If you trading Futures and Options (F&O), then it is important to know its tax rules. The calculation of the turnover in F&O is based on every trade profit or loss. In the event of the los, the calculation of the turnover becomes more difficult. Speculative los can only be offset with a speculative gense. These two should be of the same financial year. It can be forwarded for only four years.
Logas can be set-off
F & o The rules of non-spacious lawses from trading are not very difficult. These can be set-off in the year year. It can be carried for 8 years. This helps traders in tax-planning. so F & o The income from the traders who want to manage their tax liability well.
F&O trading is not speculative transaction
According to the Income Tax Act, if F&O trading is done through a recognized stock exchange, it is not considered a speculative transaction. This is mentioned in section 43 (5). Therefore, F&O transactions are considered non-spacious business income and are taxed under ‘Business or Profession Profits and Gains’ heads. The income from F&O trading (whether loss or profit) is necessary to show as a business income in income tax return. The trader is allowed to reduce trading expenses from it.
Business experiences allowed to reduce from income
Trading related expanses include brokerage charges, transaction costs, internet and telephone bills, depression on lipops and other assets, subscription fees of trading platforms, advisory fees, etc. Apart from this, if the trader has kept a staff for trading, then its salary will also be included in the business expenses related to trading. This means that traders must keep an account of every small and big expenses related to trading.
Separate rules of turnover calculation in F&O trading
In F&O trading, turnover does not mean total value of traded contracts, but the total profit and loss of every trade. This can be easily understood with the help of an example. Suppose you earn a profit of Rs 20,000 from one trade and if you lose Rs 15,000 on the second trade, then your turnover will be Rs 35,000 (20,000 + 15,000).
Meaning of turnover in futures
Turnover in futures means the total loss or profit in every square-off position. The turnover in the options is from the total profit or loss of selling and buying the options. It also includes the premium that is available on selling options. This method of calculation of turnover is quite important, because on the basis of this, there is a tax audit under Section 44 AB and the eligibility of Principal taxation is fixed under Section 44 AD.
Principal taxation option
If the turnover from F&O trading is up to Rs 3 crore, then the trader can select the option of preparation taxation. In this scheme, if the trader makes its profit 6 % or more of its turnover, then he does not have to maintain books. This means that he does not even need to audit his accounts. However, if the decklered profit is less than 6 percent and the total income crosses the basic exhalation limit, then the tax audit becomes necessary.
Los carry-forward not on filing returns after deadline
If business comes under non-spacious business income in case of loss from F&O trading, then some special benefits are available. Loss can be set-off with another income (except salary income). However, both should be of the same financial year. If the laws cannot be adjusted in the bean year, then it can be carried and carried out for 8 years. However, to forward this loss, it is necessary to file an income tax return inside the deadline. If the income tax return is filed after the deadline, then the trader is not allowed to forward the loss for four years.
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ITR-3 correct form to file returns
ITR Form-3 is the correct form to file income tax returns of F&O traders. Actually, this form is for such individuals and HUFs, which have income from business or profession. The form includes information about business income, decreasing experiences, depression, audit details and balance sheet.
Avinash Nalappalli
(Polypalli is a business head of Cleartax)