More than four of every five F&O contracts in the world take place in India making our country a global capital of Futures & Options. While this has raised the hackles among the economic policymakers, at the individual level, it is crucial to know how these should be reported in the ITR.
F&O income
Section 43(5) of the Income Tax Act, 1961 states that income or loss from F&O is classified as non-speculative business income. It comes under ‘Profits and gains of Business or Profession’ in ITR.
If one chooses presumptive taxation ITR 4 can be used.
F&O income falls under the category of non-speculative business income.
Individuals can report F&O incomes/losses in ITR-3. But those opting for the presumptive taxation under Section 44AD have to file ITR-4.
The rate of tax on F&O for individuals is as per the income tax slabs pertinent to him/her.
The turnover is computed by adding all the gains and losses made in all the trades.
Mutual fund gains
ITR 2 and ITR 3 allow an investor-taxpayer of capital gains under the section “Schedule CG”. The details of mutual fund units such as purchase price, redemption price and holding period need to be mentioned.
The interesting part is the form will automatically calculate the capital gains tax arising out of the information furnished.
The tax liability on profits earned from mutual funds depends on a few factors such as type of fund, holding period and the tax slab of the taxpayer. One year is the cut-off holding period for equity funds for determining whether STCG or LTCG will be applicable.
The cut-off holding period for debt funds is 36 months.
Equity trading income
Individuals reporting income from the purchase and sale of equity shares could use ITR 2.
After selecting the form from the online e-filing portal, one has to select “Schedule Capital Gains”. The details of the security, prices on purchase and sale and the holding period have to be provided.
Just in case you forgot, the last date for filing the ITR for FY24 is July 31, 2024.
Fewer than 100 hours remain for the deadline of Income Tax Return filing to end. With more and more Indians joining the equity, derivatives and mutual fund bandwagon, it is essential to know how information on these investments should be reported. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
