July 5, 2018

Computation of Tax on Gains from Futures & Options (F&O) Trading

The Gains from trading in Future and Options (F&O) are not considered as Capital Gains but are considered as Business Income. These gains are considered as non-speculative business gains and therefore income tax on these gains is levied as per the income tax slab rates.

To levy income tax – the first thing which is required to be done is computation of income. Once the income is computed, the tax would be levied on the income so computed. The lower the income, the lower is the tax payable and the higher the income, the higher is the tax payable.

There are 2 ways to compute the Income from F&O Trading:-

Normal system of computation i.e. Income = Sales – Purchase – Other Expenses – Depreciation
Presumptive system of computation i.e. Income = Assumed percentage of Sales

These 2 systems have been explained below in detail.

Read more at http://www.onemint.com/2018/07/04/computation-of-tax-on-gains-from-futures-options-fo-trading

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