Taxation of Futures & Options Income

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Taxation of Futures Options Income
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• Taxation of Futures Options is simple but there
  has been a lot of confusion about it. So, Let
  just understand this step by step in detail.
• INCOME to start with, from FO 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.
• Turnover Computation in FO 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.
• EXPENSES CLAIMED all expenses related to carrying
  of FO 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 FO business.

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• 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 FO 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 FO Income refer my next article.
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