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COMMODITY TRADING (DEAL IN FUTURES)

RAJ KUMAR (FINANCE MANAGER) (1393 Points)

14 April 2010

HELLO FRIENDS, CAN ANYBODY TELL ME, IS DEALING IN FUTURES IS TREATED AS SPECULATIVE TRANSACTION

IS TRADING IN FUTURE IS FOR HEDGING PURPOSE THEN WHETHER IT IS TREATED AS BUSINESS INCOME.

WHAT IS THE RATE OF TDS AND UNDER WHICH SEC.

PLS HELP ME.

I AM IN VERY URGENT NEED.

PLS. REFER SECTION ALSO AND EXPLAIN CLEARLY.

I SHALL BE VERY THANKFUL TO YOU.

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2 Replies

Amir (Learner) (4016 Points)
Replied 14 April 2010

Dear Sir,

Trading in Commodity Futures will be treated as Speculative Business only except -

(a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or

(b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or

(c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member;or]

(d) an eligible transaction in respect of trading in derivatives referred to in clause [(ac)] of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange;] {Commodity exchange has not been notified so far}

{CLause (b),(c)& (d) cannot be applied in ur case}

So ur case can be covered in (a) above if done for hedginig purposes then it will be treated as Normal Business & not speculative otherwise it will be treated as speculative business...

Regarding TDS - On which payments...pls clarify...If u meant TDS on sum paid to broker on suffering Loss then no TDS is not required to be deducted.

The relevant Sections are - 43(5) & Explanation (2) to Sec 28.

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CA. BHAVIK (CHARTERED ACCOUNTANTS) (39 Points)
Replied 06 January 2012

Though as per new notification of CBDT, MCX is now a recognised stock exchange for the purpose of section 43(5) of the act, neverthless trading in commodity derivatives will still be treated as speculation business since the defination of "derivative" as is defined under SCRA act, does not include commodites...