long term capital gain tax? How is it calculated? Please give the breakup. Please note both wife senior citizen and son annual income is 1,50, each.

B Will wife and son have to share the tax equally, as both are now joint holders of the land. C Can they save the tax by constructing a new house on the vacant area of existing plot of land.