Derivative exposure based on Income tax returns for retail traders - Outcome from latest SEBI board meeting


Is SEBI benefiting Mutual fund industry’s?


Dear Nithin

Any update?
Good news?


hmm… very tricky. I know there has to be some product suitability test to ensure people who have no clue don’t risk their entire savings on derivatives. But I don’t think tagging derivative exposure to income or saying no income means you can’t trade F&O is the right way to do this. No agriculturist (who isn’t required to pay taxes today) will ever be able to trade F&O this way.

@Karthik is putting up a questionnaire to determine product suitability that we will get all our clients who trade derivatives to answer. Maybe in the future we would say that people who can’t answer even the basic bits wouldn’t be allowed to trade F&O at Zerodha. Maybe we will ask people to take some tests based on content published on Varsity before allowing to trade F&O.

I think what we will be doing would have been a better way to have don this.

Maybe the above would have been a better way to do this.


Nopes, I guess exchanges will take some time before putting their circulars out.


Completely agree.

Also there was an article that brokers were protesting the burden of compliance of ensuring that client is within his exposure limit.

Was the any outcome on this from sebi /exchanges?

Like u said, income based will prevent agriculturists, retired ppl, ppl with inheritances, etc from trading derivative.
Which is wrong.

What u think will really happen?

Based on experience running zerodha & interacting with govt.


If there is enuf support/resistance the trend can change even intraday (ex: Now lets not say, journalists have strong base etc.

I guess we deserve SEBI’s decision, as not many are even aware/caring for the rules that affect their trading, then how do we expect them to protect their capital.


do you trade in derivatives,from when you started, i dont want to file it return bcoz of same reason =income below limit,but people are confusing that not filing may receive notice


@nithin but in any case it will be difficult to implement such harsh restrictions on both the brokers like you and the traders like us as well. isn’t it??

how will it be monitored?? i mean wheather a broker or a trader is following the guidelines given by the SEBI??


Currently there is no monitoring system on this - neither at exchanges or brokers. Need to see what comes through in the next few months.



I do both derivatives and cash. The problem with IT dept. is that they might not know much about trading and the kind of leverage we get in trading. So seeing that we are trading say nifty (38000 margin ) they might think we are actually trading 10000 *75 = 7,50,000 and that we have that kind of money. Who knows what goes on in the IT dept.

I received a notice last year for not filing IT returns for Assessment Year 2015-16 on my email. I checked on the income tax website and it was showing some transations of f&o and delivery. I don’t know why they singled out only a few trades as I had made many trades that year. Anyway there was an option in the list called “Self-Income from transaction is below taxable limit” i used that option to file compliance on their website.

Inspite of filing compliance, a few weeks later I received a letter by post about the same issue and was asked to reply within 15 days ( i don’t remember the exact time limit) to the assessement officer whose name and address was mentioned in the notice. So i replied that i have already filed the compliance on their website and attached the acknowledgement slip i had received on filing. I sent the letter by registered post and used an acknowledgement card that we get at the post office so that i can make sure that i have proof that i have replied to the notice. After that i have not received any communication from them.


There are Huge data been dumped by various agencies to the Income Tax by way filing of AIR. The agencies includes stock exchanges , Depositories , Banks , Credit card companies etc. Its always better to file return correctly after compiling all the financial information. Income tax can send letter till 6 years back on the basis of above data. By that time we might not have all the information handy. So its better to file even if its loss.


Just file

Better to file and avoid headaches later


so you are filing this year it- return,or not doing so


Most probably will have to file this year. But first we need some clarity regarding this sebi decision. eg: if they say that anyone having income less than 2.5 lakh cannot trade derivatives, then we will have to show income more than 2.5 lakhs and pay some tax to be eligible for trading. All depends on sebi decision.


Dear All, Kindly register a griviance with PMO regarding SEBI proposal to link derivative exposure to income as per ITR.

Text -

PMO Greviance registration -

Just copy paste, and fill up ur mob no/email
that’s it :slight_smile:


Will the questionnaire be split into different parts? Like some may be interested in trading only futures and not options etc.




today I have heard something in headline on cnbc awaaz that sebi has framed new rule of Derivative regarding liquidity. what are these can anyone explain


That’s for physical delivery instead of cash settlement of derivatives.

And rules for which stk can be in derivatives and which can’t.