Calculating Futures and Options (F&O) turnover for tax purposes involves a specific approach, distinct from other types of business turnover calculations. Here's a consolidated view of how to calculate F&O turnover, based on the latest guidelines and examples from various sources.
Turnover Calculation:
For Futures & Options, turnover is calculated as the absolute sum of all profit and loss from the transactions. You don't consider the total value of the contracts traded, but only the net results of your trading activities. This includes both favourable (profits) and unfavourable (losses) differences, treated as turnover.
Here's the calculation of F&O turnover presented in a table format:
| Particular | Instrument | Buy Amount Invest Right, Invest NowOpen a FREE* Zero commission* on Mutual Funds and IPO ₹20* per order on Equity, F&O, Commodity and Currency Enter your mobile number to continue*By signing up you agree to our Terms and Conditions | Sell Amount | P/L | Turnover |
| Nifty50 FUT | FUT | 18,000 | 18,500 | 500 | 500 |
| Reliance FUT | FUT | 2,500 | 2,000 | -5000 | 5000 |
| Nifty50 18000 CE OPT | OPT | 1700 | 2700 | 1,000 | 1000 |
| Nifty50 18500 PE OPT | OPT | 5000 | 9000 | -4,000 | 4,000 |
| Total | 1,500 | 10,500 |
Tax Audit and Expenses:
Regardless of profits or losses, F&O turnover must be reported. Tax benefits are available for F&O losses, but a tax audit under Section 44AB is required if losses are reported or if trading turnover exceeds specific thresholds. Expenses related to F&O trading, such as brokerage fees, subscription costs, and other relevant business expenses, can be deducted from the total income.
Advance Tax and Carry Forward Losses:
F&O traders must pay advance tax if they don't opt for presumptive taxation under Section 44AD. Losses from F&O trading are treated as non-speculative business losses, which can be set off against other income except for salary, and can be carried forward for 8 years.
Documentation for Tax Filing:
When filing taxes for F&O trading, you'll need Form 16, Form 26AS, trading account statements, turnover reports, profit and loss statements, transaction statements, and bank statements (if applicable).
Note on Turnover Limits:
It's crucial to be aware of the turnover limits for options trading and the conditions that mandate a tax audit, including the trading turnover not exceeding Rs. 1 Crore for avoiding mandatory audit requirements.
Each case may have its nuances, so it's advisable to consult with a tax professional or chartered accountant who can provide tailored advice based on your specific trading activities and financial situation.
