FNO trading loss tax queey

Dear Sir,

Hope you are doing well !!

Hi,

Whether audit is mandatory or not will depend upon the following:

1. Total turnover ( Turnover in fno is calculated differently). If your total turnover is between 2 to 5 crores, then you are not required to get the books accounted.

2. Whether your other incomes are less than 2.5 lacs or not?

Please take a phone consultation for detailed discussion. In case audit is required, we can help you in getting the audit done.

No books of accounts needed in this case. Bank statements and stock broker statements would be enough.

Hi

Since income from F&O business or derivative trading is considered as normal business income, tax audit under section 44AB is applicable like in any other business transactions.

So, the right classification of  Normal profit / speculative profit/loss is important for arriving correct tax liability as well as for carrying forward of losses to be setoff in future. 

 Tax Audit required for F&O transaction when 

• Tax audit is not mandatory in case F&O trading turnover* does not exceed Rs. 1 Crore.
• If turnover exceeds Rs. 1 crore, Tax audit u/s 44AB will be applicable, if the net profit from such transactions is less than 6% of the turnover.
• If turnover exceeds Rs. 2 Crore, Tax Audit u/s 44AB is mandatory irrespective of profit or loss declared

Calculation of Turnover would be the total of favourable and unfavourable of each squared transaction in a year and premium received on sale of option would only be added to turnover

Maintenance of books of account and Tax audit u/s 44AB of income tax is mandatory in case turnover from F&O transactions exceeds Rs. 2 Crore irrespective of loss or profit.

However, if F&O or derivative turnover is less than Rs. 2 crore, maintenance of books of account is mandatory if there is a loss.

Loss  incurred for F&O transactions can be adjusted against rental or interest income and any unadjusted loss can be carried forward up to 8 years which can be set off against future business profit from any business including profit from F&O transactions.

Feel free to call for details discussion.

It is not necessary that you need to get your accounts audited but I need more facts.

If you need detailed explanation let's have a phone consultation.

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

Thank you

Hello,

F&O Trading is considered under the business head. Whether tax audit would be applicable depends upon various factors, Turnover, Net Income/(Loss), Other taxable income amounts.

To sum up, if you have other taxable income which is more than the basic exemption limit of Rs. 2,50,000 and you want to claim the loss under F&O Trading to future years, you would be required to get your accounts audited.

Maintaining books of accounts would mean to make a proper Balance sheet and Profit & Loss Account for the year from the bank statements and broker statements.

I hope this answer satisfies your requirements. It would be advisable to consult a practicing CA. You can contact us directly or take a phone consultation.

Regards,

CA Hunny Badlani

Yes, audit is required and books are to be maintained. You will have to give the P&L of the trading portal, trading book of the portal. You may contact me for the same. Our fees for audit, book writing and return filing is 10k plus GST.

- If the taxable income is below Rs.2.50 lacs then there is no need of audit. Turnover of F&O is calculated differently. If the turnover is less than 2 CR, you can claim the benefit of presumptive taxation u/s 44AD and pay tax on 6% of the turnover. In such case there is no need of book keeping and audit.

Dear Sir,

In case a person incurs a loss from trading, it can be set-off against any other income of that year (except salary income). ... However, if this loss is carried forward to future years, it can only be set-off against business income of that year.

Thanks and regards

Shiv Kumar Agarwal