Business Income
Income from trading treated as a business rather than as investment, taxed at slab rates with expenses deductible.
Formula
Business Income = Trading Profit - Deductible Expenses including brokerage, exchange charges, internet, depreciation and advisory fees
Unit
₹
In depth
Whether trading is business income or capital gains depends on frequency, volume, holding period, intention and how the taxpayer treats it in their own books — there is no bright-line test, and the classification must be consistent year to year. Derivatives trading on a recognised exchange is always non-speculative business income. The compensation for the higher slab rate is that expenses become deductible, including securities transaction tax, which is not deductible against capital gains. Business income also brings tax audit requirements above prescribed turnover thresholds and obliges advance tax payment in instalments.
Worked example
A trader with ₹8,00,000 of derivatives profit deducts ₹1,20,000 of brokerage, charges, software and internet costs, paying tax on ₹6,80,000. As capital gains none of those expenses would have been deductible.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Business Income” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.