While filing ITR1 return for F&O, say suppose I have a profit of 50000 Rs and it has Brokerage charge of say 2000 Rs.
What amount do I need to add in my income? 50000 Rs or 48000 Rs? (subtracting brokerage from profit)
@Jenny_Benz, after trading in F&O, one cannot file ITR-1. You will have to file either ITR-3 or ITR-4.
ITR-3 would mostly involve computing profits = business income/loss - business expense
while ITR-4 would involve computing profits = 6% or 8% of turnover.
I would advise getting help from a CA, especially if you are not well versed with taxation rules of ITR-3 or ITR-4.
F&O trading is considered to be a Non-Speculative Business Income. Brokerage paid for such trading can be claimed as a valid business expense in the P&L Statement reported in Form ITR-3. Thus, the taxable income would be INR 48,000 after claiming expenses.
You can read more about it here - Income Tax on F&O Trading
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ITR3 or 4 would need an Audit report from CA. I guess we ITR1 is allowed but I can’t subtract brokerage in this case.
@Quicko Please confirm if
Hey @Jenny_Benz
When Income Tax Audit is applicable, the CA needs to file the Tax Audit Report. In such a case it is mandatory to file ITR 3 (For business income) and not ITR 4 (For presumptive income). Also, ITR 1 does not allow you to report Capital Gains or Business Income and is filed by individuals with salary income.
You can claim the brokerage and other trading expenses when filing ITR 3. Since, ITR 4 is for Presumptive Income and you cannot claim the expense.
Here a video you can check out to understand different types of ITR Forms and use this tool to know which ITR form to file.
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