Hi,
For the Income tax filing do we have to include the Unrealized profit or loss from F&O open positions at the end of year to calculate the PGBP income?
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F&O Unrealized profit
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Quick Summary
No, the transaction is not settled for calculation of turnover.
Thanks, for calculation for net profit do we have to include the unrealized profit?
No, it will be accounted in the year of its realization.
Only realised (squared-off) trades are taxed, generally:
• For F&O as non-speculative business income, the income is based on the accounting method. Under ICDS and the mercantile system, profits on open positions at year-end (mark-to-market) aren't recognised as income (ICDS I: MTM gains not recognised unless realised). MTM losses on open derivative positions aren't allowed either (ICDS I, para on MTM losses; CBDT Instruction 3/2010 disallowed notional losses).
• So for the ITR, report only closed or settled positions during the FY. Daily settled futures (MTM settled daily by the exchange) are effectively realised. Many treat futures MTM settlements as realised profit or loss.
• Options open at year-end: premium paid or received is carried as an asset or liability until expiry or square-off.
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