F& o trading

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Querist : Anonymous

Querist : Anonymous (Querist)

24 February 2014 F&O trading treat as business income. How calculate turnover

Nikhil Kaushik

Nikhil Kaushik (Expert)
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02 March 2014 it is treated as business income. the turnover is sum of daily pay in and pay out on each contract.

Querist : Anonymous

Querist : Anonymous (Querist)

10 March 2014 Shall show as a speculation loss in itr

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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24 July 2024 In India, Futures and Options (F&O) trading is treated as business income, specifically under the category of "Speculative Business Income" as per the Income Tax Act, 1961. Here’s how turnover is calculated and how you should report F&O transactions in your Income Tax Return (ITR):

### Turnover Calculation for F&O Trading

1. **Definition of Turnover**:
- For F&O trading, turnover is computed by aggregating the absolute value of net profit and loss resulting from all transactions during the financial year.
- It includes both realized and unrealized gains and losses.

2. **Method of Calculation**:
- **Gross Turnover**: Sum of the absolute values of all profits and losses (both realized and unrealized) on F&O transactions.
- **Net Turnover**: Difference between positive and negative absolute values of such profits and losses.

3. **Example**:
- Suppose during the financial year, you have:
- Profits on transactions: Rs. 5L
- Losses on transactions: Rs. 4L
- Gross Turnover = |5L| + |4L| = Rs. 9L
- Net Turnover = 5L (profits) - 4L (losses) = Rs. 1L

### Reporting in Income Tax Return (ITR)

- **Speculative Business Income**:
- Report the net profit or loss from F&O trading under the head "Speculative Business Income" in your ITR.
- The net profit is taxed as per the slab rates applicable to individual taxpayers.
- Losses can be set off against any other income under the same head (Speculative Business Income) of the current year. If any unabsorbed loss remains, it can be carried forward for set-off against speculative income for the next 4 years.

- **ITR Forms**:
- Use appropriate ITR forms for reporting speculative business income. For individuals, typically ITR-3 form is used for reporting income from F&O trading.
- Provide details of turnover, profit, and loss as per the calculation method discussed.

### Conclusion

- **Treatment**: F&O trading is considered speculative business income and turnover is calculated based on the absolute values of profits and losses.
- **Taxation**: Net profit is taxed at applicable rates, and losses can be carried forward for set-off against future speculative income.
- **Compliance**: Ensure accurate calculation of turnover and proper reporting in your ITR to comply with income tax regulations.

For precise guidance tailored to your specific circumstances, it’s advisable to consult a qualified Chartered Accountant or tax advisor who can provide detailed advice and assistance with tax planning related to F&O trading.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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24 July 2024 Please do not give wrong response. F&O is specifically kept out of speculative activities. Kindly read section 43(5).

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