26 July 2018
The client has salaried income and he has traded in future and option as well as in equity. He has loss in future and option. His total income excluding loss exceeding 2,50,000/-. Which ITR should i filled? Where to show this future and option income in ITR?
02 August 2024
In the scenario where a client has both salaried income and trading income (including futures and options), the ITR form to be used and the manner of reporting are as follows:
### **ITR Form to be Used**
1. **ITR-3**: This form is suitable for individuals and Hindu Undivided Families (HUFs) who have income from: - Salaries - Business or profession (including income from trading in futures and options) - House property - Other sources
Given that the client has: - Salaried income - Trading income in futures and options (which is treated as business income) - The total income (excluding loss) exceeds ₹2,50,000
**ITR-3** is the appropriate form for this scenario.
### **Where to Show Futures and Options Income in ITR-3**
1. **Income from Salaries**: Report this in **Schedule S** of ITR-3.
2. **Income from Trading in Futures and Options**: - **Business Income**: Futures and options trading is considered a business activity. Therefore, it should be reported as business income. - **Schedule BP (Business or Profession)**: Fill out this schedule to report the income from futures and options trading. The losses should be reported under the appropriate sections for business losses. - **Profit and Loss Account**: Provide a profit and loss account statement detailing the trading income and expenses. - **Schedule CFL (Carry Forward of Losses)**: If you have any losses from futures and options, these should be carried forward to be adjusted against future business income. Ensure to fill out this schedule to claim the carry-forward of losses.
### **Tax Audit Applicability**
- **Threshold for Tax Audit**: As per section 44AB, if the gross turnover from trading activities exceeds ₹1 crore, a tax audit is required. For futures and options trading, this threshold is applicable to the total turnover from such transactions.
Since you mentioned the client has a loss in futures and options trading and does not specify the turnover, the audit requirement will depend on whether the turnover exceeds ₹1 crore. If it does not exceed this limit, a tax audit may not be applicable.
**Note**: Ensure to check the latest thresholds and regulations as they might have been updated.
### **Summary**
- **Form to Use**: **ITR-3** - **Reporting Futures and Options Income**: - **Schedule BP**: Report the trading income and losses as business income. - **Schedule CFL**: Report any carry-forward losses. - **Tax Audit**: Applicable if the turnover from trading exceeds ₹1 crore; otherwise, not required.
Make sure to accurately maintain and present the trading records and financial statements to support the reported figures in the ITR.
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