Derivatives
This query is : Resolved
16 August 2008
Hi,
The following are my queries.
1. How to compute the income/loss from options and futures.
2. I have considered the income/loss from options and futures as income/loss from speculative business.
Please provide me with the complete details with respect to the above aspects.
Regards
CA Tejashwini
The following are my queries.
1. How to compute the income/loss from options and futures.
2. I have considered the income/loss from options and futures as income/loss from speculative business.
Please provide me with the complete details with respect to the above aspects.
Regards
CA Tejashwini
16 August 2008
HI
16 August 2008
How to Compute Turnover In Case Of Future & Options Trades?
I am a working professional and apart from my salary I have some income in Futures and option transactions and shares. I need to know few this.
1. Since Futures and options transactions are under business income. Can we set of gains and losses against income from salary?
2. How is turnover in Futures and options transactions calculated?? If notional value is considered, even 5-10 transactions will exceed 40L turnover and we need go through tedious Tax audit process.
3. What are documents that needs to be submitted while filing returns of income. Apart from Form 16, will a statement of account for futures and options transactions would be enough?
Answer to your first question is Negative. The loss from "Capital Gains " and "Business & professions" can not be set off with income from Salary.
The meaning of turnover for in case of transactions in Futures and Options of shares is not defined under the I T Act.In case of derivative trading-Futures and Option- the difference on which the contract is purchased or sold is important. Although the value of contract is number of contract multiplied with the shares price , yet what is actually given or taken is differential amount in contract. For example if you purchase a future contract for Rs 105 for a share having a lot of 100,you pay nothing at the time of buying a contract, yet at the time of expiry if contract , you are either gainer or loser which is determined whether there is positive or negative difference. So , for the purpose of determining the turnover in case of future and options , for the purpose of 44AB , based on the guidance note of ICAI , following items should be considered to constitute turnover
• The total of positive and negative differences , plus
• Premium received on sale of options is also to be included in turnover ,plus
• In respect of any reverse trades entered, the difference thereon
But not the total value of contract .
Accounts with Return
Regarding your third question, if you do not fall in case of tax audit or a case that regular books of accounts are maintained , even in that case your return of income should be accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year [this is as per explanation section 139(9)]
income tax, Speculation
I am a working professional and apart from my salary I have some income in Futures and option transactions and shares. I need to know few this.
1. Since Futures and options transactions are under business income. Can we set of gains and losses against income from salary?
2. How is turnover in Futures and options transactions calculated?? If notional value is considered, even 5-10 transactions will exceed 40L turnover and we need go through tedious Tax audit process.
3. What are documents that needs to be submitted while filing returns of income. Apart from Form 16, will a statement of account for futures and options transactions would be enough?
Answer to your first question is Negative. The loss from "Capital Gains " and "Business & professions" can not be set off with income from Salary.
The meaning of turnover for in case of transactions in Futures and Options of shares is not defined under the I T Act.In case of derivative trading-Futures and Option- the difference on which the contract is purchased or sold is important. Although the value of contract is number of contract multiplied with the shares price , yet what is actually given or taken is differential amount in contract. For example if you purchase a future contract for Rs 105 for a share having a lot of 100,you pay nothing at the time of buying a contract, yet at the time of expiry if contract , you are either gainer or loser which is determined whether there is positive or negative difference. So , for the purpose of determining the turnover in case of future and options , for the purpose of 44AB , based on the guidance note of ICAI , following items should be considered to constitute turnover
• The total of positive and negative differences , plus
• Premium received on sale of options is also to be included in turnover ,plus
• In respect of any reverse trades entered, the difference thereon
But not the total value of contract .
Accounts with Return
Regarding your third question, if you do not fall in case of tax audit or a case that regular books of accounts are maintained , even in that case your return of income should be accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year [this is as per explanation section 139(9)]
income tax, Speculation
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