When writing options do we need to square off OTM contracts say at 0.5/- on expiry day before they reach 0 (obviously benefit for broker) to avoid issues with taxation wherein there no capital to show in statements for premium collected.
Income Tax on profit from trading in options is taxable at slab rates. The loss if any can be adjusted with any other income except salary and remaining can be carried forward for 8 years. You can also claim trading expenses incurred since options trading is considered as a non-speculative business income.
As far as the squaring off is considered, taxation is not directly related to it. Based on the profit or loss incurred, income tax treatment would change.
Read more about tax treatment here - Income Tax on F&O Trading
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