How to report revenue from buying and selling in F&O in your I-T returns

The due date to file the revenue tax return (ITR) for the monetary yr (FY) 2021-2022 or the evaluation yr (AY) 2022-23 is across the nook. If you’re a dealer with revenue from futures and choices (F&O), together with intra-day buying and selling, income from such exercise have to be disclosed as enterprise revenue in your returns.

ITR-3 is the relevant ITR type to report revenue from ‘profits and gains from business or profession (PGBP)’. The tax payable on such revenue is on the slab fee relevant to every particular person.

Reporting enterprise revenue permits deduction of related bills. Thus, prices comparable to dealer’s fee, demat costs, price of analysis experiences, depreciation of units used to commerce and web prices might be claimed as bills from such revenue.

Set-off & carry ahead

Income from buying and selling is additional divided into speculative and non-speculative enterprise revenue. Intra-day buying and selling transactions are deemed to be speculative (since there isn’t any supply of shares) and different F&O transactions are handled as non-speculative.

While the tax payable on each incomes is similar, the distinction arises by way of disclosure and particularly when any loss is incurred—the latter lets you use the set-off or carry-forward provisions to regulate loss towards revenue and scale back tax outgo.

If you incur a loss on non-speculative F&O buying and selling, that quantity can be utilized to set off the loss towards any head of revenue, besides wage. For instance, loss on F&O buying and selling might be set-off towards revenue from your own home property or capital features or revenue from different sources in addition to any non-speculative revenue. The unutilised loss, if any, might be carried ahead for the following eight years and might be set off solely towards non-speculative enterprise revenue.

On the opposite hand, an intra-day buying and selling loss (speculative), might be set off solely towards speculative revenue. The unutilised steadiness, if any, might be carried ahead for the following 4 years to be set off towards speculative incomes.

The solely situation to hold ahead the buying and selling losses is to file the ITR earlier than the due date, in keeping with Neetu Brahma, director, Nangia Andersen India.

Books of account & audit

When reporting enterprise revenue, the requirement to take care of books of accounts arises “when the turnover is greater than ₹25 lakh or if the online revenue is greater than ₹2.5 lakh each year in case of a person,” said Sandeep Sehgal, partner-tax, AKM Global, a tax and consulting firm.

Stock brokers generally provide a detailed statement of profit and loss of all the transactions carried out during a financial year. “These statements come in very handy for traders but by themselves cannot be considered as books of accounts,” added Sehgal.

Also, as per the Income Tax Act, a tax audit is obligatory if the turnover from the enterprise exceeds ₹10 crore (the restrict is ₹1 crore if money receipts and money funds in the course of the yr don’t exceed 5% of the entire receipts or funds). If you selected presumptive revenue tax, then the tax audit is relevant provided that your reported revenue is lower than 6% or 8% of the turnover.

The calculation of turnover in inventory buying and selling is barely completely different. For intra-day transactions, the transaction settlement quantity—whether or not optimistic or detrimental—is the turnover. Say, you obtain a inventory ‘X’ at ₹1,000 and offered it for ₹1,500, then the distinction of ₹500 is the turnover. The identical is true for futures as effectively. Say, you entered right into a future contract worth of ₹1 lakh and later offered it at ₹95,000, the detrimental distinction of ₹5,000 is the turnover.

In the case of choices, the premium collected on sale of choice also needs to be taken into consideration. Say, you obtain an choice on an index of 100 models at ₹50 and offered it at ₹60, the turnover is (100 models*( ₹60-50)) plus the choice premium obtained (100 models*60) which is equal to ₹7,000 (1,000+6,000).

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