Everything an F&O trader should know about return filing

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You can classify yourself as an Investor if you hold equity investments for more than 1 year and show income as long term capital gain LTCG. You can also consider yourself an investor and gains as short term capital gains STCG if your holding period is more than 1 day and less option trading tax india 1 year. In this chapter we will discuss on all aspects of taxation when trading is declared as a business income, which can be categorized either as:.

Unlike capital gains there is no fixed taxation rate when you have a business income. Speculative and non-speculative business income has to be added to all your other income salary, other business income, bank interest, rental income, and othersand taxes paid according to the tax slab you fall in. You can refer to chapter 1 for tax slabs as applicable for FY In option trading tax india to find out my tax liability, I need to calculate my total income by summing up salary, and all business income speculative and non-speculative.

The reason capital gains is not added is because capital gains have fixed taxation rates unlike salary, or business income. Now, I also have an additional income of Rs. I hope this example gives you a basic orientation of how to treat your income and evaluate your tax liability.

We will now proceed to find a list of important factors that have to be kept in mind when declaring trading as a business income for taxation.

If you file your income tax returns on time July 31 st for non-audit case and Sept 30 th for audit case, you can carry forward any business loss that is incurred. Speculative losses can be carried forward for 4 years, and can be set-off only against any speculative gains you make in that period. Non-speculative losses can be set-off against any other business income except salary income the same year.

So they can be set-off against bank interest income, rental income, capital gains, but only in the same year. You option trading tax india forward non-speculative losses to the next 8 years; however do remember carried forward non-speculative losses option trading tax india be set-off only against any non-speculative gains made in that period.

In such case my tax liability for the year would be —. I have a non speculative business loss of Rs. If you incur speculative intraday equity loss of Rs. I can carry forward speculative loss of Rs. Also to reiterate, speculative business losses can be set-off only against other speculative gains either the same year or when carried forward.

Towards the end of a financial year you might have realized profits and unrealized losses. If you let option trading tax india be, you will end up paying taxes on realized profits, and carrying forward your unrealized losses to next year.

This would mean a higher tax outgo immediately, and hence any interest that you could have earned on that capital which goes away as taxes. You can very easily postpone this tax outgo by booking the unrealized loss, and immediately getting back on the same trade. By booking the loss, the tax liability for the financial year would reduce.

We at Zerodha are the only brokerage in India presently giving out a tax loss harvesting report, which will spot all opportunities for you to harvest losses.

Click here to learn more. It is called BTST when you buy today and option trading tax india tomorrow without taking delivery of the stock. Since you are not taking delivery, should it be considered as speculative similar to intraday equity trading?

There are both schools of thought, one which considers it to be speculative because no delivery was taken. A factor to consider is if such BTST trades are done just a few times in the year show it as STCG, but if done frequently it is best to show it as speculative business income. Paying advance tax is important when you have a business income.

When you have a business income you have to pay most of your taxes before the year ends on March 31 st. It could be more or less. The best way to pay advance tax is by paying tax for that particular time period, so Sept 15 th pay for what was earned until then, and by March 15 th close to the year end, you can make all balance payments as you would have a fair idea on how you will close the year.

You can claim a tax refund if you end up paying more advance tax than what was required to pay for the financial year. Tax refunds are processed in quick time by IT department. You can make your advance tax payments online by clicking on Challan No. Also, here is option trading tax india interesting link that helps you calculate your advance tax — http: You can also check this link to see how exactly interest or penalty is calculated for non-payment of advance tax.

Both these financial statements might need an audit based on your turnover and profitability. We will discuss more on this in the next chapter. An audit is required if you have a business income and if your business turnover is more than Rs 1 crore for a financial year. For equity traders, an audit is also required as per section 44AD in cases where turnover is less than Rs.

There are various types of audits prescribed under different laws like company law requires a company audit; cost accounting law option trading tax india a cost audit, etc. Ideally this audit should be done by the IT department itself, but considering the number of balance sheets out there it is surely impossible for IT department to audit each one of them. You the tax payer can use any CA of your choice.

We will in the next chapter briefly explain how a CA typically creates these two statements. It also helps lenders evaluate credibility, and act as a check for any fraudulent practices. Which ITR form to use? I have come across incidents where people have declared both speculative and non-speculative as capital gains to avoid having to declare business income, and not having to option trading tax india ITR3.

Taking a shortcut like this could mean a lot of trouble if called for an IT scrutiny. Business expenses when trading — Advantage of showing trading as a business is that you can option trading tax india all expenses incurred option trading tax india a cost option trading tax india can then be used to reduce your tax outgo, and if a net loss for the year after all these costs, it can be carried forward as explained above.

