Delhi-based Lakshaya Bakshi has a special request for the finance minister ahead of the upcoming Union Budget–remove tax audit for traders who have losses to carry forward from investments made in futures and options (F&O). The 29-year-old marketing professional is unaware that tax audit to carry forward losses is mandatory only if the total turnover from F&O trades exceeds ₹10 crore.
“As a precautionary measure, my father’s chartered accountant suggested that I get my accounts audited for the purpose of income tax filing to avoid getting a notice from the income tax department," he said.
Bakshi’s is not a standalone case where many chartered accountants (CAs) audit F&O trades even when not applicable. “Rules around calculating turnover, profitability, etc., in the case of F&O trading are too complicated and therefore, most CAs end up auditing just to avoid complication," said Karan Batra, founder, chartereclub.com.
Last week, Nithin Kamath, chief executive officer of Zerodha, pointed out in a tweet that failing to declare trading income, including losses, in income tax returns (ITRs) can lead to automated notices and penalties. “Considering the user growth in the last 18 months, the number of notices are bound to go up exponentially next year (sic)," he tweeted.
If you’re one such trader new to the derivatives market or are planning to dive in, read on to know the tax implications of dabbling in F&Os.
