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future and options

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Uday Aggrawal (Querist)

28 January 2017 Can anyone please clarify anything about calculation of turnover of future and options other than what is written in the guidance note for tax audit.

Shantanu

Shantanu (Expert)

29 January 2017 the manner of computation of turnover is different from the manner of computation of turnover in case of other businesses. In case of F&O Transactions, the turnover would be determined as follows:- The total of favourable and unfavourable trades would be taken as the turnoverPremium received on the sale of options is also to be included in the turnoverIn respect of any reverse trade entered, the difference thereon, should also form a part of the turnover. This can be explained with the help of an example. Assuming an F&O Trader enters into the following 2 transactions:- Purchases 1 Lot of Futures of Reliance worth Rs. 5 Lakhs and sells it for Rs. 5.50 Lakhs thereby receiving a profit of Rs. 50,000.Purchases 1 Lot of Futures of Tata Motors worth Rs. 2 Lakhs and sells it for 1.90 Lakhs thereby incurring a loss of Rs. 10,000. In case of the above 2 transactions:- Total profit = Rs. 50,000 – Rs. 10,000 = Rs. 40,000Turnover for the purpose of Tax audit = Rs. 50,000 + Rs. 10,000 = Rs. 60,000

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