Itr form for futures & options trading

You have an option to file ITR4, provided your profits from F&O transactions (net Turnover) is minimum 6%.

Thanks for the quick response.

I looked at ITR 4. It does not seem to have any field/schedule for short term capital gain & LTCG (for debt funds with indexation). I need to declare those also. Can I fill them in ITR4 somehow?

Regards

Abhishek

Firstly, your query was not complete at first instance.....

Secondly, you can file ITR3 with capital gains and also for F&O transactions (with option of no account case) which is as easy as  ITR4 ......

Thanks again for the comment. Here is what I think I need to do for declaring business income in ITR 3:

Nature of business - 13010 - Investment activities

Balance sheet - No creditors/debtors. Stock in trade / Cash as per brokerage statement on Mar 31.

P&L = Receipts = Turnover from brokerage statement. Profit/expenses as in brokerage statement.

No Audit required as turnover is less than a lakh and profit > 8% of turnover.

Pls confirm if my understanding is correct.

Thanks once again for all your help.

Regards

Abhishek

Yes, you can follow that...

But Sir,

It says "there cannot be negative net profit in "No Accounts Case", so please advise how to show net loss from F&O trading in "No accounts Case" in P/L sheet.

Thanks in Advance

For no account case the net loss cannot be negative but profit of minimum 6% u/s. 44AD. 

If you want to declare loss and also carry forward the same, books of accounts are required to be maintained.

What if there is a loss  of Rs 50000 in business of derivatives. As per Guidance Note on Tax Audit Turover of derivatives is total of favourable and unfavourable differences. In this light if  favourable  differences are Rs 100000 and unfavourable differences  are Rs 150000 and net of Differences is -Rs 50000(Loss in derivative business) . The assesseee is required to go for Tax audit  as his income is less than 6%/8% as required u/s 44AD. Now while feeding in ITR-3 we have to fill  all income and expenditure in Part A-P&L of ITR-3 . What figure should be mentioned and in which column of  Part A-P&L of ITR-3 ? And  further what turnover should be mentioned in Clause 40 of Form 3CD ?

 

Calculation of turnover in case of F&O Trading

Turnover can be calculated, in the manner explained below:

1. The total of positive and negative or favourable and unfavourable differences shall be taken as turnover.
2. Premium received on sale of options is to be included in turnover.
3. In respect of any reverse trades entered, the difference thereon shall also form part of the turnover.

Here, it makes no difference, whether the difference is positive or negative. All the differences, whether positive or negative are aggregated and the turnover is calculated.

For computation of turnover of futures,  the total of positive and negative or favourable and unfavourable differences shall be taken as turnover.

Expenses

Expenses such as postage, conveyance and telephone, incurred for carrying on the business can be claimed as business expenses.

As per the query data......

1. TO would be 2.50L

2. Audit may not be applicable unless section 44AD(4) gets triggerd.

Sir,

In this case of derivatives turnover is negative and purchases is taken as Nil. Should  we feed  Turnover as Sale of Goods in Column 1Ai of Part A-P&L   of ITR-3 and purchases as Nil ? Should we adjust the charges levied in trading account with turnover or these charges should be mentioned seperately  somewhere else ? Further in this case 3CD will be applicable as there is  a loss. Which turnover ( Net turnover is negative)should be mentioned in clause 40 of Form 3CD ?

With Regards

Amit

Sorry to agree with you, for nil turnover concept......

Sir,

I Do not mean Nil Turnover.

In this case of derivative business total of positive differences is Rs 100000 , total of negative differences is Rs 150000 hence the net turnover is Rs -50000 (Rs. minus fifty thousand). But  as per Guidance note on Tax Audit Turnover is 250000. It appears  that turnover as per guidance note is only for the purpose of caculating turnover for applicability of 44AB. Guidance note does not mean that the Turnover Rs 250000 should be shown in Profit & Loss Account.

Now we have to file two forms . One is Form 3CB+3CD and second is Form ITR-3

In ITR-3 we have to feed P&L Account in Part A-P&L of ITR-3. The First issue is  that here in P&L of ITR-3 which figure has to be filled as Sale/Revenue and Purchases and in which column ? We have to open P&L Account in ITR-3 and then decide. This is confusing.

The Second issue is that in Clause No 40 of Form 3CD  which figure should we  feed as Total Turnover of the assessee ? Again we have to open Clause 40 of Form 3CD and then decide. This again confusing.

Kindly opine.

With Regards

Amit

1. I repeat, unless sec. 44AD opted in preceeding year, tax audit would not be applicable u/s. 44AB, when TO is below 1Cr. Secondly the loss from F&O is allowed to be set off with other incomes except salary, so in most of these cases net income exceed BEL only in the case if salary exceed BEL.

2. Here for ITR 3 ....... You can show all positive turnover as gross receipts, and negative turnover as gross payments.

3. For Form 3CD, same as gross payment value......

4. In such cases, professionals prefer to offer 6% profit margin over audit liability ....

Sir,

We should calculate the 6% profit to be offered to avoid audit liability in the following case :

In this case of derivative business total of positive differences is Rs 100000 , total of negative differences is Rs 150000 hence the net turnover is Rs -50000 (Rs. minus fifty thousand). But  as per Guidance note on Tax Audit  Turnover is 250000.( It appears  that turnover as per guidance note is only for the purpose of calculating turnover for applicability of 44AB. Guidance note does not mean that the Turnover Rs 250000 should be shown in Profit & Loss Account. )

Profit to be declared under section 44AD (Three Options )

1. 6 % of Rs 100000 (Total of positive differences)  = 6000

2. 6 % of Rs. 50000 ( Net of positive and negative Differences)  = 3000

3. 6 % of Rs. 250000 ( Total of positive and negative differences)  = 15000

Which of these 3 options is correct ?  Or actual answer is something else . What section 44AD says. And please note that turnover as per guidance note is only for the purpose of calculating turnover for applicability of Tax audit if I am not incorrect.

Kindly opine

With regards

Amit