Whether personal Investments to show in business books

Dear Querist,

No, personal investments, insurance and mutual funds need not be included in the business balance sheet if they are not used for the F&O/F&I trading business.

The business balance sheet should show only business-related assets and liabilities, such as broker balance, margin, bank balance and trading capital. Personal investment income or gains should be reported separately in the ITR, wherever applicable.

Practical step: keep business trading records and personal investment records separate.

For a more detailed review of your case, you may book a phone consultation.

CA Shubham Goyal

Dear Sir,

Hope you are doing well.

Personal investments such as mutual funds, life insurance policies, fixed deposits, and other assets held in an individual capacity are generally not required to be included in the business balance sheet of a person engaged in F&O trading. 

The business balance sheet should normally contain only those assets and liabilities that relate to the trading business. Personal investments should be kept separate from business assets.

However, if the Income Tax Return requires disclosure of capital account or personal assets and liabilities, such investments may be reflected for reporting purposes. This does not mean they form part of the business.

Therefore, where an individual is engaged in F&O trading and the investments are purely personal in nature, mutual funds, insurance policies, and other personal investments need not be shown as business assets in the balance sheet.

Dear Querist,

For F&O/day trading, it is not necessary to pass a separate Tally entry for every single trade if the broker provides complete contract notes, ledger and trade-wise P&L statement.

Practically, you may pass summary entries in Tally, preferably monthly or daily from broker statements, showing:

Broker balance / margin
F&O profit or loss
Brokerage, STT, GST, exchange charges, stamp duty etc.
Bank transfers to/from broker

A single yearly net P&L entry may be acceptable only where books are not mandatorily required and all broker records are properly maintained, but it is not the best practice. For proper accounting and future scrutiny, monthly summary entries with broker reports as backup are better.

Trade-wise details should be preserved through broker statements/contract notes, not necessarily entered one by one in Tally.

CA Shubham Goyal

For F&O, generally the details shared by your broker is good enough. No need to make seperate books of accounts.