Treatment of Future & Option Trading loss in IT return

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 June 2010 in last financial year i had done trading in future & options in which i had booked loss of Rs 30000. My buying amount for the year was 5 crore 30 thousand & selling amount was 5 crores only. hence incurred loss of 30 thousand from future trading. now for the purpose of my income tax return my questions are:-

1) Under which head i need to furnish deltails of loss (whether in capital gains head or business income head).

2) can i adjust the loss from other income. i have income from interest of about 2 lacs. or should i carry this loss to next year.

3) whether i am required to audit my books of accounts for future trading. what is the turnover limit for audit of accounts for future trading.

4) some of my trading transcations were of intraday. what is the treatment for that transcations.

5)for how much years i can carry this loss.

CA. Anoop Gadia

CA. Anoop Gadia (Expert)
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15 July 2010 1. it in business loss
2. yes, business income can be set off
3. for audit there is net turnover required
IMP: TAX AUDIT IS ONLY REQD FOR BUSINESS INCOME I.E FOR INCOME FROM DERIVATIVES/FUTURES AND OPTIONS. Not from Income from Capital Assets or Speculation Income. So you may have a income of Rs. 2 Crore from Delivery/Intraday but no need for Tax Audit.
Another point to note is the method by which the limit of 40 Lakh is calculated for audit purpose in case of Derivatives. As the Future lots are upwards of Rs. 2 Lakhs its quite easy to cross the 40 Lakh figure by way of turnover, which is incorrect in principle.
So the total difference between Buy and Sell price of FnO is taken to calculate the 40 Lakh limit, i.e. the profit + loss + premium on options recd + premiums paid.
It may well be that you have net loss from derivatives and still have to go for tax audit. For e.g. Profit 20 L + Loss 25 Lakh = Turnover 45 Lakh Tax Audit Reqd. Net Loss = Rs. -500,000.

4. all are in business loss.

5. carry forward for 8 years.