Urgent Query on Gross Receipts for F&O Income in ITR4

ITR 2347 views 2 replies

Balbeer

CA Office Staff

32 Points Joined July 2009

We are preparing ITR4 for F&O income. Can some one tell what should be the amount that has to be put in the Gross Receipts.

Futures

Contracted Value = 1 Cr Plus

Actual Payments Received = 4.25 Lacks (where there is net money received due to profit at a contract level)

Actual Payments done = 4 Lacks (where there is net money paid due to loss at a contract level)

Net profit in Futures = 25 thousand

Options

Total Premium Received = 20 Lacks

Total Premium Paid = 25.5 Lacks

Actual Payments Received = 50 thousand (where there is net money received due to profit at a contract level)

Actual Payments done = 6 Lacks (where there is net money paid due to loss at a contract level)

Net Loss in Option trading = 5.5 Lacks

Since in F&0 only difference is paid or received and no actual delivery taking place,

Is Gross receipt = 4.25 Lacks + 50 thousand ?

Also, no Tax Audit or books required right as per 44AB/44AA?

Thank You in advance. Looking forward to your kind responses.

Replies (2)

Aditya Maheshwari

CA in Practice

35867 Points Joined June 2009

Dear Balbir,

As per various judgements and clarification issued by the ICAI the turnover in case of F & O is taken as Profit + Loss. Hence your will have to take account all your profits + losses on Mark to Market basis (and not the contract value) and for options the options premium is taken as the turnover and add all of them and check whether they cross Rs. 40 lakhs or not. Looking by the above it seems that you have exceeded Rs. 40 lakhs in options and hence would be liable for audit u/s 44AB and you turnover would be Rs. 4.25 + 4 + 20 + 25.5 = 53.75 lakhs though your profit / (loss) is different. For the purpose of ITR the gross receipts would be .25 - 5.50 = -5.25 lakhs.

Balbeer

CA Office Staff

32 Points Joined July 2009

Thank You Aditya.

I would like to say that for premium on options, most (99%) of the contracts were squared using reverse transactions and the very few ones (3-4 contracts, max 1-2 lacks) were buy options which expired without any return, so only the difference was pocketed in 99% of cases.

I had read in the guidance note that Only the Premium received from options sale will be added to turnover for 44AB as per the following newsletter (icai.org/resource_file/9584NewsLetter_March06.pdf)

In this case isn't the turnover for 44AB = Futures profit (4.25) + Futures Loss (4) + Options Premium Received (20) = 28.25 Lacks ?

With regard to MTM, expeneses, brokerage, STT, daily P/L on a day to day basis by looking at ledger entries and the books for the trading account the sum total is about 30 Lacks.

If on ITR, I put Gross Receipt = -5.25 Lacks, and no additional expense, is the other items should be as below ?

Gross Profilt = -5.25 Lacks

Expenses = 0

Net Profit = -5.25 Lacks