F&O transactions question

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This discussion clarifies how to calculate turnover and report losses for Futures & Options (F&O) transactions for tax purposes. Turnover is calculated as the absolute sum of all favourable and unfavourable differences (₹14 lakhs in this case), as per ICAI guidelines. The actual net loss of ₹6 lakhs is then reported in your Income Tax Return (ITR). There's no mismatch; turnover is an audit metric, while the net loss is the taxable income figure. You'll report the turnover and cost of acquisition in your ITR, with the net loss being the final result.

Rohit Rathod

Rohit Rathod (Querist)
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24 November 2025 here is the case scenario

f&o transactions
sale qty 15 cr, profit is 4 lakhs & loss is 10 lakhs
absolute figure is 14 lakhs but actual loss is 6 lakhs.

turnover would be 14 lakhs and let loss would be 6 lakhs then balance figure of 8 lakhs is not matching as per profit of 4 lakhs or loss of 10 lakhs

1. tax audit or itr?
2. if ITR (presumptive) - 6% profit need to show however actual loss is 6 lakhs, means need to do tax audit ?
3. if tax audit as per point 2. turnover would be 14 lakhs as per tax audit guidelines issued by icai but actual loss is 6 lakhs how to reconcile?

My 2 pov:
(1) For the profit and loss account, show the Rs. 14 lakhs as turnover (revenue figure) and then record Rs. 10 lakhs as losses and Rs. 4 lakhs as profits, resulting in net Rs. 6 lakhs loss, but that does not match totalling of credit and debit balance
(2) Sale - 15 cr and purchase - 15.06 cr resulting into 6 lakhs loss

Any suggestions?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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24 November 2025 Turnover Calculation for F&O
- As per ICAI Guidance Note (para 5.14(b)), turnover for derivatives = sum of favorable and unfavorable differences.
- Here:
- Profit = ₹4 lakhs
- Loss = ₹10 lakhs
- Turnover = ₹14 lakhs (absolute sum).
- Net result = Loss of ₹6 lakhs (10 – 4).

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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24 November 2025 Applicability of Presumptive Taxation (Sec 44AD)
• Presumptive scheme requires declaring at least 6% of turnover as profit if receipts are digital.
• On ₹14 lakhs turnover, presumptive profit = ₹84,000 minimum.
• But you have an actual loss of ₹6 lakhs, which is non claimable.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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24 November 2025 - Tax audit under Sec 44AB is triggered if:
- Turnover > ₹10 crores (not applicable here), OR
- You opt out of presumptive taxation in any of the preceding five years and declare income below 6%/8% of turnover, and your total income exceeds the basic exemption limit.

Otherwise you have to maintain books of account and declare the loss in ITR. Even in that case no tax audit applicable.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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24 November 2025 - Turnover (₹14 lakhs) is only a compliance figure for audit purposes.
- Net loss (₹6 lakhs) is the actual P&L result to be reported in ITR.
- There is no mismatch:
- Turnover = absolute sum of differences (audit metric).
- Net result = profit – loss (taxable income metric).
- Both figures coexist: turnover for audit, net loss for tax computation.

Rohit Rathod

Rohit Rathod (Querist)
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25 November 2025 How to incorporate this into p&l account ?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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25 November 2025 In ITR you need to declare just turn over & COA as such net loss is arrived; though actual P&L acc. will differ.

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