Module 7 Markets and Taxation

Chapter 6

Turnover, Balance Sheet, and P&L

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6.1 – Turnover & Tax Audit

In the previous chapter, we discussed briefly on tax audit, and when it is required if you are declaring trading as a business income. To determine if an audit is required or not, we need to first determine the turnover of your trading business.

Reiterating – the requirement of calculating turnover arises only when treating trading P&L as a business income (An audit is not required if you only have capital gains income irrespective of the turnover). Turnover is only to determine if a tax audit is required or not. Your tax liability does not get affected by your turnover.

An audit is required if –

  • Rs 2 Crores mark – Turnover for the year crosses the Rs 2 crores. This is in case of digital transactions, and stock market trading is 100% digital. (Otherwise  it is Rs 1 crore).
  • Section 44AD – If the turnover is less than Rs 2 crore, and if profit less than 6% of turnover and total income exceeds basic exemption limit(An audit is not required if turnover is less than Rs 2 crores but your total  income is within the taxable limit of Rs 2.5lks). This limit was extended from Rs 1 crore to Rs 2 crores from FY 16/17.

I am sure the first thing that came to your mind after reading turnover is contract turnover, i.e

  • Nifty is at 8000, you buy 100 Nifty
  • Buy side value = 8000 * 100 = Rs.800,000/-
  • Nifty goes to 8100, you square off the 100 Nifty
  • Sell side value = 8100 * 100 = Rs,810,000/-
  • Turnover = Buy side value + Sell side value = 800,000 + 810,000 = 1,610,000/-

But it is not the contract turnover the IT department is interested in; they are interested in your business turnover.

Read below on how business turnover can be calculated –

The method of calculating turnover is a debatable issue and what makes it a grey area is that there is no guideline as such from the IT department. One article of great help though is the guidance note on tax audit under Section 44AB by ICAI (Institute of Chartered accountants of India, the governing body for CA’s). The article on Page 23, Section 5.12 of this guidance note has a guideline on how turnover can be calculated. It says:

  • Delivery based transactions

For all delivery based transactions, where you buy stocks and hold it more than 1 day and sell them, total value of the sales is to be considered as turnover. So if you bought 100 Reliance shares at Rs 800 and sold them at Rs 820, the selling value of Rs 82000 (820 x 100) can be considered as turnover.

But remember that the above calculation of turnover for delivery trades is only applicable if you are declaring equity delivery based trades also as a business income. If you are declaring them as capital gains or investments, there is no need to calculate turnover on such transactions. Also, there is no need of an audit if you have only capital gains irrespective of turnover or profitability.

  • Speculative transactions (intraday equity trading)

For all speculative transactions, aggregate or absolute sum of both positive and negative differences from trades is to be considered as a turnover. So if you buy 100 share of Reliance at 800 in the morning and sell at 820 by afternoon, you make a profit or positive difference of Rs 2000, this Rs.2000 can be considered as turnover for this trade.

  • Non-speculative transactions (Futures and options)

For all non-speculative transactions, the article says that turnover to be determined as follows –

  • The total of favorable and unfavorable differences shall be taken as turnover
  • Premium received on sale of options is also to be included in turnover
  • In respect of any reverse trades entered, the difference thereon should also form part of the turnover.

So if you buy 25 units or 1 lot of Nifty futures at 8000 and sell at 7900, Rs.2500 (25 x 100) the negative difference or loss on the trade is turnover.

In options, if you buy 100 or 4 lots of Nifty 8200 calls at Rs.20 and sell at Rs.30. Firstly, the favorable difference or profit of Rs 1000 (10 x 100) is the turnover. But premium received on sale also has to be considered turnover, which is Rs 30 x 100 = Rs 3000. So total turnover on this option trade = 1000 +3000 = Rs 4000.

The above calculations (points 1 to 3) are fairly straight forward; the next important thing to decide though is if you want to calculate turnover scrip wise or trade wise.

Scrip wise is when you calculate the turnover by collating all trades on the particular contract/scrip for the financial year, find average buy/sell value, and then determine the turnover using the above 3 rules with the total profit/loss or favorable/unfavorable difference on this average price.

Trade wise is when you calculate the turnover by summing up the absolute value of profit and loss of every trade done during the year, and following the above rules.

