Profit Earned from Options is TAX Payable??

torontoguy · #1 19th October 2007, 11:57 AM

Hello all Members !!

I want to about options suppose If I am making
money through options then I have to pay any income tax on options gains? please reply

if this topic is already discussed then please post
the links plz.

Thanks

rkkarnani · #2 19th October 2007, 02:47 PM

Quote:

Originally Posted by torontoguy

Hello all Members !!

I want to about options suppose If I am making
money through options then I have to pay any income tax on options gains? please reply

if this topic is already discussed then please post
the links plz.

Thanks

All income from FnO is fully taxed. It has no rebate under Capital Gains.
You can get the STT amount paid by you adjusted in the incometax payable by you.

nagakiran · #3 25th October 2007, 11:45 PM

Is Tax percentage applicable on gain from FnO is 10% only as short-term capital gains ??

aca_trader · #4 26th October 2007, 11:23 AM

Quote:

Originally Posted by rkkarnani

All income from FnO is fully taxed. It has no rebate under Capital Gains.
You can get the STT amount paid by you adjusted in the incometax payable by you.

A matter not yet settled. One can go through the AAR's Judgement in Morgan Stanley case to read the arguments both in favour of and against Derivatives Instruments Trading Gains being taxed as capital gain . Ofcourse, IT deptt. would like to tax all F&O transactions as Business Income but I have a difference of opinion (I am yet thinking about how to bring covered call income under capital gain taxation.). Let's see when the courts give a clear-cut verdict. Till then, it'll be a contentious matter.

Best Regards,
--Ashish

humble.student.trader · #5 26th October 2007, 09:07 PM

What do people normally pay? Is it 10% or considered as income and added to any other income that amounts to more than 30% in some cases?

torontoguy · #6 27th October 2007, 07:21 AM

Hello All Friends Thank you very much for the knowledgeable discussion.

Well I have read the thread of diosys under the fire you tax related questions forum.

and in that I have found that income from the derivatives is completely taxable.

and I think there is a turnover issue of 40lac if your turnover is more than 40 lac I think then person will be considerd as a businessman and he has to pay 30% tax.

But in case if person is having turnover of rs30lac and not earning more than 40,000/- PA then also he has to pay tax? ( and that person has no other income only dependent on stocks)

torontoguy · #7 27th October 2007, 07:26 AM

Hi Aca trader Thanks for your reply.

Well Once I had discussed the same question with the CA I think in 2006 and that time CA had said the Income from Derivatives is not taxable
he had said that it is speculative income and that's why it is not taxable income.

But I don't know was he right or wrong.

Thanks
Pal

Quote:

Originally Posted by humble.student.trader

What do people normally pay? Is it 10% or considered as income and added to any other income that amounts to more than 30% in some cases?

Quote:

Originally Posted by aca_trader

A matter not yet settled. One can go through the AAR's Judgement in Morgan Stanley case to read the arguments both in favour of and against Derivatives Instruments Trading Gains being taxed as capital gain . Ofcourse, IT deptt. would like to tax all F&O transactions as Business Income but I have a difference of opinion (I am yet thinking about how to bring covered call income under capital gain taxation.). Let's see when the courts give a clear-cut verdict. Till then, it'll be a contentious matter.

Best Regards,
--Ashish

torontoguy · #8 27th October 2007, 07:29 AM

Quote:

Originally Posted by rkkarnani

All income from FnO is fully taxed. It has no rebate under Capital Gains.
You can get the STT amount paid by you adjusted in the incometax payable by you.

Thanks for the reply,

Well I never showed my Share Trading details in ITR Coz I had no income from the shares. But as you have said I can get the rebate of STT ? how it can be done?

I think it only applies for the trader who is in profit what for the trader who is in loss?

torontoguy · #9 27th October 2007, 07:31 AM

Quote:

Originally Posted by nagakiran

Is Tax percentage applicable on gain from FnO is 10% only as short-term capital gains ??

I think 10% is for the individual , individual in the sense who is having less transactions.
but if person do the quick transactions and having heavy transaction on monthly basis then I think he comes in business catagory and that attracts the 30% TAX on the income.

please correct me if I am wrong.

Thanks

aca_trader · #10 29th October 2007, 02:52 PM

Quote:

Originally Posted by torontoguy

I think 10% is for the individual , individual in the sense who is having less transactions.
but if person do the quick transactions and having heavy transaction on monthly basis then I think he comes in business catagory and that attracts the 30% TAX on the income.

please correct me if I am wrong.

Thanks

You are right. The issue is of categorization into Capital Assets and Stock in Trade. Once, that is done, the tax rates are decided and hence will vary from case to case, Individual to Individual.

But simply coz the transaction are derivative transactions, one should not assume that it will be taxed as Business Income. A derivatives instrument is as much a Capital Asset as Stocks are.

Best Regards,
--Ashish