Taxation and admissible expenses on FnO trading

Salary and Director's remuneration shall be taxable under the head Income from Salary. Hence none of the above expenses shall be deductible.

Whereas income from F & O shall be treated as Business Income, as there is no actual delivery and Contracts are made at transaction but the accounting is done only for the difference amount, but as per my knowledge in this case also above expenses shall not be deductible. 

@ Aditya

The salary and director remuneration shall be taxable under the head Income from Salary.

In case of income from f&o, in my view the following expenses shall be allowable

1. Annual fees for live data feed from NSE/MCX

2. Brokerage.

3. Depriciation on Laptop or Computer purchased for the purpose of trading.

With regard to software / tool to do trading, i am not sure as to treat it as revenue expense or capital expense. 

The income should be taxable under the head "Profits and Gains from Business".
 

 

Hi Aditya,

There is no issue on taxability of Salary Income. It shall be taxable under the head of income from salary but expenses in regard of F&O trading is not deductable from the same.

Now, question arise about the taxability of income from the trading in F&O segment, as per proviso (d) to section 43(5) of Income Tax Act'1961, income arising from the trading in derivaties (i.e F&O) through recognised stock exchange is not a speculative transaction, therefore, the same income is chargable as non speculative business income and all the revenue expenses incurred is deductable.

Hi Hanish/Umang,

This is what I think too. For example, if director's salary and normal salary from another company is treated under a different head as compared to the income from FnO trading then the deductions under each head must be possible. 

This means that if it can be clearly shown that the expenses incurred for conduting the FnO transactions have no overlapping use with the other head then we should be able to deduct the expenses.

For example, the software and the data feed is solely used for FnO trading. The brokerage, STT and annual account maintenance fees etc would all fall under this head. Correct?

@ Aditya

Yes u need to make Director Salary and Salary from other company fully taxable under the head salary.

Under the head Profit and Gains from business, you can make the income of f&o taxable and can claim deduction of the expenses mentioned above.

@ Ankit

Thanx for the info... i was not aware of that, i shall check it soon.

my doubt is the same, so are these rules still valid in 2022, my expenses for set off against trading income will be payment of internet bills, software charges, mobile bils, purchase of new mobile phone which i did for trading, and apart from this i have a normal salary for which i claim 80c deductions like PF, PPF, LIC etc ,