Tax treatment and accounting entries of derivative

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Daya

Daya (Querist)
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24 October 2024 what is the Tax treatment and Accounting treatment of Derivative, such as
F&O, Currency, Commodity etc

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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26 October 2024 As per Section 43(5) of the Income Tax Act, income or loss from F&O, commodities etc. is classified as non-speculative business income. Therefore, it is necessary to declare profit/loss from F&O as Business Income under the PGBP head (PGBP Profits & Gains from Business and Profession).
Accounting Treatment:
F&O:
Recognize gains/losses from F&O trading as revenue/expense in the Profit & Loss Account.

Currency Derivatives:
Recognize gains/losses from currency derivatives trading as revenue/expense.

Commodity Derivatives:
Recognize gains/losses from commodity derivatives trading as revenue/expense.

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