If you’re a trader, your income from trading is considered business income. Just like other businesses, you can claim expenses incurred in relation to trading as deductions, reducing your taxable income. Here’s how you can make the most of allowable expenses:
Example of Deduction:
Suppose you earn ₹40,000 from intraday trading and spend ₹3,000 on a trading course. You can deduct the course fee, reducing your taxable profit to ₹37,000.
Common Expenses You Can Claim:
- Rent Expense
If you rent an office or workspace for trading, the rent paid is deductible. - Memberships and Subscriptions
Costs for trading tools, memberships, or subscriptions, as well as books or courses to enhance your trading skills, can be claimed. - Depreciation on Assets
Assets like laptops used for trading have long-term utility. Instead of deducting the full cost in one year, you can claim depreciation annually. - Trading Expenses
Brokerage fees, clearing charges, exchange transaction fees, STT, stamp duty, and other trading-related expenses are fully deductible. - Mobile and Internet Expenses
Mobile bills and internet costs related to trading are allowable. For shared personal and business use, claim only a proportionate amount. - Loan Interest
If you’ve taken a loan for trading, the interest paid can be deducted. - Office Supplies
Deduct expenses on stationery, printer ink, and other office materials used in trading. - Repairs and Maintenance
Costs for repairing or maintaining trading-related equipment like laptops or furniture are claimable. - Legal and Professional Fees
Fees paid to professionals, such as a Chartered Accountant (CA) for auditing your books, are deductible as business expenses.
Important Considerations:
- Relevance: Expenses must be wholly related to your trading business.
- Documentation: Keep receipts and proof of payment.
- Digital Payments: Use digital modes of payment to maintain transparency and avoid cash transactions.
By leveraging these deductions, you can effectively reduce your taxable income and maximize profits. Stay compliant and organized to make the most of the tax benefits available to traders.