Losses on future and options

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ANKITA JAIN (Querist)
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11 August 2014 I have made only 2 transactions of future and options during the financial year 2013-2014 which was stt paid. On one transaction i have made profit of rs. 20000 and on another i have made loss of Rs. 180000 ,now how can i treat in my ITR whether it is business loss or short term capital loss and if it is business loss then a set off is possible against such loss or not?????

Nikhil Kaushik

Nikhil Kaushik (Expert)
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11 August 2014 1. I believe this query was asked earlier. The answer is that pre-dominantly such transactions are accounted for as business transactions and hence such income or loss is accounted for under "PGBP."

2. the option of treating it as capital exist but is not an easy one as you shall have to prove that you entered into these transactions for capital appreciation!

3. accounting as business loss helps in much more liberal carry forward of losses as such loss can be set off against other income heads also whereas capital loss can be set off only against capital gains.

4. Where you wish to carry forward such losses, you need to get the tax audit done and submit ITR4.

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ANKITA JAIN

ANKITA JAIN (Querist)
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11 August 2014 Is there any tax Audit required??

Nikhil Kaushik

Nikhil Kaushik (Expert)
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11 August 2014 that depends. If you have any income that cannot be set off against this loss and such income exceeds Rs 2 lakhs, then audit is straightaway applicable.

ANKITA JAIN

ANKITA JAIN (Querist)
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11 August 2014 there is turnover requirement of Rs. 1 crore for Audit not an income of rs. more than 200000.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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11 August 2014 Dear Ankita,

Please refer section 44AD(5)

ANKITA JAIN

ANKITA JAIN (Querist)
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11 August 2014 You are right .Thanks

Nikhil Kaushik

Nikhil Kaushik (Expert)
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11 August 2014 you are most welcome :)

ANKITA JAIN

ANKITA JAIN (Querist)
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11 August 2014 whether this limit is to be seen in receipts of lic agent commission?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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11 August 2014 for LIC agent 44AD is not applicable. In such cases, audit shall be required only as per 44AB ie Rs 1 cr turnover.

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ANKITA JAIN

ANKITA JAIN (Querist)
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14 August 2014 One more thing which i want to know that how To calculate turnover?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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14 August 2014 calculate turnover for?

ANKITA JAIN

ANKITA JAIN (Querist)
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14 August 2014 I read about turnover in F& o some where .Anyways please tell me the whole process how to report it in ITR 4 and my income from other sources is 150000 and commission from Lic is 23000 and my F&o loss is around 120000.This F & o loss was calcilated simply Sale - purchase. please advise me now.
Thakyou

Nikhil Kaushik

Nikhil Kaushik (Expert)
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14 August 2014 F&O turnover is to be computed on the basis of net amounts received or paid on each contract. So if on one derivative contract you make Rs 50 gains and on another contract you make Rs 50 loss, your turnover shall be Rs 100.

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ANKITA JAIN

ANKITA JAIN (Querist)
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15 August 2014 commission income and income from other sources can be set off against this loss.
and there will be no requirement of audit as total income (all income-set off of this loss-deduction) is in limit of Rs. 200000 (44 AD).
Am i right??

Nikhil Kaushik

Nikhil Kaushik (Expert)
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15 August 2014 yes it can be set off. but not the intra-day trading losses on equity shares will shall be accounted for as speculative income

the problem though is that Income-tax department even where set off is done, ask for audit by issuing 139(9) notice.

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