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Ashu jain (Practicing)     27 September 2020

Future and Options Trading

In case of tax audit of futures & options we don't need to consider the provision of aggregate of positive & negative differance as turnover ?

Just need to take the difference of purchase and sales amount as Profit or loss?

Thanks & Regards


 14 Replies

Jayendra

Jayendra (student)     27 September 2020

Absolute value to loss/gain. i.e. total profit plus loss(loss shall be added not deducted)
This will be your total turnover
1 Like
Ashu jain

Ashu jain (Practicing)     27 September 2020

Sir if this will be turnover then what would be the amount of purchase in this case for tax audit purposes ?
Jayendra

Jayendra (student)     27 September 2020

The turnover as calculated above shall be used for determining the applicability of tax audit. Plz clarify on your doubt about purchases, whether its for calculation of capital gain or else..
1 Like
Ashu jain

Ashu jain (Practicing)     27 September 2020

Sir i m asking if turnover is crossing tax audit limit, i.e case in which tax audit is applicable, in that case we dont need to consider this absolute value of profit or loss for turnover. Normal provisions are applicable when doing tax audit of Future and options trading, for the calculations of turnover ?
Jayendra

Jayendra (student)     27 September 2020

Eg.

1 lot of reliance purchased at 100000 and sold at 150000.

1 lot of TCS purchased at 40000 and sold at 35000


then

Turnover = 50000+5000 = 55000
Net Income = 50000-5000 = 45000.
2 Like
Ashu jain

Ashu jain (Practicing)     27 September 2020

In your case purchase will ne 10000(55000-45000), in case of tax audit also, or it should be 185000(150000+35000)
Jayendra

Jayendra (student)     27 September 2020

You'll have to use prudence rather then sticking to rules,
Show Positive trades as income (cr to trading/ p&l) and negative trades as losses/exps(dr to trading/p&l)
1 Like
Ashu jain

Ashu jain (Practicing)     27 September 2020

Sir maybe you are not getting the question, this rule would be applied when applying 44AD, in case of tax audit this rule itself is not applicable, pls check the income tax provisions for better clarity
Jayendra

Jayendra (student)     27 September 2020

Keep it simple..
absolute turnover is your sales and losses shall be purchases in case of f&o
Ashu jain

Ashu jain (Practicing)     27 September 2020

Sir i think u r unaware of tax audit provisions, also pls tell the answer for your example only. In your case purchase will be 10000(55000-45000), in case of tax audit also, or it should be 185000(150000+35000) ?
Jayendra

Jayendra (student)     27 September 2020

You don't need purchase value actually. The provisions you're bragging about are applicable to normal audits in case of F&O its different scenario.

And under which section, the provisions are stated about purchases etc ? kindly enlighten me. :)
1 Like
Ashu jain

Ashu jain (Practicing)     27 September 2020

If purchase is not required, then how will you report Profit and loss Account in tax audit, why are your not answering the question raised on your example only? Please dont recommend your answers on the basis of half knowledge, as it can be misleading.
Jayendra

Jayendra (student)     27 September 2020

You need to compute turnover only for determining applicability of audit. For the purpose of disclosure in profit and loss account show profits on income side and losses on debit side

my eg. Income from F&O = 50000
Exps/Losses in F&O = 5000
1 Like
Saroj Jyoti

Saroj Jyoti (GSTP, Tax Consultant)     24 December 2020

did your query resolve?


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