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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Location of Business

Kiran Traders Ltd carries on a regular manufacturing business and also enters into speculative transactions that amount to a business. For tax planning, how does the Income-tax Act, 2025 treat the speculation business?

The speculation business is deemed distinct and separate from any other business. The Act says that where speculative transactions are of a nature to constitute a business, they are not merged with the company's other business such as manufacturing.

  1. AIt is merged with the manufacturing business for computing profit
  2. BIt is deemed distinct and separate from any other businessCorrect
  3. CIt is chargeable under Capital gains
  4. DIt is ignored if the manufacturing business is profitable

Explanation

The Act provides that where speculative transactions constitute a business, that speculation business is deemed distinct and separate from any other business. So it is not pooled with manufacturing and is not a capital gain.

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