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What is Speculative Transaction
As per section 43(5) , speculative transaction means a transaction in which a contract which is ultimately settled ,otherwise than by the actual delivery.
For Example-
Mr A entered into contract with Mr B to purchase shares at Rs 1000 after 3 months
After 3 month,price of share is 800.
Hence ,Mr A suffers loss of 200
Mr A now has 2 options
- Buy Share from B at 1000
- Handover 200 difference to B and not purchase the shares
1. Buy Share from B at 1000
,if Mr A still buys share at 1000,it is not a speculative business as there is actual delivery of shares
Handover 200 difference to B and not purchase the shares
if Mr A doesnt buy share but instead hand over 200 to Mr B,this is a speculative transaction loss because there is no delivery of shares
However,if it is done through Stock Exchange and fulfills prescribed condition,it is a speculative loss as it is covered in exceptions as explained below
Exceptions
Following transactions shall not be a speculative transaction
1 Commodity Tranding on Stock Market (CDT Paid) (New Amendment)
Eligible transaction of Commodity dealing on recognized association
on which
Commodity transaction tax paid
Is not speculative transaction
(If Commodity transaction tax not paid,then it will be a speculative transaction).
Speculative transaction means
Transaction through recognized Association on electronic screens
+
Stamped contract note given by intermediary/member(also called broker)
+
Unique Client identity Issued & PAN Number available of assessee
2, Eligible transaction of Trading in Derivatives on Recognized Stock Exchange.
Is not speculative transaction
Here, Speculative transaction means
Transaction through recognized Stock exchange on electronic screens
+
Stamped contract note given by broker/sub broker)
+
Unique Client identity Issued & PAN Number available of assessee
3.A contract for purchase of material etc. for actual delivery
to hedge future price fluctuation.
4.A person who already holds the share
enter into a contract for stock and shares to guard against loss of shares holding .
5. Jobbing or Arbitrage .
Member of stock exchange or forward market may enter into contract to prevent loss in future course of business. Example:-Jobbing or Arbitrage.
