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A speculative transaction under section 43(5) is a contract for purchase or sale of a commodity, including stocks and shares, which is settled:
AOtherwise than by actual delivery or transfer
BOn a recognised stock exchange through a broker
CWithin thirty days of entering into the contract
DAt a price exceeding the fair market value quoted
Answer & Solution
Correct answer: A. Otherwise than by actual delivery or transfer
1. Section 43(5) defines a speculative transaction by its mode of settlement: the contract is settled otherwise than by actual delivery or transfer of the commodity or scrips.
2. Speculation business is treated as distinct and separate, and speculation losses can be set off only against speculation profits.
3. Eligible derivative transactions on recognised stock exchanges are specifically excluded from the definition, so exchange trading alone (option B) does not make a transaction speculative.
_Source: ICAI CA Inter P3(A) Income-tax SM (May 2026), Ch 3 Unit 3 PGBP, PDF p. 13_
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