How is the taxation different on Intraday Futures?
Believe both stocks & Options Intraday trading gains directly come under individual tax slab profit gains - There is no LTCG or STCG involved here.
But believe futures taxation involves total transactions turnover rt?
Please provide the details?
Intraday Gains from shares will be treated as Speculative Income and Intraday Future Gains will be treated as Business Income and both will be taxed as per the applicable tax slabs.
Under FNO - turnover will be absolute profit, which is sum of positive and negative differences. This calculation will be done for determining the applicability of tax audit.
Refer this link for more info https://zerodha.com/varsity/chapter/turnover-balance-sheet-and-pl/
Will refer the link for details - but one basic question - Options Intraday handling & Future Intraday handling is different rt?
Options is treated like shares only (only profit is taxable) - there is no turnover involved here rt?
Only in futures the turnover comes into picture rt?
No - Options Intraday and Future Intraday is always non speculative i.e business income.
Only Intraday in Shares is speculative income.
The concept of turnover is involved both in Futures and Options.
Yes got it after reading the details of the link
Now I have 2 questions (all wrt Individual taxation with ITR1 <50L)
If turn over is less than 5 crores (before it was 2 crores) - for an Audit does my gross profit should be less than 6% of turnover or my net profit.
Believe gross profit does not have brokerage deductions whereas in net profit we deduct brokerage charges also
If I declare both short term & long term profits as investment income and not business income then I pay appropriate taxes like STCG & LTCG (not slab based wrt income - only applicable fixed rates) and the turnover of these transactions does not get added to this requirement of audit rt?
AA] If turn over is less than 5 crores (before it was 2 crores) - for an Audit does my gross profit should be less than 6% of turnover or my net profit.
Believe gross profit does not have brokerage deductions whereas in net profit we deduct brokerage charges also.
Earlier, the threshold limit was 1 Crore. If your turnover does not exceed threshold limit; there is no requirement of Audit.
The Audit applicability of profit of less than 6% applies in the below scenario:
Suppose, if you had FNO or business Income for any previous years and you were declaring under presumptive scheme under section 44AD; (meaning currently you are in presumptive scheme upto FY 2019-20)
now if you are opting OUT of presumptive scheme in FY 2020-21 and your FNO or business Income is less than 6%(meaning either in loss or in profits less than 6%) but total income is greater than basic exemption limit; then you have maintain books of accounts and get the AUDIT done [Tax Audit is applicable].
BB] If I declare both short term & long term profits as investment income and not business income then I pay appropriate taxes like STCG & LTCG (not slab based wrt income - only applicable fixed rates) and the turnover of these transactions does not get added to this requirement of audit rt?
Yes, if you declare short term and long term profits as investments and pay tax as per its flat rates 15% and 10% respectively; then turnover of these transactions should not be added to determining the applicability of tax audit.
You did not answer the details wrt gross vs net profit. Pls provide details on that too.
Yes, gross profit will be before brokerage and other deductions.
Sorry for asking again 6% is on gross or net profit (I know difference between gross and net profit - want to know on the applicability of 6% of gross or net profit on turnover)
6% or any other percentage than 6% is on turnover and it will be NET.
As per the tax provisions, all the expenses shall be deemed to have been given effect.
Another question wrt futures turn over calculation
Futures Turnover = Absolute Profit (sum of profit and loss made on various transactions throughout the year)
So for not having a audit we should have a 6% profit (and > taxable slab) but when profit is equal to turnover - then does that mean a person doing future trading should always do a audit for tax submission bcos how 6% profit can be achieved if profit = turnover?
If my understanding is wrong pls explain with an eg the calculation.
@San78 - Could you pls comment on the questions?
For avoiding audit, the requirement is not exact 6% profit, it’s minimum 6% profit.
So, if profit is coming equal to turnover, that means 100% profit which is more than the minimum 6% profit, hence no audit is required.
Hope this clears the confusion.