Can you show F&O under capital gains?

My CA wants to show F&O under capital gains but when I told him that I want to show it under business income, he asked me, “normally F&O is shown under capital gains, why do I want to show it under business income?”

Please tell me if other CA’s are also showing F&O under capital gains. Is this a common practice?

1 Like

No. Not at all.

It should be considered as business income.

1 Like

There is no way you can show it as capital gains .in itr capital gains have to add buy date , sell date /price as single entry for each transaction. My CA showed my capital gains under business income inorder to avoid filling so many scripts data. It was not making too much difference in taxes so i didn’t bothered but i don’t think in fno you can show it as capital gains but only business income.


Yeah, I told him strictly to file it under business income but I found it strange of him to even suggest it in the first place.

1 Like

Most CA’s are unfamiliar on how to deal with income from F&O trading.

Some of them, do not even know there is a difference between equity trading & f&o trading and various rulings & laws in the IT act that deal with this income classification.

For some CA’s, this will be the first time they have to deal with this type of income source for their client and there will be a learning curve.

Best thing to do is, send your CA’s links to article that explains how to deal with this, so they can familiarize with this before you approach them with your yearly return filing.

1 Like

Please change your CA. He doesn’t seem to be knowledgeable. What’s the point in hiring CA if he doesn’t know the basics that f&o can’t be treated as capital gains.


Well. I must say I am not surprised because I see that been done by so many other CAs.
As a CA in practice myself, so many times I have defended CAs here in this forum in other matters. But here I feel I understand what you are saying. Yesterday a new client came to me for IT filing. He has intra day and short term trades. He is telling me the way I have calculated turnover is wrong only because his previous CA did it that way.
The problem here is many CAs are not updated. The ones above 50 years of age didnt study about FNO for their exams then because there was no FNO.
So when you have FNO income, I suggest you go for younger ones. Otherwise its like you go to a general physician when you have eye sight problem. He will treat you but may not give you the best treatment.

Not a justification at all. For you you treat income under capital gains, there has to be a capital asset. Derivatives are not capital assets as per the definition given in The Income Tax Act, 1961.

And I have to defend him again. He is knowledgeable but FNO is not his expertise. :grin::crazy_face::crazy_face:


He is young in his early 20’s. He called me today and threw another bomb today.

Here’s what he said…

  1. I have loss in zerodha and profit in Upstox. Overall I am in profit. He still suggested I go for Audit since I have a loss in zerodha (individual broker) otherwise I might get IT scrutiny (turnover 19L). I said, I will take my chances.

  2. He also said I can not file F&O under section 44AD as there is no sale or purchase of products. I had to tell him that I know other traders doing it and hence I want to get it done under section 44AD.

Is he purposely misdirecting me or he genuinely lacks the knowledge? Or, am I on the wrong?

I took their services from one of the popular tax filling website in India. (don’t want to name it but they are on 1st page of Google for “file income tax online”.

btw… @Jason_Castelino I didn’t know you take up IT filling. I have read many of your posts here on Zerodha. From next year onwards, I want to file through you. Can you kindly share your contact details?

I think he lacks knowledge.

  1. Yes. You may get notice. But as long as you know you have filed returns as required by the provisions of the Act, all that you have to do is respond to the notice. Trust me even assessing officers dont understand FNO. That’s why you get notices. Most of the time after we reply to the notice they check the relevant section which we have quoted in our response and then accept our original return.
  2. Wrong.

Yes. I will share my number in a private msg. It will tantamount to advertisement otherwise. :stuck_out_tongue_winking_eye:

1 Like

I meant i do FNO + short term investment in cash , Rather than showing SGTC of cash market scripts , i combined both in business income!

Still you cant do that. Now both of us know the return will be processed. Its not a big issue. But its not the right way to do it.

I file returns for free from cleartax self filing. Wherever I get stuck or have doubts, I just drop a mail to customer care and they respond within 24 hours
If the CA is not knowledgeable enough, then I think mine is a better idea as long as you don’t need audit

1 Like

I think that’s possible

1 Like

No one ( including many assessing officers ) knew about all the specifics, until Nitin ji started writing articles on it, which gave a larger exposure into the subject among the public.

1 Like

I never said FNO is speculative. All that I said was it cant be treated as a Capital Asset. Unless it is a capital asset, there wont be capital gains.

Oh wait. I read it wronly. I read it as you combined both and took it as capital gains. My bad.