I have a doubt regarding F&O, how the future and options are taxable, I know how to calculate turnover for Futures and for Options (in options premium will also include with profit and Absolute lose). if it exceeds 10cr, then it is eligible for audit, if not, it is not eligible.
For instance: The buy value of futures is 3,94,78,169 and sell value is 3,96,20,722 and the profit made was 1,42,555 and the turnover is 3,97,975(i.e 1,42,555+|270264| (loss))
However, the ambiguity rises here. I calculate turnover of futures, it is 3,97,975. so in ITR form which value shall i consider whether turnover or sell value (i.e 3,96,20,722) .
if anyone knows about this, could you please explain briefly?
10 July 2024
In the context of Futures and Options (F&O) trading, the turnover calculation is crucial for taxation purposes, especially when determining whether tax audit is applicable under Section 44AB of the Income Tax Act, 1961. Here’s a breakdown to clarify your query:
### Turnover Calculation in F&O Trading:
1. **Futures Trading:** - **Turnover Calculation:** For futures, turnover is computed as the absolute profit realized from transactions. It includes both positive and negative differences arising from different contracts entered during the financial year.
2. **Options Trading:** - **Turnover Calculation:** For options, turnover includes the premium received on sale of options. It is calculated as: - Premium received on sale of options + Absolute value of profit on exercised options + Absolute value of loss on exercised options.
### Choosing the Correct Value for ITR Filing:
- **For Futures Trading:** In your case, if the turnover from futures trading is Rs. 3,97,975 (which includes profits and losses), this is the turnover figure you would report in your Income Tax Return (ITR). This turnover figure should be reported under the respective schedule or section where F&O income is disclosed.
- **For Options Trading:** Similarly, for options trading, you would calculate the turnover as per the method described above and report the total turnover figure in your ITR.
### Key Points to Note:
- **ITR Reporting:** Ensure that the turnover figures reported in your ITR accurately reflect the computations based on profits and losses from F&O trading.
- **Tax Audit Requirement:** If the turnover from F&O trading exceeds Rs. 10 crore in a financial year, a tax audit under Section 44AB of the Income Tax Act is mandatory. If it is below Rs. 10 crore, tax audit is not mandatory but other conditions for audit applicability may still need to be considered.
### Conclusion:
When filing your Income Tax Return (ITR), the turnover figure calculated based on profits and losses from F&O trading (whether futures or options) should be reported. This turnover figure is crucial for determining tax liability and compliance with audit requirements if applicable. Ensure that all calculations are accurate and comply with the guidelines provided by the Income Tax Department.
If you are uncertain about any aspect of turnover calculation or tax implications, it's advisable to consult with a tax advisor or chartered accountant who specializes in F&O taxation to ensure compliance and accuracy in your ITR filing.
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