- A company whose gross total income comprises of income chargeable under the following heads- Interest on securities, Income from the house property<\/a>, Capital gains, and income from other sources.<\/li>
- A company having a principal business of the business of trading in shares, the banking business, or the business of granting of loans and advances.<\/li><\/ul>\n\n\n\n
What shall not be deemed as Speculative transactions?<\/h2>\n\n\n\n
The following shall not be deemed as Speculative transactions:<\/em><\/strong><\/p>\n\n\n\n
![\"What](\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2021\/03\/image001-28.png\")
<\/figure><\/div>\n\n\n\n- A contract in respect of the raw material or merchandise entered by a person in the course of his manufacturing or merchanting business with a view to guard against losses due to fluctuations in future price in respect of his contracts for actual delivery of goods manufactured or merchandise sold by him.<\/li>
- A contract in respect of shares and stocks entered by a dealer or investor to guard against the loss in his holdings of stocks and shares through fluctuations in price.<\/li>
- A contract entered into by the member of a forward market<\/a> or by a stock exchange in the course of a transaction in the nature of jobbing or arbitrage with a view to guard against losses which may come in the ordinary course of his business as such member.<\/li>
- An eligible transaction in respect of trading in derivatives referred in clause (ac) of Section 2 of the Securities Contract (Regulation) Act, 1956.<\/li>
- An eligible transaction in respect of trading in the commodity derivatives that is carried out in a recognized association, and that is chargeable to commodities transaction tax under the Finance Act, 2013<\/strong>[1]<\/strong><\/a><\/sup>.<\/li><\/ul>\n\n\n\n
Types of Speculative Transactions in Stock Exchanges<\/h2>\n\n\n\n
Few types of these transactions and how they are conducted in stock exchanges are mentioned below:<\/em><\/strong><\/p>\n\n\n\n
- Option dealings<\/strong><\/li><\/ul>\n\n\n\n
It refers to the right to buy or sell a security within a prescribed time at a prescribed price. The right to purchase securities is called the call option, and right to sell securities is called the put option.<\/p>\n\n\n\n
- Margin trading<\/strong><\/li><\/ul>\n\n\n\n
In this shares are bought from money borrowed from the brokers. The client opens an account with the broker. He then deposits cash or securities into the account and agrees to maintain the margin at a level. When the broker buys securities, the clients’ account is debited with the amount of such securities.<\/p>\n\n\n\n
- Arbitrage<\/strong><\/li><\/ul>\n\n\n\n
It refers to benefiting from the difference in the price of a security prevailing in two exchanges. The arbitrager buys the security at which it’s cheaper and sells it in the market where it is costlier. <\/p>\n\n\n\n
- Wash sales<\/strong><\/li><\/ul>\n\n\n\n
This refers to a transaction where a speculator sells a security from one broker and buys the same security through another broker but at a higher price.<\/p>\n\n\n\n
- Cornering<\/strong><\/li><\/ul>\n\n\n\n
It means a situation where an individual or a group acquires a significant portion of company’s shares.<\/p>\n\n\n\n
- Cornering<\/strong><\/li><\/ul>\n\n\n\n
- Wash sales<\/strong><\/li><\/ul>\n\n\n\n
- Arbitrage<\/strong><\/li><\/ul>\n\n\n\n
- Margin trading<\/strong><\/li><\/ul>\n\n\n\n
- A company having a principal business of the business of trading in shares, the banking business, or the business of granting of loans and advances.<\/li><\/ul>\n\n\n\n