Let me explain both with some examples –

  1. 100 Nifty Jan future bought at 8000 and sold at 8100 on 1st Another 100 Nifty Jan future bought at 8100 and sold at 8050 on 10th Jan. Determine turnover

Using scrip wise:

Average Nifty Jan Fut buy: 200 Nifty Buy at 8050

Average Nifty Jan Fut sell: 200 Nifty Sell at 8075

Total profit/loss = 200 x Rs 25 = Profit of Rs 5000 = Turnover of Nifty Jan Futures

Using trade wise:

100 Nifty Buy at 8000, Sell at 8100, Profit = Rs 10,000

100 Nifty Buy at 8100, Sell at 8050, Loss = Rs 5000

Turnover of Nifty Jan futures = Rs 10,000 + Rs 5000 (absolute sum of the loss) = Rs 15000

  1. 100 Nifty Dec 8000 puts bought at 100 and sold at 50 on Dec 3rd. Another 100 Nifty Dec 8000 puts bought at 50 and sold at 30. Determine turnover

Using scripwise:

Average of Nifty Dec 8000 puts buy: 200 puts at 75

Average of Nifty Dec 8000 puts sell: 200 puts at 40

Total profit/loss = 200 x Rs 35 = Loss of Rs 7000

Total Selling value of options = 200 x Rs 40 = Rs 8000

Total Turnover for Dec 8000 puts = Rs 7000 + Rs 8000 = Rs 15000

Using tradewise:

Trade 1

100 Nifty Dec puts bought at 100 and sold at 50, Loss = Rs 5000

Selling value of options =100 x Rs 50 = Rs 5000

Turnover = Rs 10000

Trade 2

100 Nifty Dec puts bought at 50 and sold at 30, Loss = Rs 2000

Selling value of options = 100 x Rs 30 = Rs 3000

Turnover = Rs 5000

Total turnover = turnover of (trade 1+trade2) = Rs 15000

Which of the methods scrip wise or trade wise should I follow?

Calculating turnover trade wise is the most compliant way of determining turnover. The tricky bit calculating trade wise turnover though is that no broker (other than us at Zerodha) currently offers trade wise turnover report. All brokers provide a P&L with an average buy/sell price, which can be used to calculate scrip wise turnover. If you are not trading at Zerodha and are looking at calculating turnover tradewise, you will have to download all trades done during the year on an excel sheet and calculate turnover manually.

Here is the scrip wise and trade wise turnover reports on Q (Zerodha’s reporting tool)

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Once you determine the turnover, you will know if you need an audit or not, that is if a visit to a CA and have him verify your balance sheet and P&L statements is compulsory or not.

6.2 – Section 44AD

An audit is also required as discussed above if your profit is less than 6% of the turnover. By turnover I am referring to all business turnover (speculative, non-speculative, and any other business you have), and by profit I am referring to only your net business profits (not including, salary, capital gains, and others). This means that if you are trading as a business and incur a loss, you will most likely have to get the books audited.

But an important thing to remember is that if your turnover is less than Rs 2 crore (was Rs 1 crore until  FY 16/17) and if your profit is less than 6% of turnover an audit is not required if your total tax liability for the year is zero. That means if your total income (Salary + Business income + capital gain) is less than Rs 2.5lks (minimum tax slab), you have no tax liability and hence audit not required. But it is advisable if losses are substantial to file the return with audit.

Applying section 44AD for trading as a business income is causing huge inconvenience for the retail trading community. Turnover in an ordinary business to turnover while trading on the markets is hugely different. Unlike an ordinary business where there is a fixed margin every time there is a transaction, in the business of trading there is no such guarantee. This section is an unnecessary burden that indirectly gets most small retail traders to have their books audited. We at Zerodha have petitioned to the government through this campaign on Change.org, make sure to support it and also get your trading friends to do the same.

When you show trading as a business income, you will have to file using ITR4, which would mean that like any other business you are required to create and maintain –

  • Balance Sheet
  • P&L statement
  • Books of Accounts

Like discussed above, these will need to be audited based on your turnover (either turnover crosses the 2 Crore mark or in case the turnover is less than 2 Crore and your profits is less than 8% of the total turnover). Creating balance sheet, P&L, and maintaining books of account is quite simple for individuals with just trading as a business income, it is explained below in brief.