Disclaimer — Do consult a option trading tax india accountant CA before filing your returns. Audit is also required as per section 44AD in cases where turnover is less than Rs.

I have two questions — 1 Is an audit required in case I am incurring loss and my turnover is less than 1 cr? But if your net income for the year is above 2. There is no need of calculating turnover for advance tax. Based on whatever profit you have made till the end of sept, dec, and March periods, just pay incremental tax accordingly.

Audit is based on your turnover. Since there is a loss and you fall under a tax slab, yeah audit is needed. Check all the chapters, audit is quite a simple thing. If I have a loss of 20, then i need to get it audited for which i will have to pay CA anotherSo more loss if you make a loss in trading. What a shame, Audit should not be there if there is loss. Advance tax is not required if income is computed under section 44AD; see Section of Income tax Act.

The taxes you are paying is transaction tax. Income tax still has to be paid. You need to add this 1lk to 3. Option trading tax india, first of all great article. I have a personal question, please help me out.

I don't trade daily. In whole yr, I might have placed less than orders in total. I do not wish to get my account audited and option trading tax india not claim any loss in ITR 4. When do I have to pay tax and I want to know about taxation charges as well as do I need to audit.

I am just a stock trades. One more if earn above 1 crore in a single year what will be the taxation on that. Trading is a business, so like every business you need to pay an advance tax every quarter on your expected year end income. IF you pay more, option trading tax india can always get a refund. Tax is not on the turnover, it is on the net profits only.

Turnover is to determine if you need a tax audit or not. Hi, Whether tax audit required in foll0wing case: Total trading turnover — more than 1 crore in FYbut incurred loss in trading. Also, total income in same year is less than 2. Is tax audit required? Also — as a valued added servicecan Zerodha provide services of tax consultants to prepare file option trading tax india of traders? My Salary is — Rs.

In your case since no advance tax has been paid till now, for April 1st to March 31st point 3 option trading tax india is applicable C and from April 1st this year till you pay the taxes point 2 B is applicable. For deferment of advance tax. The said interest is levied 0. Hey Krish, sorry if I suddenly sounded like a chartered accountant putting up this section of the act.

For advance tax not paid between April 1st to March 31st3. Vishal, the penalty can be paid, but that will be black mark on your ITR. I have gone through your article about taxation. It has cleared many concepts. Can Zerodha provide any support for audit, CA? In such case, what advise would you give to beginners like me? I am salaried employee and I have been filling ITR1 form for last 2 years.

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As the volume and value of transactions is very high, the manner of filing of ITR and computing the Turnover for the purpose of Tax Audit is slightly different as compared to other businesses. Even though these transactions are non-delivery based transactions, these transactions would still be treated as Non Speculative.

The expenses incurred for the purpose of Business like Telephone Expense, Internet Expense etc would also be allowed to be claimed in the income tax return. The trader would be required to prepare normal books of accounts under Section 44A of the Income Tax Act. Moreover, if the turnover is more than Rs. This tax audit would be required to be conducted by a practising Chartered Accountant for each year for which the turnover exceeds Rs.

Although, the tax audit is required only in cases where the where the annual turnover is more than Rs. Although the turnover is very high but the profit margin is fairly low. The transactions are also squared up by payment of differences. The contract notes are issued for the full value of the asset purchased or sold but the entries in the books of accounts are made only for the difference. The transactions may be squared up at any time on or before the expiry date. This can be explained with the help of an example.

If the transactions in share market are entered into for the purpose of Investment — the gains arising on such transactions would be treated as Capital Gains. It would be determined on the facts of each case whether the delivery based transactions are to be treated as Capital Gains or are to be treated as Business Income.

If these transactions are treated as Business Transactions, then the tax would be levied as mentioned above. If the transactions are considered as Investments, then the tax would be levied in the manner as described in this article — Treatment of Capital Gains on sale of Delivery based Shares.

If the Loss is not set off against the incomes of the same financial year , then such loss can be carried forward and set off against future incomes. However, for the loss to be carried forward and set off , the loss should be disclosed in the Income Tax Return and the ITR should be filed before the due date of filing of income tax return.

If the Loss is not disclosed in the income tax return or the income tax return is not filed before the due date — the loss would not be allowed to be carried forward. Loss claimed in ITR filed after the due date of filing of Return as Belated Return is not allowed to be carried forward. He is also the founder of this website and loves to help people with their Tax Queries. Select your email service Close Gmail Yahoo! In case of the above 2 transactions: