CBDT Lets Stock Gains Be Treated as Business Income
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- Central Board of Direct Taxes issued Circular No. 6/2016, directing officers to honor a taxpayer’s classification of listed securities as either capital assets or stock‑in‑trade.
- Income Tax Department must accept the taxpayer’s chosen label for securities, provided the classification is consistently applied year‑to‑year and not switched without justification.
- Active traders with total income under ₹12 lakh can report profits as business income if they trade frequently, use own funds, and treat securities as stock‑in‑trade, but they face higher audit scrutiny.
Why it matters: Active traders with sub‑₹12 lakh income lower tax by treating gains as business income, but audit risk adds compliance costs, increases legal exposure, and deters aggressive trading.
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