6.3 – Balance sheet, P&L, Book of accounts

Balance sheet

A personal balance sheet provides an overall snapshot of your wealth at a specific period in time. It is a summary of your assets (what you own), your liabilities (what you owe) and your net worth (assets minus liabilities).

Creating a personal balance sheet is fairly simple first pull together all of these information:

  • Your latest bank statements
  • Loan statement,
  • House loan statement
  • Personal loan statements
  • Principal balance of any outstanding loans
  • Demat holding statement

Once you have all of that information available, start developing your balance sheet by listing all of your assets (financial and tangible assets) with its respective values. Typical examples of the assets could be –

  • Cash (in the bank, in hand , deposits with Bank)
  • All investments (mutual funds, Shares , Debt investment )
  • Property value ( Cost of Purchase + Duty any paid + Interiors etc)
  • Automobile value ( Motor Car + Two wheeler )
  • Personal Property Value ( jewelry, household items, etc)
  • Other assets ( Computers, Loans to friends , plot of land etc)

The sum of all of those values is the total value of your assets.

Next, you can look at your liabilities, which should be everything you owe. Here are some common liability categories:

  • Remaining mortgage balance (Loan Statement)
  • Car loans
  • Student loans
  • Any other personal loans
  • Credit card balances

The sum of all of the money you owe is your liabilities.

The difference between your assets and your liabilities is your net worth.

That’s it; this is your balance sheet. Instead of creating one at the end of every financial year, it probably makes sense to update once every few months.

Profit & Loss statement

Profit and loss will summarize your revenue streams and your expenses for the financial year.

To create your P&L for the given Financial Year, you will have to list down all revenues and expenses.

Revenue –

  • Realized sale value from your stock holdings (Capital gains)
  • The Income from F&O, Intraday, or Commodity Trades. (Speculative and non-speculative business income)

Remember that you can’t add your salary income (if you are working elsewhere) into you revenue stream on the P&L.

Expenses –

  • Salaries, if you have people helping you trade.
  • Rent, if you are using an office or any space for trading activity for which you are paying a rental income
  • Brokerage charges, taxes, and all other trade related expenses.
  • Advisory fees, consultancy, depreciation of computer, and etc (read the expenses section in the chapter on taxation-traders)

Revenue minus the Expense equals profit.

A Balance sheet helps you understand your networth between two dates and the P&L will give you the reasons why your networth went up or down in that period. Maintaining financial discipline is the key to long term personal wealth creation. A personal balance sheet and P&L will ensure that you are constantly in touch with reality – your assets and liabilities.

Book of accounts/Book-keeping

Maintaining book of accounts and Book-keeping seem like very complex tasks, and typical reactions I have seen from traders is to get scared of the word and try postponing the decision to learn more on the topic. Again for an individual with only trading as a business income and/or salary, it is super simple- you just need to maintain two books.

Bank book: Take an excel download of all your bank statements, and make a note next to every entry to identify the nature of the transaction. It is also best to keep a copy of all the bills in case of expenses.

Trading book: This should be automatically getting maintained for you by the broker where you trade. The broker should be able to give you a P&L statement including all expenses for the year, ledger statement, and an online repository of contract notes if required. Unlike what many people think, contract notes aren’t really required unless a scrutiny by the IT department, and even then if only asked for the same.

As a person who has traded with over 10 online brokers in India, the ledger and P&L statements with all expenses on it will show up any hidden charges by the broker.

At Zerodha, we take great pride in the transparency we bring in as a business. Every charge other than brokerage is captured on the other credits/debits section on the tax P&L on Q. We also give you a summary with value of all your open option positions starting April 1st and closing March 31st. This is extremely usefull when you are trying to tally your ledger with your P&L statement.

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We are almost done with the taxation module. The last chapter will have an explanation on what kind of ITR forms to use, and also an excel download of a sample ITR 4 form with all details as an easy reference.


