Commodity contract turnover calculation
This query is : Resolved
30 March 2014
how commodity exchanange contracts are charged to tax and how to calculate their turnover?
how to deal with the income tax notice received regarding contract of rs. 1000000 or more in commodity exchange?
30 March 2014
the turnover is calculated on the sum of absolute value of loss and gains on individual contracts. (this process is to be carried out on daily pay in - pay out basis)
foe eg: if you lose Rs 10 on one contract and gain Rs 10 on another contract, the turnover shall be Rs 20. However, gains and less shall be net ie in this case it would be Rs Nil.
so you need to compute your income and tax liability thereon in the above manner.
foe eg: if you lose Rs 10 on one contract and gain Rs 10 on another contract, the turnover shall be Rs 20. However, gains and less shall be net ie in this case it would be Rs Nil.
so you need to compute your income and tax liability thereon in the above manner.
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30 March 2014
here turnover becomes rs. 20 and again loss of rs. 10 will be deducted. correct me if m wrong.
How to deal with the income tax notice received regarding non filing of returns and transactions are detected by the IT deptt of commodity exchange contract of rs. 10,00,000 or more.
How to deal with the income tax notice received regarding non filing of returns and transactions are detected by the IT deptt of commodity exchange contract of rs. 10,00,000 or more.
19 July 2024
Dealing with income tax related to commodity exchange contracts involves understanding how turnover is calculated, how losses are treated, and what steps to take when you receive an income tax notice. Here’s a detailed explanation to address your queries:
### 1. Tax Treatment of Commodity Exchange Contracts:
- **Turnover Calculation**: For income tax purposes, turnover from commodity exchange contracts is computed as the aggregate of positive and negative differences, i.e., profits and losses arising from such contracts. If you have traded multiple contracts, you sum up the total profits and losses across all contracts to arrive at your turnover figure.
Example:
- Suppose you have traded contracts with the following results:
- Contract 1: Profit of Rs. 20,000
- Contract 2: Loss of Rs. 10,000
- Total turnover = Rs. 20,000 (profit from Contract 1) - Rs. 10,000 (loss from Contract 2) = Rs. 10,000.
- **Taxation of Gains**: Profits from commodity exchange contracts are taxable as business income under the Income Tax Act, unless you can establish them as capital gains. Business income is taxed at regular slab rates applicable to your total income.
- **Treatment of Losses**: Losses from commodity exchange contracts can generally be set off against other business income or carried forward to subsequent years for set-off against future profits from the same business.
### 2. Dealing with Income Tax Notice:
- **Non-filing of Returns**: If you receive an income tax notice for non-filing of returns related to commodity exchange transactions amounting to Rs. 10,00,000 or more, follow these steps:
- **Gather Information**: Collect all relevant documents such as transaction statements, contract notes, bank statements showing funds transfer, and any other records related to your commodity exchange transactions.
- **Calculate Turnover**: Compute the turnover as explained above and ensure it matches the figures reported in the notice.
- **Prepare Response**: Respond to the notice promptly and accurately. If you have valid reasons for non-filing (such as misunderstanding or oversight), explain these clearly.
- **File Returns**: If you haven’t already, file your income tax returns for the relevant assessment year(s) showing the income from commodity exchange contracts and pay any tax due.
- **Consult a Tax Professional**: If you are unsure how to respond or need assistance in calculating turnover or preparing a response, consult a qualified tax professional or CA who specializes in income tax matters.
### Conclusion:
Managing income tax related to commodity exchange contracts involves accurately calculating turnover, understanding tax implications of profits and losses, and responding effectively to income tax notices. It’s crucial to maintain proper records and seek professional advice if needed to ensure compliance with tax laws and regulations.
### 1. Tax Treatment of Commodity Exchange Contracts:
- **Turnover Calculation**: For income tax purposes, turnover from commodity exchange contracts is computed as the aggregate of positive and negative differences, i.e., profits and losses arising from such contracts. If you have traded multiple contracts, you sum up the total profits and losses across all contracts to arrive at your turnover figure.
Example:
- Suppose you have traded contracts with the following results:
- Contract 1: Profit of Rs. 20,000
- Contract 2: Loss of Rs. 10,000
- Total turnover = Rs. 20,000 (profit from Contract 1) - Rs. 10,000 (loss from Contract 2) = Rs. 10,000.
- **Taxation of Gains**: Profits from commodity exchange contracts are taxable as business income under the Income Tax Act, unless you can establish them as capital gains. Business income is taxed at regular slab rates applicable to your total income.
- **Treatment of Losses**: Losses from commodity exchange contracts can generally be set off against other business income or carried forward to subsequent years for set-off against future profits from the same business.
### 2. Dealing with Income Tax Notice:
- **Non-filing of Returns**: If you receive an income tax notice for non-filing of returns related to commodity exchange transactions amounting to Rs. 10,00,000 or more, follow these steps:
- **Gather Information**: Collect all relevant documents such as transaction statements, contract notes, bank statements showing funds transfer, and any other records related to your commodity exchange transactions.
- **Calculate Turnover**: Compute the turnover as explained above and ensure it matches the figures reported in the notice.
- **Prepare Response**: Respond to the notice promptly and accurately. If you have valid reasons for non-filing (such as misunderstanding or oversight), explain these clearly.
- **File Returns**: If you haven’t already, file your income tax returns for the relevant assessment year(s) showing the income from commodity exchange contracts and pay any tax due.
- **Consult a Tax Professional**: If you are unsure how to respond or need assistance in calculating turnover or preparing a response, consult a qualified tax professional or CA who specializes in income tax matters.
### Conclusion:
Managing income tax related to commodity exchange contracts involves accurately calculating turnover, understanding tax implications of profits and losses, and responding effectively to income tax notices. It’s crucial to maintain proper records and seek professional advice if needed to ensure compliance with tax laws and regulations.
21 July 2024
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