Income tax filing for derivatives trading

#1
Hi,

I have done some trading in futures and options alone and this is my bank statement tally for 31-Mar-2011

Total debit for FY 2010-2011 = 463635.43
Total credit for FY 2010-2011 = 478684.86

These amounts are solely for my derivatives trading.

In ITR 4 I have mentioned these parts.
PART BS

Amount of total sundry debtors 6a 463635
Amount of total sundry creditors 6b 478685
Amount of total stock-in-trade 6c
Amount of the cash balance 6d 448266

PART PL

Gross receipts 51a 942320 (6a+6b)
Gross profit 51b 15049 (6b-6a)
Expenses 51c
Net profit 51d 15049

My gross profit is calculated from bank statement which includes brokerage and STT and other charges. Am I doing anything wrong here?

Thanks,
Kiran
 
#3
Hi Kiran,

Any luck in resolving those issues.
I am facing the similar situation.
Also, I have few trades in Delivery,( not intra day) should it be clubbed with above?
Any help will be appreciated.
 

alokdaga

Active Member
#4
Hi,

I have done some trading in futures and options alone and this is my bank statement tally for 31-Mar-2011

Total debit for FY 2010-2011 = 463635.43
Total credit for FY 2010-2011 = 478684.86

These amounts are solely for my derivatives trading.

In ITR 4 I have mentioned these parts.
PART BS

Amount of total sundry debtors 6a 463635
Amount of total sundry creditors 6b 478685
Amount of total stock-in-trade 6c
Amount of the cash balance 6d 448266

PART PL

Gross receipts 51a 942320 (6a+6b)
Gross profit 51b 15049 (6b-6a)
Expenses 51c
Net profit 51d 15049

My gross profit is calculated from bank statement which includes brokerage and STT and other charges. Am I doing anything wrong here?

Thanks,
Kiran
Derivative trading is treated as business income. Any profit or loss is simply added to taxable income. Hope it helps...
 

sridhar

Active Member
#5
My CA is very clear that Derivatives trading Gains/Losses are treated under head "Speculation". Says there is a specific ruling re. this. Also due to this Losses under Derivatives trading cannot be offset against other Business Gains. However Derivatives trading profits can be offset against other Business Losses.

Will try & hunt down the ruling.
 

hitesh

Active Member
#6
My CA is very clear that Derivatives trading Gains/Losses are treated under head "Speculation". Says there is a specific ruling re. this. Also due to this Losses under Derivatives trading cannot be offset against other Business Gains. However Derivatives trading profits can be offset against other Business Losses.

Will try & hunt down the ruling.
Prior to the assessment year 2006-07, transactions in exchange traded financial derivatives were considered as a speculative transactions.

The amendment to section 43(5) (of the Income Tax Act) that transactions covered under clause (d) would not be treated as speculative transaction wef 1st April 2006.
 

a1b1trader

Well-Known Member
#7
Will someone here, please help to fill ITR 4 for derivative trading, with attaching a sample ITR 4 filled file and the explanatory notes, if possible (how to fill the relevant rows). Whether STT and other taxes paid is an expanse etc. etc.

Thanks
 

hitesh

Active Member
#8
Will someone here, please help to fill ITR 4 for derivative trading, with attaching a sample ITR 4 filled file and the explanatory notes, if possible (how to fill the relevant rows). Whether STT and other taxes paid is an expanse etc. etc.

Thanks
There is a WorkSheet called "Part PL" in ITR4. Details of Income and expenses need to be given in this page.

There are serial number 1 to 51 in part PL.

In serial number 1, Profit / Loss from F&O Operations need to be disclosed. This amount is net of duty and taxes as mentioned.

From serial number 9 to 42, you have to mentioned expenses (which is relevant and applicable).

Excel file attached herewith gives model income & expenditure account for F&O operations. Against each head, serial number of ITR4 worksheet Part PL is given.

Find here attached two files Example and 2012_ITR4

Hope this helps.
 
#9
I have shown my f&o transaction under short term capital profit/loss and clubbed with other short term capital gain/loss, i was not ready to show f&o as business income and maintain books of account and also head ache of audit etc. Hope i can make the correction in later years if required
I am salaried employee
 

a1b1trader

Well-Known Member
#10
There is a WorkSheet called "Part PL" in ITR4. Details of Income and expenses need to be given in this page.

There are serial number 1 to 51 in part PL.

In serial number 1, Profit / Loss from F&O Operations need to be disclosed. This amount is net of duty and taxes as mentioned.

From serial number 9 to 42, you have to mentioned expenses (which is relevant and applicable).

Excel file attached herewith gives model income & expenditure account for F&O operations. Against each head, serial number of ITR4 worksheet Part PL is given.

Find here attached two files Example and 2012_ITR4

Hope this helps.
Many many thanks to you Hitesh for your kind help. It will take some time to understand the whole accounting and taxation system.

We trade/invest in stock market in few different ways, like.

1. Intraday Trading in F&O - business income/loss (BI/L)

2. Positional Trading in F&O - this is BI/L or short terms capital gain/loss (STCG/L)

3. Intraday Equity - what income / loss is this. I think this is speculative income/loss (SI/L).

4. Short term Equity - What is the definition of short term here. Equities purchased and sold after, just transferred to demat account (2-3 days), 1 week, 1 fortnight, 1 month etc etc. The income/loss in period defined as short term will be STCG/L. What about other period(s), (not allowed for STCG/L). Will that be business income or speculative income/loss.

5. Long term Equity - No problem here. The LTCG in equity is free of tax and LTCLoss is not allowed to adjust with other income.

Further, do one has to keep account books (ledger, cashbook, journal, stock book, vouchers etc) like normal business or statement of broker will do the needful (for a total turnover of say 3-5-7 lakhs). If yes, then one has to employ a part time account assistant to help in maintaining the accounts.

I may add that I am asking this for a new entrant (started trading/investing in this Ass.Year only) like post graduate student, housewife, salaried employee etc. who has no other income/having income but less than taxable limit/above taxable limit.

Once again thanks for your kind help.
 

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