Key takeways from this chapter –

  1. Audit of the books is required if turnover is more than INR 1 Crore mark
  2. Audit of the books is required if turnover is less that INR 2 Crore but if the profits is less than 6% and total income more than basic exemption limit (was 1 cr until FY 2016/17)
  3. Audit of the books is NOT required if turnover is less than INR 2 Crore and profits higher than 6% of the turnover (was 1 cr until FY 2016/17)
  4. Turnover does not take into consideration the regular contract turnover
  5. Turnover refers to the business turnover
  6. Business turnover (for trading as a business) can be calculated scripwise or tradewise
  7. Trade wise turnover is the most compliant way of declaring turnover.
  8. If you are declaring trading as a business then one needs to use the ITR3 (ITR 4 until 2016) form to file tax returns
  9. ITR3 requires you to have Balance Sheet and Profit and Loss statement along with books of account
  10. Balance sheet equation states that Net worth = Assets – Liabilities
  11. P&L statement details the revenues and expenses
  12. If trading as a business maintaining 2 books of account becomes mandatory – Bank Book and Trade book
  13. It is advisable to maintain and update Balance Sheet, P&L, and books of account once in every quarter.

 

Disclaimer – Do consult a chartered accountant (CA) before filing your returns. The content above is in the context of taxation for retail individual investors/traders only.

725 comments

  1. Harshendra Singh says:

    After reading these chapters I as a CA student, feeling more fascinated and excited by the complex world of Taxation and related matters.

    • Harishankar says:

      I am a bit baffled by the concept of adding in the selling value – especially when you have bought a options contract. Taxation philosophy is based on making sure that any income earned must be offered for taxation.

      When dealing in options, the trade may end up in one of the 3 states:-
      1. Trader squares off the options contract prior to expiry.
      2. If the option is in money, the exchange squares off the options contract and issues a credit to buyer or debit to seller.
      3. The option expires out-of-money – in which case, there is no square off of the contract done by the exchange.

      Only in case 3), the seller of the option has earned the premium (as there is no squaring off of the out-of-money contract) – in cases, 1) and 2).

      • Nithin Kamath says:

        Hari, turnover requirement is only to determine if audit is needed or not. It doesn’t affect taxation in any way. Also like I have mentioned earlier, the way I have explained, is probably the most conservative way. You can adopt for any method that you think is right.

        • SURESH says:

          Hi,
          Please advise how I can check p&l for a specific period like last year or a month?

          Where I can check same in kite?

          If their any link for easy access, please send me ASAP.

          • Nithin Kamath says:

            When you login to Kite, click on your client ID on top right of the page, you will link to Q backoffice. You can see the P&L there. Q.zerodha.com is the direct link.

        • SAI KUMAR says:

          NIthin Sir,

          my intraday turn over is 1,56,412 and short term turn over is 46959 and and my profit on intraday is -27754 and my profit on short term is -2681 showing on Q-office.plz confirm wether audit is required or not is any tax will be applicable for me.

          • Nithin Kamath says:

            can you read the chapter on audit. Since your profit is less than 8% of turnover you will need audit. But I guess since your turnover is so little, you can show profit as 8% and you can avoid audit.

        • Sai Lakshmi says:

          Hey! The turnover calculation is very clear (which is to be credited to profit and loss account) however how to calculate the purchase value that is to be debited to profit and loss account?

  2. Harshendra Singh says:

    Illustration given here are more practical and illustrative than those given on our ICAI books. Keep up the good work.

  3. sp gupta says:

    Good that you have deciphered the ambiguous content of Taxation. What about over 95% of traders associated with other Brokerage Houses? I am sure they will have their own interpretation of Taxation and would proceed accordingly. Why can’t CBDT come up with simple and clear sections which would be helpful to layman as well….

    • Nithin Kamath says:

      I don’t think any brokerage out there has taken the effort till now to decipher taxation for their clients. So what 95% of traders need to know are general guidelines around taxation, which is covered in this module. This is meant for everyone trading and investing and not just for Zerodha clients. For people investing/trading with us we give a bunch of reports that is very helpful to be compliant while filing income tax returns.

  4. Nilesh says:

    Hi, Thanks for all the information.
    You have shown with example how turnover is calculated both for trade wise and scrip wise. Can you please explain similarly how the Gain / Loss would be computed ? I am planning to show STCG and F&O has business income. So I understand that I should be able to reduce my profits scrip wise by the deducting the cost of transactions i.e Brokerage, STT incurred on those transactions. Is that assumption correct ?

