F&O Loss

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If you've incurred a loss from Futures & Options (F&O) trading in the financial year 2019-20, you must still report this loss in your income tax return, even if you don't wish to set it off or carry it forward. Failing to report can lead to future notices from the tax department. Regarding audits, if your turnover is below Rs. 2 crores, you might be eligible for presumptive taxation under Section 44AD, potentially exempting you from the audit process. However, not reporting losses or opting out of Section 44AD has long-term implications, including potential penalties and missed opportunities to offset future profits.

Barren Doe

Barren Doe (Querist)

25 July 2020 Hi
I have made F&O Loss for the Financial year 2019-20. I don't want to set off or carry forward the loss -

1. Do I still need to show the loss in income tax filling?
2. Since I don't want to set off or carry forward the loss for future do I have to still go through Audit process.

Appreciate experts help please.

CA KARAN SINGH

CA KARAN SINGH (Expert)

26 July 2020 Yes, Barren Doe In any case you have to report losses in your Return of Income otherwise you may receive notices from the Income Tax Department in the future for non-compliance.

And as far as the audit is concerned if your turnover is less than Rs. 2 crores, you are eligible to declare income on a presumptive basis. In that situation, you are not required to go through the Audit process.

Barren Doe

Barren Doe (Querist)

26 July 2020 Thanks for your response

CA KARAN SINGH

CA KARAN SINGH (Expert)

26 July 2020 You are most welcome Mr. Barren Doe

CA Raj Doshi

CA Raj Doshi (Expert)

26 July 2020 Dear Barren There is this notion among taxpayers to not report and carry forward a loss and not get an audit done. There is nothing wrong in Filing an audit report and carrying forward a loss as when government is a partner in profits then it's a partner in losses too. Also, Sec 44AD has it's own issues like once you opt out, you cannot opt in for subsequent 5 years. When you make profits in future from any business for the next 8 years,you will be able to set off these losses and not required to pay taxes to that extent. Also, when you will no report your FNO transactions at all, it will again land you in notices from tax officials as correctly pointed out by Karan. And there can be bright chances of Penalty for not getting a tax Audit done which would be 0.1% of turnover of Rs.1,50,000 whichever is lower. Regards CA. Raj Doshi raj@rcdco.in www.rcdco.in

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