Because of prop firm being legal in India. How much Tax we have to pay on its profits? Also after how much time I have to declare my earnings to pay tax? Like is it after 1 financial year (1 april to 31 march) or everytime I withdraw profits from prop firm into my bank account?
Taxation on prop firm
- Thread starter Preet046
- Start date
TaxWiser
KF Mentor
Hey there!
Great question! When it comes to profits from a prop firm in India, here's what you need to know:
Tax on Profits
▪︎ Tax Rate: Profits from trading with a prop firm are generally considered business income. This means they are taxed according to your income tax slab rate.
▪︎ Speculative vs. Non-Speculative: If your trading is frequent and your primary source of income, it might be classified as non-speculative business income, which is taxed at your applicable slab rate.
Declaring Earnings
▪︎ Financial Year: You need to declare your earnings for the entire financial year, which runs from April 1 to March 31.
▪︎ Tax Filing: You report your total income, including profits from the prop firm, when you file your income tax return. This is typically done after the end of the financial year, by July 31 of the following year.
▪︎ Withdrawals: You don't need to declare your earnings every time you withdraw profits into your bank account. Instead, you declare the total profits earned during the financial year when you file your tax return.
So, keep track of your earnings throughout the year and report them when you file your taxes. If you need more detailed advice, consulting a tax professional might be a good idea.
Hope this helps!
(Source: Zerodha Varsity, Taxguru)
Thanks for the help Brother. I want to ask some more questions:-Hey there!
Great question! When it comes to profits from a prop firm in India, here's what you need to know:
Tax on Profits
▪︎ Tax Rate: Profits from trading with a prop firm are generally considered business income. This means they are taxed according to your income tax slab rate.▪︎ Speculative vs. Non-Speculative: If your trading is frequent and your primary source of income, it might be classified as non-speculative business income, which is taxed at your applicable slab rate.
Declaring Earnings
▪︎ Financial Year: You need to declare your earnings for the entire financial year, which runs from April 1 to March 31.▪︎ Tax Filing: You report your total income, including profits from the prop firm, when you file your income tax return. This is typically done after the end of the financial year, by July 31 of the following year.▪︎ Withdrawals: You don't need to declare your earnings every time you withdraw profits into your bank account. Instead, you declare the total profits earned during the financial year when you file your tax return.
So, keep track of your earnings throughout the year and report them when you file your taxes. If you need more detailed advice, consulting a tax professional might be a good idea.
Hope this helps!
(Source: Zerodha Varsity, Taxguru)
1st:- If somebody withdraws significant profits from forex prop firms like in lakhs every month do it creates an issue? Does ITR department get notified ?
2nd:- Which Prop Firms are perfectly Legal in India. Like I have heard about 5ers etc. Is it safe? Or are there any better options?
3rd:- Are there any legal troubles if someone involves in forex through prop firms and not direct currency trading or CFD trading ?
TaxWiser
KF Mentor
1st:- The IT Department can easily track any financial transactions through your PAN. Therefore, it's advisable to properly declare all income and its sources while filing your ITR to avoid any future inconvenience.
2nd & 3rd:- While I have expertise in Taxation and Personal Finance, the specifics of prop firms and forex trading regulations are outside my domain.
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