Option turnover for finding out applicability of tax audit

Refer:  /experts/f-o-transactions-turnover-for-sec-44ab--122521.asp

Or   Calculating-turnover-for-Future-Option-traders-

Calculation of turnover in case of F&O Trading
Determination of turnover in case of F&O is one of the important factors for every individual for the income tax
purpose. Turnover must be firstly calculated, in the manner explained below:
1. The total of positive and negative or favorable and unfavorable 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.
In above example:
a. Turnover: 75×10=750 (less expenses)
b. Turnover : 150×10=1500 (less expenses)
please note square off same day OR at expire doesn't make any difference in FNO

please read:
75*10=750 & 150*10=1500

Article mentions as:

1. Premium received on sale of options is to be included in turnover

my question  - when at the end of day, I squared off my positions so effectively i have not received any premium,  My ledger will not have credit  for the premium amount & will have actual profit / loss booked thus it is not different than intraday equity transaction wherein only actual profit / loss is considered as turnover, rather than sale value of entire transaction.

Therefore, should not we consider actual profit / loss ( absolute number) for intraday options and Premium received on c/f options.

 

For all non-speculative transactions, the article says that turnover to be determined as follows –

• The total of favorable and unfavorable differences shall be taken as turnover
• Premium received on sale of options is also to be included in turnover
• In respect of any reverse trades entered, the difference thereon should also form part of the turnover.

So if you buy 25 units or 1 lot of Nifty futures at 8000 and sell at 7900, Rs.2500 (25 x 100) the negative difference or loss on the trade is turnover.

In options, if you buy 100 or 4 lots of Nifty 8200 calls at Rs.20 and sell at Rs.30. Firstly, the favorable difference or profit of Rs 1000 (10 x 100) is the turnover. But premium received on sale also has to be considered turnover, which is Rs 30 x 100 = Rs 3000. So total turnover on this option trade = 1000 +3000 = Rs 4000.

The above calculations (points 1 to 3) are fairly straight forward; the next important thing to decide though is if you want to calculate turnover scrip wise or trade wise.

Scrip wise is when you calculate the turnover by collating all trades on the particular contract/scrip for the financial year, find average buy/sell value, and then determine the turnover using the above 3 rules with the total profit/loss or favorable/unfavorable difference on this average price.

Trade wise is when you calculate the turnover by summing up the absolute value of profit and loss of every trade done during the year

Read more at : https://zerodha.com/varsity/chapter/turnover-balance-sheet-and-pl/

"...For all non-speculative transactions," ok with above process of calculating turnover. But what about speculative transactions of Call/put pls.

Originally posted by : Shailendra
	"...For all non-speculative transactions," ok with above process of calculating turnover. But what about speculative transactions of Call/put pls.

 

Are you sure F&O trading is speculative transactions.........

Check section 43(5)(d) of IT Act........

Got it... thanks for patience and reply...

My Pleasure.....