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Calculation of turnover in case of f & o trading

babita paliwal (Student CA Final ) (124 Points)

04 July 2016

Dear Sir/ madam One of my client is having a business of trading of F & O .Now I want to check that the client's turnover is falling under tax audit or not. Please let me know how to calculate turnover ? Is difference between sell or buy of securities and futures and options taken as turnover or gross value of sell of securities and futures and options taken as turnover ?

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CA MANISH BINDAL (CHARTERED ACCOUNTANT ) (535 Points)
Replied 04 July 2016

The meaning of turnover for in case of transactions in Futures and Options of shares is not defined under the I T Act In case of derivative trading-Futures and Option- the difference on which the contract is purchased or sold is important. Although the value of contract is number of contract multiplied with the shares price , yet what is actually given or taken is differential amount in contract. For example if you purchase a future contract for Rs 105 for a share having a lot of 100,you pay nothing at the time of buying a contract, yet at the time of expiry if contract , you are either gainer or loser which is determined whether there is positive or negative difference. So , for the purpose of determining the turnover in case of future and options , for the purpose of 44AB , based on the guidance note of ICAI , following items should be considered to constitute turnover:-

The total of positive and negative differences , plus
Premium received on sale of options is also to be included in turnover ,plus
In respect of any reverse trades entered, the difference thereon But not the total value of contract.

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tomi singh (6 Points)
Replied 20 July 2016

Hi,

I am trading in Future and Option and also have investment in Shares. I have loss of Rs 5.6 lacs from trading F&O and turnover is Rs 31.48 lacs (this is sum of profit or loss balance from trading, ignoring negative balance) Eg: Bought 1 lot of reliance for Rs 1,00,000 and sold at Rs 1,10,000. so loss 10,000 and bought 1 lot of wipro for Rs 2,00,000 and sold at Rs 2,20,000 so profit of Rs 20000. Did I calculate turnover correctly and what total sales and purchase amount to declare in ITR form under business section in this case.

Also I have income as follow FNO (560,000)

Interest from others 192,500.00

Dividend 22,000

Total income/(Loss) - -3,45,500

Do I need my book to get audit and do Section 44AB or 44AD or 44AA apply to me?

Thanks