F&O turnover calculation

#1
ST da/Seniors/CAs,
Do we have a clear cut section/rule to calculate turnover in F&O or is it still a grey area?

I have gone through material on net about the ways to calculate turnover in F&O. I have also gone through material on Taxation by Zerodha.

If I am correct, its aggregate or absolute sum of both positive and negative differences from trades is to be considered as a turnover.

If calculated by this way, I don't think it will cross 1 crore for most traders.

I have read about 2 cases (while reading about taxation of stock markets on net) where people calculated turnover by the method mentioned above, filed ITR and have received notice from IT dept regarding turnover and audit. In both notices, turnover in F&O is not calculated by the above mentioned way. Its buy side value + sell side value. By this method, it will easily cross crores. If someone trades intraday in 3-4 contract, turnover will be huge.

I hope people who trade in F&O, file return by calculating turnover (aggregate or absolute sum of both positive and negative differences from trades) by which turnover is less than crore and generally no audit is required assuming profit is greater than 8%.
But, if turnover is calculated by other way (buy side value + sell side value), it easily crosses crores and there are chances that many of us might receive this type of notice in future and end up paying penalty for not getting audit done.

Thanks,
Gaurav
 

simplebuthard

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#2
Yes, still a grey area.

Interestingly today other brokerage says something different
Thanks Leonid.
Glad to know you liked it. It's encouraging to see people liking something one works hard on :)

As mentioned in the help section of the Tax P&L report the turnover calculation for F&O is as below:
F&O (equity, currency and commodity): Absolute sum of settlement profits and losses for F&O.

This basically means sum of all your credit and debit bill entries. So in case of intraday positions only the difference in the buy and sell premium will be considered. In case of overnight positions the entire premium will be considered.
But best is to go with the Zerodha recommended way as it favours Tax department instead of us. Thats how we can keep out of the trouble.
 

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