F&O is a popular trading concept but usually the concept of Future and options is blurred in the minds of people and reporting the same for tax returns is a hassle concept even in the minds of many accounting expertise. The enlisted points will help you know all in detail about how to report Future and Options trading in tax returns. Go through the same and expand you knowledge depth.
Future refers to a contract of buying or selling an entity or item in future at a price that is agreed upon today.
An option refers to the contract where one of the contracting parties has an option to execute or not to execute trade in future.
When one opts for tax returns, F&O is reported as business. When you report the same as business you can always claim expenses that you have incurred. You must follow the under mentioned steps to report the same as business:
Once you have earned business income, you must file Income Tax Return-4 which would demand your profit and loss sheet, balance sheet. If you have an issue over here you can always take the help of an expertise for the same.
Losses always carry tax benefits and reporting the same should be done mandatorily. Usually two types of business losses occur, namely speculative and non speculative losses. F&O loss falls under the category of non speculative loss. The loss can be adjusted from other sources of income except for the salary. In case your F&O loss remains unadjusted, it can carry forwarded for 8 years.
Since F&O trading is considered as normal business income, the rules which are applicable to normal business are applicable here. The important rules for profit and loss are same as mentioned in the case of tax auditing. Keeping accounting records is otherwise mandatory for every business. You need to calculate the turnover and the positive and the negative sum you are carrying. Every business has a return filing ate and you must get your returns filed by the same and submit the tax audit report you have prepared.
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