Report gains or losses from F&O trading as business income in ITR

YOU CAN SET OFF LOSSES AGAINST INCOME FROM ANY HEAD OTHER THAN SALARIES

- SAIKAT NEOGI

ANY INDIVIDUAL TRADING in Futures & Options (F&O) must report it in the income tax return (ITR) even if their overall income is below the basic exemption limit. Non-reporting will result in notices if the trading turnover is reflected in broker reports and annual information statement.

Non-reporting may result in loss of the right to carry forward business losses, which is permitted only when the ITR is filed within the due date. So, disclosure ensures compliance and preserves future tax benefits.

Derivatives traders have to mandatory maintain books of account if their income is more than ₹2.5 lakh and tax audit is required if the turnover is more than ₹1 crore.

Business income

As per Section 43(5) of the Income tax Act, trading in F&O is classified as a non-speculative business transaction and any gain or loss from such transaction is taxable under the head 'profits and gains of business or profession' and is taxed at normal slab rates applicable to individuals.