FNO Tax Queries

#1

Hello

  1. Should I always use ITR3 to disclose my FNO gains?
  2. why not use ITR2 (when there is little trading activity -5-10 FNO trades a year) I think, if the income is above 5L, then one will end up paying 30% of each rupee earned. is it not better to disclose all the FNO gains on ITR2 as STCG? This way my maximum tax rate will be 15 %.
  3. One of the top CA (web based) say FNO trader cant use presumptive tax scheme. is that true? Varsity says we can use presumptive method.
  4. if presumptive(6% of turnover where t/o is less than 2 cr) is possible, can I use ITR3 or ITR4?
  5. can capital gains be included in presumptive tax method?
  6. Can I switch to normal method (book keeping, expenses, pl, etc) the next year and year 3 come back to presumptive method?
  7. should I use normal method by filing ITR3 and presumptive method to use ITR4?

note: i dont do intraday trading. I have some agri income + equity (long term) + fno gains. And I am ok not to claim expenses and not to carry the losses.

Thanks.

#2

@taxiq.in @nithin can you help me understand this please? this will enable me (and many others who trade f&o) to plan the tax filing. Thanks.

#3
  1. Yes
  2. F&O is business income, can’t be shown as STCG
  3. Hmm… don’t see any issue as long as you are not trying to evade/save on taxes by doing this
  4. ITR4
  5. No
  6. Yes
  7. Yes
#4

Using presumptive method will reduce a lot of hassle in tax filing and of course it will save tax. Say turnover is 20L and profit of 5L in FNO, I would pay 1.2L (6% of TO) using presumptive method. If I’m on 30% slab, I would end up paying 1.67L as tax in normal method. When the %profit of TO is more, it is tax efficient to file tax using presumptive method. And I m using the provision made available by tax department. Is n’t it?

And a big thank you for your answers.

#5

The presumptive method is meant for small merchants who want to avoid the hassle, and not for saving on the taxes. So it is best to avoid, we have seen cases where who did have had penalties.

#6

@pnsudesh and @nithin

I am not a CA or IT expert.

IIRC, presumptive form requires GST registration numbers. There is no point in GST for retail trading since we are the end point and we dont have outward supply.

Another big issue: Presumptive income tax form cannot be used if you have capital gains or losses. The form do not have any place to put them there.

So … we cannot use ITR4.

#7

How much is penalty if we file for ITR 4

#8

Is ITR 3 complicated my auditor didn’t understand the concept of our turnover he takes total sale price as turnover and not the actual turnover (as per varsity) are you still filing with actual turnover as turnover or total sale price?

#9

Another point is in ITR 4 expenses can’t be claimed

#10

Thats ok. it is hassle free. No balance sheet/PL, expenses, etc. I would have loved if ITR4 is suitable for FNO traders. We can simply extract the turnover (which is sale premium + profit) from console and pay 6% of it as tax. I am dissatisfied to know that ITR4 cant be used.

#11

I’m clear with the turnover part as majority of us use the sameway ,I too think ITR 4 is pretty simple as you said but capital gain cannot be shown in it and also losses.

#12

Auditor fee is very high for ITR 3

#13

OH MH … DAMN …

I just checked this year’s ITR3 … looks like we can use it to file presumptively calculated profit.

Last year, we could only give information about how much of the business income is deemed to be presumptive. but this year form and the way the data fields and wordings are laid out … it looks like the tax is also based on presumptive profit.

I will update this thread if i find definitive information on this. But if there is no explicit mention … we might just have to take the java/excel tool validation checks as the way of doing things.

#14

check my last reply to the thread.

#15

YES. IT IS DEFINITIVE.

We can use ITR3 and file our profit on presumptive basis. However if profit is higher than 6%, we have to report that and pay higher tax. See the instruction below.

@nithin @Vinay_S @pnsudesh

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#16

Is this newly added or old thing,I remember my auditor said if profit is less than 6% it requires audit in ITR3/ITR4 and tax audit compulsory in ITR3 if turnover is more than 2crores in digital mode

#17

Turnover is not based on the notional value of the contract. It is based on what we receive/lose to/from our account on per trade basis.

So it is more correct to say … gross receipts instead of gross turnover.

If this gross turnover/receipts is more than 2cr, we have to audit.

But if the profit is less than 6% or goes in loss … we can declare 6% profit and pay tax on it, avoiding audit.

If audit is done… we can carry forward the losses and offset it against the profit in future (i think … for next 8 years).

#18

I have few doubts
1.if I’m filing get with ITR 3 and then for some reason I’m quitting the business will or create some problem in future?
2.the GST turnover has been revised to 40 lakhs so if a trader keeps his turnover below 40 lakhs means can he file ITR4?
3.Can ITR3 be filed salaried persons?

Thanks In advance

#19
  1. no problem at all. but it is convenient if you use same ITR3 form every year if you have any intention of trading again. you can just declare a 1000 inr turnover and pay tax for 60 inr. this approach is good if you had already reported loss and want to carry forward. BUT if you have some tax refund, then be aware that ITR3 returns take more time to be processed by IT dept.

  2. For trading you dont need gst. Do not worry. You can just use ITR3, it is not that hard. Use the java utility /form. It validates the form and helps entering all the required fields.

  3. Salary income is included. Actually ITR3 is all inclusive form. If you have any business income, you can use it. If no business income then , you can use ITR2, because it is more simple.

Disclaimer: I am not an auditor or IT dept person. I am not legally qualified to give tax advice. I am just sharing what I came to know from my experience.

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#20

I think, Zerdodha needs to improve the tax service(not an obligation though) to help the traders. People will be ready to pay for the service as long as they are tax compliant. CAs on the market do not necessarily know the capital market situations. I believe @nithin Nithin had recommended a tax consultant on a separate post. But I could not make a contact due to tech errors. Thanks everyone for participating in this conversation.

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