F&O and derivatives tax turnover

Income Tax Income from Business or Profession
#42

Hi @Rahul_Bhide,

In this case, for AY 2023-24,

  1. Tax is levied on the gains on FnO, and not on the turnover amount.
  2. There is a concept of Advance tax, which is to be paid by a taxpayer at the right time so that there is no interest/penalty levied.

You can read more about Tax on F&O - Futures and Options Trading - Learn by Quicko.
You can also book a MEET, for personalized expert assistance with your taxes.

#43

Hi…,

I need clarification for the below trade

01-08-2022 bought ABC share 250 numbers at 2,320 per share

01-08-2022 sold ABC share 2300 strike August call option Rs 130 per share (one lot of 250 shares)

31-08-2022 ABC share price was 2350 as the call is ITM, stock delivered at 2300

Can you please see the below explanation of turnover will be calculated for the option sold for Rs 130 (250 in a lot) is correct

If I am declaring option profits under 44AD, can I declare 32,500 as turnover and declare 6% of profit ? (There will be other option trades turnover also, as the total turnover over is below 5 cr )

For the equity delivery, as it is STCC, can I show the difference (2320-2300)*250 = 5000 plus brokerage/STT as Short term capital loss. Say, 5000+ 2000 (brokerage plus STT) total 7000 short term capital loss

Please confirm the treatment of option profit and delivery loss is as per the regulations. Thank you in advance for your support.

regards
Ramki

#44

@Hem_Shah Can you please help here?

#45

@Shrutika_Shah @Hem_Shah can you please reply when you get time. Thank you

#46

Hi @ramki

Apologies for the late response.

F&O Income or Loss is a non-speculative business income as per the Income Tax Act. Thus, it should be reported as Business Income under the head of Income from Business and Profession.

According to the act, options turnover & profit can be reported under section 44AD (Presumptive taxation for Business). However, the turnover limit for the same is 2crore. Here’s a read on Section 44AD - Presumptive Taxation for Business - Learn by Quicko your reference.

Also, as per the new guidelines by ICAI, now the turnover is calculated as the absolute profit/loss in case of both, futures & options. Here’s a read on turnover calculation for F&O.

For equity, the STCL can be reported under the head Income from Capital Gains as Short term capital loss.

Hope this helps.