Fire your tax related queries and i would get it solved!!!

[canikhil]

Traderniftybullji,
Thanks for the calculations. If quantity increases then profit should also increase in that ratio. Else would end of earning for government only.
The breakeven point with Finvasia was very low when traded in options so wanted to focus on that. Will talk with CA also who manages my returns .

Nikhilji ,
Till date , My CA regularly prepared balance sheet ( submit ITR-3 ) etc. Will share the updates with him also. Thanks again for the help. Audit was not done till date. The income was from IT Consultancy and not from Trading in Market.

To be honest, got no idea why this formula is used. Once you take sales side as turnover, ideally there should not be any need for adding the difference also. But this is what ICAI proposed in the tax audit guidance note, so you gotta follow it (at least your CA has to)

Your CA should know all this. he should be updating you, not the other way around!

 

[canikhil]

Yes @canikhil Ji, pls tell us,why this weird thing sell value of option has been considered as a part of TO.

the weird part is not the sell side..weird part is the difference being added to sell side to get the turnover!

 

[Raj232]

the weird part is not the sell side..weird part is the difference being added to sell side to get the turnover!

My understanding is that there are several companies who are in the business of selling options (i..e. collecting premium) against their futures holdings. Those transactions expire mostly worthless (zero at the end of the month).
"Premium received on sale of options is to be included in turnover."

In such cases the complete sell price (i.e. total premium received) as there is no corresponding buy transaction (since it expires worthless) would be considered to be included as turnover.

So the provision was made in I.Tax Act to include the above type of trader as well

 

[canikhil]

My understanding is that there are several companies who are in the business of selling options (i..e. collecting premium) against their futures holdings. Those transactions expire mostly worthless (zero at the end of the month).
"Premium received on sale of options is to be included in turnover."

In such cases the complete sell price (i.e. total premium received) as there is no corresponding buy transaction (since it expires worthless) would be considered to be included as turnover.

So the provision was made in I.Tax Act to include the above type of trader as well

may be. But I don't think so. Because if I go by your assumption, the difference between buy and sell would anyway be sell price only!

 

[Raj232]

may be. But I don't think so. Because if I go by your assumption, the difference between buy and sell would anyway be sell price only!

Exactly and its not an assumption, its mentioned in the Tax Law.

 

[traderniftybull]

My understanding is that there are several companies who are in the business of selling options (i..e. collecting premium) against their futures holdings. Those transactions expire mostly worthless (zero at the end of the month).
"Premium received on sale of options is to be included in turnover."

In such cases the complete sell price (i.e. total premium received) as there is no corresponding buy transaction (since it expires worthless) would be considered to be included as turnover.

So the provision was made in I.Tax Act to include the above type of trader as well

Exactly, and this is what I want to listen (though I knew it beforehand, but want to listen from you guys)
The rule for inclusion of sell value should have been made for these option writers, who do not close their sell trades, at epiry.
But the fools there (framing rules) applied it on all traders, without applying their heads.
And as this ridiculous rules is in favour of every one, except option (buy) traders, no one tried to change/amend it for option writers only.

 

[canikhil]

Exactly, and this is what I want to listen (though I knew it beforehand, but want to listen from you guys)
The rule for inclusion of sell value should have been made for these option writers, who do not close their sell trades, at epiry.
But the fools there (framing rules) applied it on all traders, without applying their heads.
And as this ridiculous rules is in favour of every one, except option (buy) traders, no one tried to change/amend it for option writers only.

not in agreement with you friend. what I am saying is that you should just have sell as the turnover and ignore the difference. That is what traditional accounting is.

 

[traderniftybull]

not in agreement with you friend. what I am saying is that you should just have sell as the turnover and ignore the difference. That is what traditional accounting is.

Agreed
But, then why special treatment for calculating future trading turnover,
Calculating TO and so taxation rules are highly tilted (beneficially) towards furture TO

 

[canikhil]

Agreed
But, then why special treatment for calculating future trading turnover,
Calculating TO and so taxation rules are highly tilted (beneficially) towards furture TO

primarily because in futures we record the notional values which are not true reflection of movement of funds

 

[traderniftybull]

lekin yeh kahaan ka insaaf hua ki
to earn a profit of say 50 points in option our TO is taken as 4000 (or any such figure) a + b, or even b the sell value is too much.
and
to earn a profit of say 50 points in futures our TO is 50 only, that is our profit is our TO

BTW, I am considering only profit here (as the rules are same for loss also)