The method of calculating turnover is a debatable issue. The grey area is that there is no guideline as such from the IT department. However, ICAI has issued a guidance note on tax audit under Section 44AB by ICAI (Institute of chartered accountants of India, the governing body for CA’s). The article on Page 42, Section 5.14 of this guidance note has a guideline on how turnover can be calculated. It says
For all non-speculative transactions (Derivatives, futures, and options), turnover shall include:
The total of favourable and unfavourable differences
Premium received on sale of options is also to be included in turnover
In respect of any reverse trades entered, the turnover shall also include difference thereon.
For Speculative transaction: In the case of intraday there is no actual delivery or transfer of the commodity or scrips. The turnover, in this case, shall be absolute profit i.e the Sum of positive and negative differences between buy and sale value.
As per our opinion, you cannot apply the same formula we use for futures as it clearly mentions that premium is also to be considered in the case of options.
The guidelines issued by ICAI mentions the turnover calculation for all types of transactions.
Therefore we will suggest the same method of turnover calculation irrespective of the the intention or strategy of the the transaction. The turnover of options shall include:
Premium received on sale of options
Absolute profit i.e. the sum of positive and negative differences between buy and sale value.