  5. Prabhu says:

    Nithin Hi,

    Thanks for the wonderful initiative.

    While trading Options –
    For all non-speculative transactions, the article says that “Premium received on sale of options is also to be included in turnover…”

    However, when I Square off a Long position, I need to Sell the existing Long Position. I am not Writing an Option. Since in this case I am not really taking in the Premium but just Squaring off the trade, is the Sell value also considered as Premium received, to be added to the Turnover as shown in your example ? Or is Premium received, only when I Short Sell / Write an Option ?

    Is the no difference between Writing an Option and Selling to Square Off as far as Turnover is concerned ?

    I am a bit confused.
    Thanks in advance for your reply.

    Prabhu

    • Nithin Kamath says:

      Prabhu, it is upto you on what inference you make out of it. But I think the most compliant way to decipher would be to look at both the points:
      Premium received on sale of options is also to be included in turnover
      In respect of any reverse trades entered, the difference thereon should also form part of the turnover.

      So yes, consider sell value of all options (either long exit of fresh short) for calculating turnover. If you are trading at Zerodha, your turnover statement will have this calculation.
      But like I have said, turnover is to only determine if you need an audit or not. It is best to have books audited in any case.

      • Prabhu says:

        Nithin,
        Thanks for your clarification..

        Yes, I do trade with Zerodha and its been a good experience..
        Rgds

        • Akash says:

          Hi Nithin,

          Appreciate the work you are doing and how patiently you have answered all questions.

          My issue is that in the zerodha tax p&l statement total charges (which include Brokerage, Turnover etc) are not given separately for Equity Intraday and Equity Short Term Transactions. For last FY I have traded for like 85% in equity intraday and remaining equity short term delivery based.

          As zerodha doesn’t give total charges separately for equity intraday and equity delivery based hence my CA is considering turnover ratio to split the total charges between equity intraday and equity delivery based. However as the turnover calculation logic is different for equity intraday and equity delivery based its not giving correct picture of the total charges incurred for the two. For example though I have traded 85% in equity intraday, intraday turnover is 120660 and short term turnover is 109716.

          So my question is whats the best way to identify the actual total charges incurred for equity intraday and equity short term delivery based with out going through each contract note as that would be cumbersome.

          Many Thanks

          Lucky

      • Vishal says:

        Hi Nithin, I also have same problem in understanding how the squaring off an option is considered as premium. Two questions:
        1- I believe squaring off of options is considered premium in Zerodha and is taken into turnover calculation, pls confirm?
        2- If I trade futures, Square off of future position will not be taken as premium in Zerodha calculation? In case of futures, sum of profits and losses will define the turnover, pls confirm.

        Bye
        Vishal

        • Nithin Kamath says:

          Vishal,

          1. Yes the turnover reports (tradewise or scripwise) both consider squared off premium value as part of turnover. This is the most conservative approach. It is upto you though on how you want to declare the turnover.
          2. Yes, in case of futures only sum of profits and losses is considered as turnover the reason being in futures the margin gets blocked and not debited.

          • Sumit says:

            Hi Nitin, Thx for the detailed explanation. However, I don’t think you should encourage the most conservative approach to calculating turnover by adding option sales premium even in case of squared off option trades. Revenue + Profit can not be turnover.

          • Nithin Kamath says:

            Sumit, like I have mentioned earlier, when advising I have to be as conservative as possible. Don’t want people to come back if tomorrow a notice comes up.

          • Sumit says:

            Nitin, I’d advise people to file appeal if they get any notice. But it’ll be very wrong to propagate a practice which is conceptually wrong, especially by prominent industry representatives like you. Many tax laws in india are ambiguous or conceptual fallacies. We need to oppose those.

      • ASHISH says:

        Hi Nithin

        My querry is if i add the difference of option buy & sell & after this i add the sell value of he option wont it be double calculation of turnover

        since the value of diff is already incorporated in sale value of option if its a profit trade

        thx in advance

        • Nithin Kamath says:

          Ashish, the way I have explained is the most conservative way. It is upto you on how you want to declare turnover. This is quite a grey area.

      • Ankit says:

        Hi nitin
        I also trading in future and option , and turnover of these exceed by one core which is calculated as per icai guidelines , but in this trading I got loss , but while making of profit and loss , how can I claim my loss because indirect expenses regarding this is so less, can u please explain or send any p& l format future and option related as soon as possible.

