Calculation of turnover in of Business of option trading
This query is : Resolved
Shreyansh Agrawal
(Querist)
07 December 2020
Sir, for AY 2020-21, my client did trading in Options. ICAI suggests calculation of turnover as follows:
1. The total of favourable and unfavourable differences shall be taken as turnover.
2. Premium received on sale of options is also to be included in turnover.
3. In respect of any reverse trades entered, the difference thereon, should also form part of the turnover.
This turnover can be used for checking applicability of Tax audits, but what should be taken as turnover to be filled in ITR. (Since turnover is less than 50 lakhs, I intend ti file ITR U/s 44AD)
Eg. of a Transaction:
Suppose an option was sold 1 lot (1 lot = 100 Shares) a Rs. 50 and this option expired on expiry day. Now, as per ICAI suggestion, turnover will be sum of below:
1. Favourable difference Rs. 5000 (since option expired there will be no buy value, hence buy value shall be zero)
2. Premium received on sale of option which is Rs. 5000 (50*100)
Hence total turnover comes to 10000 (5000+5000), which is double of what I Traded. This turnover seems to be wrong.
Can anyone help me out as to how the Turnover should be shown in books of accounts.
1. The total of favourable and unfavourable differences shall be taken as turnover.
2. Premium received on sale of options is also to be included in turnover.
3. In respect of any reverse trades entered, the difference thereon, should also form part of the turnover.
This turnover can be used for checking applicability of Tax audits, but what should be taken as turnover to be filled in ITR. (Since turnover is less than 50 lakhs, I intend ti file ITR U/s 44AD)
Eg. of a Transaction:
Suppose an option was sold 1 lot (1 lot = 100 Shares) a Rs. 50 and this option expired on expiry day. Now, as per ICAI suggestion, turnover will be sum of below:
1. Favourable difference Rs. 5000 (since option expired there will be no buy value, hence buy value shall be zero)
2. Premium received on sale of option which is Rs. 5000 (50*100)
Hence total turnover comes to 10000 (5000+5000), which is double of what I Traded. This turnover seems to be wrong.
Can anyone help me out as to how the Turnover should be shown in books of accounts.
Nikhil Kaushik
(Expert)
07 December 2020
if you intend to use 44AD, then the turnover computed as per the guidance note itself has to be mentioned in the tax return.
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