09 September 2013
sir, i have done many transactions of future of commodity in silver and jeera. i have made profits in some transactions and and losses in others. pl let me know whether i am covered under tax audit of income tax, also, turnover is full amount of sale of each lot or just net of profit/loss. as net is loss from these, can i adjust this loss against my other business of trading of shoes. pl guide me accordingly as i have to file my income tax return thanks.
12 September 2013
sir, one consultant has guided me that f & o business is not speculative business and it will be treated as normal business profit/loss as per guidelines. so pl guide me can i take benefit of that.
31 July 2024
For the transactions involving commodity futures, here’s a detailed guide on tax implications, tax audit requirements, and handling profits and losses:
### **1. Classification of Income:**
- **Commodity Futures:** Transactions in commodity futures are generally treated as business income and not speculative. The profits and losses from these transactions will be considered as part of your regular business income.
### **2. Tax Audit Requirement:**
- **Applicability:** Tax audit is required under Section 44AB of the Income Tax Act if the turnover exceeds ₹1 crore for a business (₹50 lakh if opting for presumptive taxation under Section 44AD). This limit applies to the aggregate turnover of all businesses, including commodity futures.
- **Turnover Definition:** For commodity futures, the turnover for tax audit purposes is calculated based on the total value of transactions. It is not limited to just the net profit or loss. Specifically, it includes the total value of all purchases and sales.
### **3. Handling Profits and Losses:**
- **Profit and Loss Reporting:** Report the profits and losses from commodity futures trading in your income tax return under the head "Business Income." Since commodity futures are considered a non-speculative business, losses can be adjusted against other business income.
- **Set Off Losses:** If you have a loss from commodity futures, you can set off these losses against the profits from other business activities, such as trading in shoes. This is permitted under the rules for business income.
### **4. Treatment of F&O Business:**
- **Nature of F&O Business:** Futures and options (F&O) trading is considered a business activity and not speculative as per guidelines from the Income Tax Department. Therefore, the profits and losses from such trading are treated as regular business income and can be adjusted accordingly.
### **5. Filing Your Income Tax Return:**
- **Form to Use:** For reporting income from commodity futures and other business activities, use **ITR-3** if you are a business owner or **ITR-4** if you are opting for presumptive taxation under Section 44AD/44AE.
- **Documentation:** Maintain detailed records of all transactions, including contracts, trade confirmations, and statements from brokers. These records are essential for preparing financial statements and for tax audit purposes if applicable.
### **6. Summary:**
- **Tax Audit:** If your aggregate turnover exceeds ₹1 crore (or ₹50 lakh under Section 44AD), you are required to get your accounts audited.
- **Turnover Calculation:** Include the total value of all commodity futures transactions for calculating turnover.
- **Loss Adjustment:** You can adjust the losses from commodity futures against other business income.
- **Business Classification:** Treat the profits and losses from commodity futures as business income, not speculative.
**Consult with a tax professional** to ensure all records are correctly maintained and that you are in compliance with the applicable provisions. This will help you accurately file your return and handle any potential audit requirements.
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