  6. VISWAKUMAR.R says:

    A BIG thanks for the elaborate details given.

  7. Nilesh says:

    Hi Nithin,
    I am planning to show Speculative and Non Speculative Business Income for my trading activities. I have noted that per transaction I am incurring following cost :
    Brokerage SerTax Stamp TO Charge IPF DHC DpChrg STT Amount Edu Cess Higher Educ Cess
    Can i simply say that Total cost per transaction = Brokerage + Service Tax + Stamp + TO Charge + IPF + DHC + DpCharge + STT Amount + Edu Cess + Higher Educ Cess + (Cost per share * No of shares)
    And deduct the Total cost from my Selling Price of Equity to calculate the Net Profit / Loss per euity script ? Are all components elgible to be considered for arriving at the Total cost ?

    • Nithin Kamath says:

      If you are declaring spec/non-spec business income, yes all components eligible to be treated as an expense. Yes you can calculate the way you have mentioned.

  8. Ganesh Keer says:

    Hi Nithin,

    For the equity based transactions while filing returns we need to mention Purchases of P & L Schedule in ITR 4, in our Zerodha trading account I see those scripts as well for whom I have not sold in financial year 2014-15. So do I need to consider for purchases or not?
    Accordingly my profit/loss is calculated in ITR 4. (Sale of goods – Purchases).
    Please advise.
    Regards,
    Ganesh Keer

    • Nithin Kamath says:

      If you are considering this as an investment, then you need to show the capital gains only on what is booked profits. If you are showing them as trades, you can MTM the closing price of the stock in trade.

  9. Prashant Warrier says:

    From reading this article, it seems to me that for all practical purposes, anyone reporting their trading activity as a business will need to necessarily get an audit done….After all, we know that many (most) people will struggle to make that 8% return on capital on an annual basis unless you are very good. Also turnover of 1 crore would be significant. Therefore i think most retail traders fall in the bracket of “require audit”. Is that a fair statement?

  10. kamal madan says:

    I am showing trading as speculative & non-speculative income, prepare P&L account & Balance sheet. Do I need to send these along with ITR V ?

    • Nithin Kamath says:

      No need of sending anything (btw it is ITR 4 and not 5), everything can be done online today. You will be asked for the physical copies if you are called by the ITO for scrutiny.

  11. NAGESH says:

    I am very much delighted to read your commentary on tax implications while trading in the markets. From the reading, i can understand that no audit U/s. 44AB is required if the turnover is less than 1crore , the profits lesser than 8% and income not exceeding taxable limits. Income means, is it after including the profit/loss from trading in F&O which is treated as business profit/loss. One example is: Income from other sources is 3 lakhs and income from trading in F&O is Loss of 1 Lakhs and hence the total taxable income becomes Rs. 2 lakhs, after setting off the business loss against the income from other sources. My doubt is, is audit U/s. 44AB required in such case as the income other than business income is taxable. Since the loss is set off, which can be done, the ultimate income resulting in to Less than Taxable Limits. Kindly clarify.

    • Nithin Kamath says:

      Yes you are right, if income from other sources is 3lks and you have 1 lk loss, then total income is 2lks and less than the taxable limit. Hence no audit required. But if your 3lks was salary income, you will not be able to offset trading loss with salary income, hence you will be in the tax bracket and hence audit will be required.

  12. Sameer chandra jha says:

    Sir I am a salaried person and do equity trading .
    I would like to know which form I would fill for filing return itr 1 and itr 4 or only itr 4
    Thanks

  13. rajesh says:

    Hi nithin i saw various reports on zerodha q i have to give the report to the to help me file returns which report shd i dwnload i deal only in options shd i use tax p&l or absolute or indicative p&l pls advise

  14. Arun Kumar Kuswaha says:

    Thanks Nitin, for all the efforts u done for understanding how to Deal with the TAX (EVIL) complications..
    and i have also filed ur Petition
    https://www.change.org/p/minister-of-finance-exclude-business-of-trading-in-securities-and-derivatives-from-section-44ad

    i m 80% clear about the Taxation after reading all this…
    just need to confirm with U some Doubts…

    i m attaching one pic plz refer..

