Income Tax Return Filing for Futures and Options

Over the years, the number of stock market traders has steadily increased, with a particular focus on F&O trading. However, calculating your trading revenue and submitting your taxes might be challenging at times, particularly if you have additional sources of income. The present article provides detailed information about the ITR for future and options. If need to comply with tax compliances on income from futures and options trading, here is the time to consult with the BizFoc team for the necessarily filing of ITR each year.

What are Futures and Options, F&O?

Futures and options (F&O) are a trading system, where the traders involved and earn profit in future, which is not fixed. It is important to file income tax return (ITR) to make sure the proper reporting of income and to comply with all tax compliances. In F&O, the traders involve in selling or buying an asset at pre-decided cost. If prices increase, the trader makes profit from it. If the trader buy position and if he sells that position, a fall in price then it will beneficial to the trader.

Meaning of F&O Trading

Futures and options (F&O) trading involves buying and selling contracts that have underlying assets such as commodities, stocks, or currencies. Traders speculate on the price movements of these assets without actually owning them, through futures and options contracts.

Futures contracts require both the seller and the buyer to sell the asset at a predetermined price on a specified future date. On the other hand, option contracts give the buyer the right, but not the obligation, to buy (call option) or sell (put option) the asset at a predetermined price within a specific time frame.

Steps to file ITR for Futures & Options

Following are the Steps to file ITR for Futures & Options:

1. Obtain Trading Statements: Gather all trading statements and documentation pertaining to the financial year's worth of your Futures & Options (F&O) transactions with Bizfoc. Contract notes, trade summaries, and any other pertinent documents your broker or trading platform may offer fall under this category.
2. Compute Your Entire Profit or Loss: We will determine your overall profit or loss from F&O trading for the fiscal year. This entails adding up the gains and losses from each trade. As required by tax regulations, keep separate records for speculative and non-speculative revenue.
3. Assess Tax Treatment: In India, financial gains or business revenue are classified as F&O income, with business revenue taxed at slab rates, and capital gains subject to varying rates or exemptions.
4. Choose the Correct ITR Form: Bizfoc choose the appropriate ITR form for F&O revenue classification, such as ITR-3 or ITR-4 (Sugam) for business revenue or ITR-2 or ITR-3 for capital gains.
5. Report Income & Losses in ITR: To report your F&O income and losses in ITR, provide accurate information, including turnover, profits, and deductions, and ensure compliance with tax regulations to avoid penalties

Benefits Of Declaring Your F&O Loss

There are various advantages to declaring your Futures and Options (F&O) loss when submitting your income tax return. These advantages include:

• Tax Deduction: One of the main advantages of proving the loss is that it can be deducted from any other money you have received. You can deduct a loss on a F&O trade from any sources of income other than your wage. This could come from a job, a business, a residence, or any other source of money. It lowers your total amount of owed taxes. This may assist in reducing your tax obligation.
• Carry over: You may carry over unabsorbed losses to subsequent fiscal years if your F&O losses in a given year surpass your total income. Your tax obligation in later years can be decreased by deducting these losses from your F&O gains.
• Tax Compliance: By disclosing F&O losses, you may be certain that you are correctly reporting your financial activities and complying with income tax regulations. Penalties and legal repercussions may result from failure to disclose losses.If you experience a loss from your F&O trading, declaring your losses can have tax benefits.
• Audit Requirement: You may be able to avoid tax audit requirements if you disclose F&O losses in your tax return. Certain taxpayers whose turnover or gross receipts beyond a predetermined threshold are required to undergo a tax audit. You might be able to avoid that threshold if you declare losses correctly.
• Recordings for Upcoming Use: You can obtain a record of your financial transactions by properly documenting your F&O losses, which can come in handy for loan applications or other financial planning documents in the future.
• Adjustment against F&O profits: Declaring the losses enables you to offset them against the profits, lowering the total tax obligation on F&O transactions, if you have both F&O gains and losses in a financial year.

How to show F&O Loss in ITR?

Transactions can be offset against all other sources of revenue (salary excluded) in the event of a F&O loss. This is a main advantage. These sources of revenue could come from a business or occupation, real estate, or other sources. For instance, if you are paying Rs 30,000 in rent each month, you will receive Rs 3,60,000 a year. If you have any loss on F&O for the year, which let's say is $90,000, you can deduct this loss from your rental revenue. Your taxable income will drop to $270,000 as a result.

ITR filing for F&O Income

1. Business Income: HUFs and individuals who have earned profits and gains from profession or business, and if they are F&O traders then file a ITR-3 form.
2. Capital Gains: HUFs and individuals who are F&O traders, and does not get income from gains and profits from profession and business, then file the ITR-2 form.

Why Choose Bizfoc for ITR filing?

BizFoc is having a team of experts and professionals, who are qualified, and well skilled to file a relevant ITR form for F&O. With the help of BizFoc team you can get the correct guidance, team also supports you to reduce liabilities and optimize deductions.

FAQs for ITR for Futures & Options