Tax Planning: Convert FNO profits to STCG

Hi @Jason_Castelino, Excellent idea and worth what i was searching for!! i have few queries though

  1. What if ITM CE of 1.44L becomes of value 2.5L (lets say sbi went further 10%) up. Then in fno how much loss will it adjust to. 1a. Similiarly if it goes down to 0.7L then?
  2. Does full time brokers allow Margin money for this or you have to have hardcore cash balance?
  3. Overtime is there any enhancement that you have thought of in this Strategty to maximize profits conversion further
  4. I’m preferring to use PE startegy when we want to anyway sell them then do this easily. and lastly
  5. Have you continued using this over these years and saw any issues from broker side or IT dept side and is it possible to change cr’s using this?

Hi @Jason_Castelino , any thoughts on this

The value of the option on expiry doesn’t matter. You will be getting delivery of stock at the strike price of the option. Now after its delivery to you, if sbi goes up by another 10 percent, obviously there will be more loss in Fno and higher profits in CG. Same way if sbi falls in those 2 days, then Fno loss reduces and cg also reduces.

You will have to check with stock delivery policy of the broker. If your account runs into debit balance usually most brokers charge interest.

Yes. If you are having surplus cash which you prefer to keep it in FD or debt funds, then after delivery of stock to your demat account, just don’t sell it. Keep rolling futures short position.
If you do this, you will not have any capital gain since you have not sold the stock. Assuming stocks keep appreciating year on year there will be more loss in Fno. In addition to delaying taxation this would also give you 7 to 8 percent return annually which is equal to the returns of debt funds.