• The business loss from the currency derivative trading in NSE

I started trading in derivatives in 2017-18. After few trades, the stock broker placed an unauthorized trading in currency derivatives in my account in Feb 2018 because of which there was a Loss of Rs 90.68 Lakhs. I had few derivatives trades thereafter. I filed a complaint with the Tribunal and the Tribunal allowed the claim of Rs 90.68 Lakhs which was paid to me in 2019-20 after the award went through the process of several challenges in the courts. My trades were in NSE and BSE and supported by time stamped contract notes.

I filed ITR-3 for the AY 2018-19 claiming the Loss from the currency derivative as business loss and adjusting the same against other heads of income as provided for in the law. The P-L acct was audited and the ITR was filed without delay. The unabsorbed non-speculative loss was obviously carried forward. The IT obviously picked up my ITR for scrutiny/assessment and they have asked me to provide the supporting documents which I did. I do not know, how the ITO would treat the business loss. I have observed that some ITAT and Courts are taking exception to whatever be the provisions under Section 43(5)(d), Section 73, Section 28 and explanations thereto etc. I am looking for what are the grounds on which the ITO could challenge my assessment so that I could be ready to face the ITO orders in CIT, then ITAT and then in High Court. First, the IT may say that it was a speculative transaction on some ground. Second, he may say that the Unauthorized Trading portion was speculative because it was not done as per NSE bye-laws and thus did not fulfill the condition specified under section 43(5)(d). Third, he may say that the Derivative Transaction was unusually high and not conducive for an individual, so it was speculative. There could be so many arguments by the ITO why the income under other heads can't be absorbed by the Loss from Currency Derivatives. 

I can only guess until I receive the assessment order, but I want to proceed with caution and have a solid ground and a consistent approach until my return is justified.
Asked 1 month ago in Income Tax

Dear Sir,


Hope you are doing well !!


We have handled such cases before.


We may assist you in preparation of submission and related communications with the department.


It is advisable to take a phone consultation for detailed discussion.

Payal Chhajed
CA, Mumbai
4796 Answers
90 Consultations

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Dear Sir,

Since, there is no transfer or delivery of the underlying asset in case of futures, the income or loss from it cannot be taxed under the head “capital gains. Therefore, depending upon the fact whether the assessee is a trader or an investor, the head of income — that is, income from business and profession or income from other sources (IFOS) — will be determined, but in either case the income will be taxed on net basis at the rates of tax applicable to the assessee.

Thanks and Regards

Shiv Kumar Agarwal

Shiv Kumar Agarwal
CA, Delhi
475 Answers
74 Consultations

5.0 on 5.0

Why it was a speculative transaction only intra day transaction are considered as speculative.

If it was not intra day it cannot be speculative.

As per section when it's allowed then how could AO deny the same. It can deny any of your claim based on judgement but not based on provisions and which are without any controversy and even if AO disallow CIT will surely allow this set off.


Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
3602 Answers
39 Consultations

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Firstly, before passing any negative order ITO will give show cause notice to you. 


In that show cause notice he will give you the reason as to why he wants to make any disallowance. At that time, you can respond based on his questions.


At this point of time, it will not be possible to provide arguments without looking into the detailed facts of your case.

Lakshita Bhandari
CA, Mumbai
5160 Answers
348 Consultations

5.0 on 5.0


This will not be treated as capital gain or loss  it will be treated either  under the head profit or gain from business or professional or inome from other sources.

In case of scrutiny you can show your documents to the AO he will allow the same.

Karishma Chhajer
CA, Jodhpur
2167 Answers
15 Consultations

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