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Adjusting loss from f&o transactions

27 July 2017

Hi There,

Have incurred losses from F&O transactions. What I want to know is if this loss can be adjusted against income other than from salary such as interest from fixed deposit?

Additionally it seems F&O income is considered as Business income and requires tax audit. Is it applicable even if I am a salaried person?

Regards

Nataraja

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6 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177704 Points)
Replied 27 July 2017

1. Yes... the loss can be adjusted against income from other sources.....

2. If your total income after the adjustment exceeds basic exemption limit........ tax audit of the F&O transactions would be mandatory.

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Natraj Kn (15 Points)
Replied 28 July 2017

Sir,

Many thanks for your comments

I had requested people from cleartax.in to file my returns. They are saying F&O income is considered speculation income and losses can not be adjusted against other income.

I AM GETTING CONFLICTING INPUTS in this regard, please can you calrify if there was a recent change in this regard or it has been this way from long time ?

Can I have your email id or phone number please?

Thanks

Nataraja

Natraj Kn (15 Points)
Replied 28 July 2017

Hello Sir,

From https://www.incometaxindia.gov.in/Tutorials/21-%20MCQ%20set%20off%20and%20carry%20frwrd.pdf:

"Loss from speculative business cannot be set off against any income other than income from speculative business. However, non-speculative business loss can be set off against income from speculative business."

I think this statement creating the confusion. Is F&O considered speculative business?

Regards

Nataraja

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177704 Points)
Replied 28 July 2017

Section 43(5) defines what is considered as Speculation under Income Tax Act. In a very simple term, all transactions without actual delivery is defined as speculative transaction. So, upto 31/03/2005, every derivative transaction whether in share or commodity was SPECULATIVE transaction within the meaning of section 43(5) i.e for Income Tax Act purpose. Finance Act 2005 brought in amendment in section 43(5) , by which Futures & Option trade in case of SHARES transaction through stock exchange recognized by CBDT for THIS purpose was taken out of the definition of SPECULATION.

F & O on Shares is Business Activity

CBDT later recognized NSE, BSE & Others for the purpose of section 43(5) . So position in case of derivative trading ( F & O) in case of shares , the transaction is not speculative from 01/04/2006 (Asst Yr 2006-07) onwards.

F & O on Commodity is Business Activity

Finance Act 2013 has from 01/04/2014( Assessment Year 2014-15) has also brought in amendment to section 43(5) , by which commodity trade through recognized exchange will not be regarded as Speculative. CBDT vide NOTIFICATION NO. 92/2013 New Delhi, the 29th November, 2013 recognized Multi Commodity Exchange of India Limited under Rule 6DDD .

Thus any derivative trading in commodity through Multi Commodity Exchange of India Limited (mcxindia.com ) will be regarded as business activity from 01/04/2013 ( FY 2013-14)