1. INCOME to start with, from F&O is considered as ‘business income’ not as a ‘capital gain income’. Hence, in case of individuals it is taxable as a slab rates. Further, it is covered in the definition of ‘Normal Business Income’ not as ‘Speculative Business Income’.
2. Turnover Computation in F&O is different from an ordinary business & there has been some changes to it recently.
For Futures, the turnover is calculated by adding absolute values of profit/loss made from each trade.
For Options, the premium is received on the sale of options is also to be included in the turnover additionally. However, where the premium received is included for determining NET PROFIT, the amount of premium shall not be considered if the transactions are squared off. It will be considered only in physical settlement.
3. EXPENSES CLAIMED all expenses related to carrying of F&O business can be claimed. In case of expenses and assets which are both personal and business expense, take proportionate business expense.
CASH payments to a person in a single day not more than Rs.10k (Rs.35K, If paid to transporter) and expenses which are required to deduct TDS. Deprecation on all assets which are used in F&O business.
4. BOOKS OF ACCOUNTS an individual/HUF whose turnover exceeds more than 25 lakhs and in case of business income turnover exceeds Rs. 2.5 lakhs in any three financial years or in the current year; if it is a first year. Also, if you fall under special situation due to opting out from the presumptive scheme of taxation before completion of a 5-year block.
5. TAX AUDIT turnover above “one crore”. The limit will be read as “ten crores” for situations where 95% of both receipts & payments are made through banking channels/ digital mode. Also, if you fall under special situation due to opting out from the presumptive scheme of taxation before completion of a 5-year block.
NOTE While OPT OUT from presumptive taxation scheme one should analyze whether he will be okay in paying taxes at the presumptive rate of 8%/6% for the next 5 years. If not, then breaking out of the cycle may require maintaining books of accounts, and getting them audited for a period of 5 years from the year of opt out.
6. SET OFF & CARRY FORWARD OF LOSSES the losses of F&O business income can be set off against any other Business/ Profession Income, House Property Head Income, Capital Gain Income and Other Income. Also, Losses can be carry forward for the next 8 financial years.
The condition for carrying these losses forward is that you have to declare these losses in your ITR and you have to file the ITR within due date.
Hence, Filing ITR of F&O Income refer my next article.
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