STCG & F&O Taxation

Taxation
1

  1. Suppose someone made a profit of 10 Lakhs from STCG & made a 10 Lakh loss in F&O. What’s his tax liability?
    STCG are filed under capital gains & F&O are filed under business income?

  2. if STCG profits are more than 5 Crore do we need to audit?

2

  1. He gets to carry forward F&O loss for 8 years. For STCG he pays 15%. He has the option to consider all share trading gains/losses as business income. If he does, then business income becomes 0.

  2. If considered under short term cap gains, and paying the 15% rate, then no. If considering this business income, then yes.

3

Regarding your first question, the fno business loss of 10 lakh will have to be compulsorily offseted by the stcg of 10 lakh, so zero tax liability will arise.

Regarding your second question, I don’t know the answer.

4

Your tax liability will be Zero. The reason being - FNO losses can be set off against all the incomes except Salary.
In your case - Short Term Capital Gains of Rs 10 Lacs can be set off against FNO Loss of Rs 10 Lacs.

Further, you can treat STCG as Business Income and set off the Loss of FNO.
However you need to declare the STCG as Business Income in future years as well.

5

Audit is applicable on Business and Profession Income.
No Audit is required if your STCG crosses Rs 5 Crore.

6

Hey @fanatic

A.) There will be no tax liability since FNO losses can be set off against STCG. In this case - Short Term Capital Gains of INR10 Lacs can be set off against FNO Loss of INR 10 Lacs.

Generally, STCG is taxed under capital gains head & F&O income is taxed under business income head but you can also treat STCG as Business Income. However, you must make sure to declare the STCG as Business Income in future years as well.

B.) Tax Audit is applicable on Business and Profession Income not on STCG.

You can refer to these articles to get a better understanding:


Hope this helps!

7

@San78 When option contract is exercised on Expiry day, we need to give physical delivery of stocks from our Demat Holding to broker for physical settlement. Is giving physical delivery of stocks consider as Capital Gain/loss or F&O income?
As Giving physical delivery from Demat Holding is considered as “Sale of stocks”.
So, is it needed to report in ITR as Capital income or F&O income ?

8

Hi @IndianTrader1,

Yes, when you give physical delivery of shares, the gain or loss should be reported as Capital Gains.

Hope this helps!

9

it means if i sell an stock option and price become in the money on expiry and i had a loss of 50lakh . so i have to give delivery to option buyer and his profit is 50 lakh ,

  1. and my this financial year profit from the fno is 2 cr , so now my net profit remain 2 cr and capital gain become -50 lakh or my profit become 1 cr 50 lakh for fy.

  2. and person who buy stock option from me and take delivery from me ,his profit become his (LTCG or STCG ) or profit form future and options / business income

10

Hi @Chirag_Malhotra

The answer to your queries are as follows:

  1. Since you are giving physical delivery of shares at the end of expiry period, the above transaction would be treated as Income from Capital gain and hence you can show a capital loss of Rs. 50 Lakh. Therefore in your case, in ITR the profit from F&O would be Rs. 2 crore and a capital loss of Rs. 50 Lakh.

  2. In case of buyer of Stock option, whenever he sells the shares that he acquired, the same would be treated as capital gain (LTCG / STCG depending on the period of holding).

Hope this helps !!