Bhairava is employed with a MNC company based out of Mumbai and he trades in Futures and Options. Since Futures and Options are considered as a “business” activity for the purpose of Income Tax Act, what is the deadline for filing his ITR ? Is it 31st July or 31st Oct?
BUSINESS INCOME
Gain or loss from F&O transactions are considered as business income / loss and taxed under the head “Profits & Gains of Business or Profession”. Income/loss from F&O trades are considered as normal business income/loss even though delivery is not involved in these transactions.
TAX AUDIT
Bhairava must calculate the turnover from his F&O trades to know if his accounts has to be audited u/s 44AB of the Income Tax Act. Turnover calculation for F&O trades are specified under the Income Tax Act and if it crosses a certain limit, then Bhairava needs to get his accounts audited. However if the turnover is within specified limits, then there is no need for Bhairava to get his accounts audited under the Income Tax Act.
TURNOVER
Turnover calculation for the purpose of determining if audit is required is as below:
Intraday: Turnover is calculated based on the absolute sum of the profits and losses per stock.
F&O (equity, currency, commodity): Turnover is calculated based on the absolute sum of the profits and losses per F&O contract.
INCOME TAX DEADLINES
If the turnover passes the litmus test and tax audit is applicable, Bharav must get his accounts audited and hence the deadline for filing his ITR will be pushed to 31st Oct. Otherwise, he needs to file his return of income on or before 31st July.
CONSEQUENCES OF LATE FILING:
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