How Tax is calculated for open F&O positions carried into next Financial year?

Taxation
1

How Tax is calculated for open F&O positions carried into next Financial year? e.g Suppose I have 500 qty 35000CE sold positions on 31-Mar and I decide to carry to 1-Apr. What is the tax implication?

2

Hey @Riya1

If you trade in Futures and Options you need file tax for income/loss from these trades. To determine the applicability of Tax Audit as per the Income Tax Act, one should calculate Trading Turnover for such income. It is important to note that tax liability does not depend on Turnover.

The method to calculate turnover for Income Tax on trading is different for each type of trade i.e. Equity Intraday, Equity Delivery, Equity F&O, Currency Trading, Commodity Trading, etc. To understand how it is calculated, one need to understand the meaning of Absolute Profit.

Learn more about Trading Turnvover Calculation for Trading Income:

3

Hi @Quicko and @Jason_Castelino

As on 31-Mar-2021, suppose I had 10 lots (75 per lot) open LONG positions in NIFTY Futures.

Buy price was suppose 15000 and the closing price was suppose as on 31-Mar-2021 be 14,900, so unrealized loss is 1007510 = 75,000

Now, I know that this unrealized loss need not be shown in ITR-3. However, how do I show this open position in the ‘Balance sheet’ page of ITR-3? What values to use and under what heading? Can you please guide?

Also, because of this open position, suppose I had negative balance in my ledger statement as on 31-Mar-2021 because margin required was suppose 1 lakh per lot so 10 lakh total margin was required and my ledger balance was suppose -5 lakh.

So when I add up all my balances in bank accounts and zerodha trading account, I end up with negative balance of suppose -3 lakh. So do I show that I had overall negative bank balance with me in my balance sheet?

Can you please guide me through this?

4

Show the the net amount (Net of Margin and negative balance) as ‘Funds with the broker’ under the head ‘Current assets.’
Alternatively, you can separately show ‘Margin for open FNO positions’ under ‘current assets’ and negative balance as ‘shortfall in margin payable’ under current liabilities.

This is how I present it for my clients. The presentation of financial statements may differ with other CAs.

1 Like
5

Hi @Jason_Castelino

Thanks for your such a detailed reply.

However, in the ITR software utility I just noticed that, there is no option in Balance Sheet section whereby I can write ‘Margin for open FNO positions’ or ‘Shortfall in margin payable’ on my own and write the numbers next to them.

So, shall I write the number for ‘Margin for open FNO positions’ under
‘Current assets: stock-in-process’, OR
‘Current assets: other current assets’?

Also, shall I write the number for ‘Shortfall in margin payable’ under
‘Current liabilities and provisions: other provisions’?

I hope you answer this query of mine. Thanks so much for all your help.

1 Like
6

Put them under other current assets and other current liabilities respectively.

1 Like
7

Okay thanks for your prompt reply :grinning:

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8

Hi @Jason_Castelino

I had one more query on filling up the ITR Balance Sheet section - Application of Funds - 2. Investments.

If I have Equity Mutual Funds in SOA format and Equity Shares in Demat a/c, under which heading should I put their respective values:
Long term investments - Govt and other securities - Quoted
OR
Short term investments - Equity shares, including share application money

How to decide?

Hope you don’t mind :smile:

9

You can quote it under any. Depending on your intention of investment. Doesn’t make much difference

1 Like
10

Oh, I see, thanks a lot

11

@Jason_Castelino Thanks for the earlier replies provided to Praksy.

I have a similar situation - Open Futures position as of March 31.

However, I am struggling with putting a value against of the asset “open futures position”. What is a good way to identify this?