Zerodha - Number One Discount Broker in India

@ Zerodha,

I have some doubts, as to what constitutes turnover on
which Income tax to be calculated & returns filed.

Would the P & L statement in back office, be taken as the
turnover figure to file income tax returns, for trading purpose.

Would appreciate, if you could elaborate on this for futcom,
from client/traders perspective

Thanks
 

Zerodha

Well-Known Member
@ Zerodha,

I have some doubts, as to what constitutes turnover on
which Income tax to be calculated & returns filed.

Would the P & L statement in back office, be taken as the
turnover figure to file income tax returns, for trading purpose.

Would appreciate, if you could elaborate on this for futcom,
from client/traders perspective

Thanks
We have a big discussion on this here: zerodha.com/z-connect/traders-zone/taxation-for-traders/taxation-simplified

Turnover is used to determine if you need an audit or not. If turnover is more than 1 crore, you need and if lesser than 1 crore and profit less than 8% you need..

Do check the post..
 
On going through Zerodha backoffice calculations of "Turnover" as defined under Income Tax to find out whether or not the audit is necessary, I observe that since the sell side of option contract is considered for each contract traded in turnover, options increase the turnover figures compared to futures as in futures the profit/loss of the entire month ( settlement period) for a contract ( like Nifty Fut June 2013...etc) .

Option traders are at a definite disadvantage when it comes to calculation of Turnover and they have to make more profits to steer clear of presumptive taxation of 8 % of turnover or more to be shown as profit so that audit is not required if the turnover is less than Rs 100 Lakhs.....so trading in options is turnover hungry....and disadvantageous for F & O trader. Trading in futures is much better in this regard..

Is my reading correct or I am missing something ?

Smart_trade
 
This facility of Tax Turnover and profits report provided in Zerodha backoffice is very good. It will reduce traders hardships while filing the tax returns....thank you Zerodha for the same...

It gives calculations for Fin Year 2013-14....for 2014-15 if it can give till the completed period till date or till the completed month, it will help in planning .

Smart_trade
 

simplebuthard

Working as Trading Assistant. Hire me !!
On going through Zerodha backoffice calculations of "Turnover" as defined under Income Tax to find out whether or not the audit is necessary, I observe that since the sell side of option contract is considered for each contract traded in turnover, options increase the turnover figures compared to futures as in futures the profit/loss of the entire month ( settlement period) for a contract ( like Nifty Fut June 2013...etc) .

Option traders are at a definite disadvantage when it comes to calculation of Turnover and they have to make more profits to steer clear of presumptive taxation of 8 % of turnover or more to be shown as profit so that audit is not required if the turnover is less than Rs 100 Lakhs.....so trading in options is turnover hungry....and disadvantageous for F & O trader. Trading in futures is much better in this regard..

Is my reading correct or I am missing something ?

Smart_trade
Based on taxation, you are right. But based on trading, options are better than futures as because the stamp duty charges in contract sheet is huge for futures, especially traders from some Indian states who pay 0.006% stamp duty.
 

TraderRavi

low risk profile
in options also the turnover should be same as futures ie profit + loss , but they are calculating sell side as turnover. no clarity in this regard.
 

Zerodha

Well-Known Member
This facility of Tax Turnover and profits report provided in Zerodha backoffice is very good. It will reduce traders hardships while filing the tax returns....thank you Zerodha for the same...

It gives calculations for Fin Year 2013-14....for 2014-15 if it can give till the completed period till date or till the completed month, it will help in planning .

Smart_trade
Yes, the 2014-15 bit will start showing up from next week.

As far as turnover calculation is concerned, it is a very grey area, but if you check this, guidance note for tax audit under 44AB: http://www.caalley.com/gn/30357dtc19988.pdf

It says turnover:

The total of positive and negative, or favourable and unfavourable differences shall be taken as turnover;

Premium received on sale of options is to be included in turnover;

In respect of any reverse trades entered, the difference thereon shall also form part of the turnover

So yeah, after consulting a bunch of big CA firms, we determined that it is best to declare the entire sell value of options as turnover (even though the 2nd and 3rd point is not very clear). If you declare more turnover IT department will not have an issue, it will be if it is declared less. So it is better to be safe rather than worry about notices in the future...
 
We have a big discussion on this here: zerodha.com/z-connect/traders-zone/taxation-for-traders/taxation-simplified

Turnover is used to determine if you need an audit or not. If turnover is more than 1 crore, you need and if lesser than 1 crore and profit less than 8% you need..

Do check the post..
@ Zerodha,

That was a big help.

Went through the entire blog, most concepts are
clear now.

Thanks

Steve
 

Similar threads