Calculation of Turnover in case of
Futures & Options
(To find out the
applicability of Tax Audit u/s 44AB)
Calculation of turnover of derivatives and
F&O trade is a debatable issue and
there comes confilicting views many a times. The interesting part is;
there is no
clarification by Income Tax department about the calculation of
derivatives turnover till now. So there can be some differences in
reaching the final turnover of derivatives for Tax Audit
Presently turnover is calculated following the method prescribed in
the Guidance note of Tax Audit
ICAI (Institute of Chartered Accountants of India). This Guidance Note
at Point 5.14, part (b) guides about the calculation
of turnover of derivatives, futures & options.
and F&O transactions are completed without delivery of
or securities. These are also squared up by payment of differences. The
contract notes are issued for the full value of the asset purchased or
sold but entries in the books of account are made only for the
differences. The transactions may be squared up any time on or before
the striking date. The buyer of the option pays the premium. The
turnover in such types of transactions is to be determined as follows:
- The total of favourable and unfavourable
differences shall be
taken as turnover.
- Aggregate of both positive as well as negative
differences will be
taken together to calculate turnover in case of derivatives, futures
& Options transactions. Or in simple words both
profits and losses will be added to calculate the turnover.
- Premium received on sale of options is also to
be included in
- In respect of any reverse trades entered, the
should also form part of the turnover.
Lets get more clarity with the help of an
If 3000 units (2 lots; Lot size1500 units) of futures of Tata
Motors are bought at Rs. 400 and sold at Rs. 410, the positive
difference of Rs.30,000 (10*3000) will be the turnover for tax purposes.
In case of options trade, suppose call of 2 lots or 3000 units of Tata
Motors are bought at Rs. 140 and sold at Rs. 135 the turnover will be
calculated in two parts.
- Firstly the loss (140-135=5) of Rs.15,000 (5*3000) will be negative difference and added to total
- Secondly the premium received on sale ie. Rs.
135*3000 = 405000 being premium received on option will also be added
Hence in this example of Futures & Optios trading Total Turnover
methodology as explained above to calculate the turnover of
derivatives transactions is applicable for determing the
applicability of TAX Audit u/s 44AB.
|| Rs. 30,000
|Loss in Options trade
|| Rs. 15,000
|Premium received on sale of Options
|| Rs. 405,000
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