Reporting F&O income in ITR

Applicable Form: F&O is consirered as income from ‘profits and gains from business or profession (PGBP). Thus Applicable form is ITR-3

Tax Rate: The tax payable on such income is at the slab rate applicable to each individual.

Due Date for Filing Return: 31st July for Non-Tax Audit Cases and 31st Oct if Tax Audit is applicable

Costs Allowed

Costs such as broker’s commission, demat charges, cost of research reports, depreciation of devices used to trade and internet costs can be claimed as expenses from such income.

Set-off & carry forward Losses

• F&O transactions are treated as non-speculative. Loss can be set-off and carry forward as Normal Bussiness Loss.
• Filing ITR on Due Date is necessary to carry forward Loss.
• Loss can be carried forward upto 8 years.
• A salaried employee having F&O Loss cannot offset the same with his salary Income.

Maintenance of Books of Accounts

When the turnover is more than Rs. 25 lakh or if the net profit is more than Rs. 2.5 lakh per annum in case of an individual.

Can F&O Traders Opt for Presumptive Taxation Scheme?

Yes, F&O Traders can opt for Presumptive Taxation Scheme u/s 44AD of Income Tax

Tax Audit Applicability

• Tax audit is mandatory if the turnover from the business exceeds Rs. 10 crores.
• Tax Audit is also mandatory if you have opted for the Presumptive Taxation scheme and you opt out of the scheme within 5 years block.

How to calculate Turnover for Tax Audit?

• The total of favourable and unfavourable differences (Profit/Loss) shall be taken as turnover (In other words, all the differences, whether positive or negative are aggregated for calculating the turnover).
• In respect of any reverse trades entered, the difference thereon, should also form part of the turnover.

Accounting F&O

Accounting of gains or losses in Futures & Options may be done gain-wise and loss-wise only. For example, in the example given in this document. F&O gain / loss account should be created and loss of Rs. 607500/- and Gain of Rs. 16,00,000 should be entered accordingly. It is the choice of the assessee to have a single account for gain and loss or separate account for gain and separate account for loss.

Filing T/O in ITR

While filling the data in ITR in the Profit & Loss Account, assessee should fill the loss or gain accordingly and nothing should be filled in the column of turnover.

Reporting F&O income in ITR