    As i had Loss of Rs.1,66,305
    and Total Turnover is less than Crore Rs.88,16,878
    and total charges is Rs.18,852
    and i want to include my Internet bills of near about 11-12K..

    i m only a Trader and trades in F&O only..
    no other source of income is there..

    so as i m in Loss..i do not require Audit .. right.?? and i have to fill ITR4 right??

    one more query i want to know about..
    suppose i have invested Rs 4 Lac in the Market.. and Withdrawn 2 lacs Partially and had a Loss of 1,50,000 in same FY year.. rest Rs 50 K is in my trading account…
    will IT will ask me about my Withdrawal??
    coz i have to show it as my Business , as i only trades in F&O..

    Thanks Alot…
    and also Thanks For Creating Zerodha and Helping us to Trade and Learn how to trade..
    🙂

    • Nithin Kamath says:

      Yes ITR4 and no need of an audit.
      ITO will not ask for the withdrawal (the chances of a scrutiny is very very very small if you have filed your returns correctly, so no one will most likely never ask) but anyways I guess you will be showing some expenses against it right? As in that 1.5lks was taken out to spend or to invest somewhere else.

      Thanks 🙂

      • Arun Kumar says:

        Thank You so much for Ur Reply Sir,
        after Reading and Research of my Trading..
        i found that i was trading with some other Broker before Zerodha came to my Life… 🙂
        and after adding Both the turnover from Zerodha and Other Broker.. my Turnover become above 1Cr. and loss of 1.5 Lac.

        one request to you their are sevral tabs under ITR-4 Form..
        and after seeing all this in ITR4 .. all my motivation got vanish..

        plz spare 10-15 min and make video from a point of view of a trader so all we can know how to handle this form..
        or screen shots also works as u have busy schedule..

        Thanks Again

  15. Shashidhar says:

    Hi Nithin, It is really a very good information you have so very well presented.
    One query on the Turnover – The sample M7C6_Excel1 (snap shot attached) that is available in the link provided in the Chapter 6 on Turnover does not seem to be covering turnover on delivery based transaction. It shows only FnO and Speculative. However in the assumptions section of the same spread sheet, STCL has been recorded. Chapter 6 specifies calculation of turn over should include: Delivery based transaction + FnO + Speculative. As a trader for ITR4, if I have to show STCG / STCL as business income / loss, should the selling value in respect of delivery based transaction be included while arriving at the total turnover which decides the requirement of audit?

    • Nithin Kamath says:

      Yes as a trader, if you have to show STCG/STCL as business income/loss, you will have to use the selling value of your delivery based trades to arrive at total turnover.

  16. Gnanamoorthi Subramaniam says:

    Hi Nithin,
    My turnover is more than 1 crore but I a having a net loss of 2 lakhs. I need a clarification whether I need to get it audited or not.
    Also do you have any CA reference

    Thanks & Regards
    Gnanamoorthi

    • Nithin Kamath says:

      IF your total income for the year is less than 2.5lks (trading loss + all your other income) then no audit is required, but otherwise yes.

  17. Priyanka says:

    Hi Nithin,

    First of all Thanks for making taxation looks simpler for a common man.

    I have few queries:

    1. I am a home maker and do frequent trading (F&O, intra-day, delivery based equity). I have overall losses in last financial year from trading and had small income less than 1lac from profession (working part-time from home for a company). Do I need to file ITR?
    2. I should use form ITR4 or ITR4s?
    3. My turnover is less than 1 crore and I made net loss in FY14-15. Do I need to prepare Balance sheet, P&L and Books of account?
    4. Do I need to get my account audited?

    5. My husband is a salaried person and do trading very frequently (short term and intraday but no F&O). Which form he is required to use ITR2 or ITR4 or ITR4s?
    6. Since he made profit of less than 8% from trading and have turnover of less than 1 crore, is he required to get the account audited?

    Kind regards,
    Priyanka

  18. Priyanka says:

    Hi Nithin,

    “the requirement of calculating turnover arises only when treating trading P&L as a business income (An audit is not required if you only have capital gains income irrespective of the turnover)” In this statement of yours, I have a query:

    Say Mr. A, apart from its other incomes like salary and rent etc., is having income (profit or loss) from delivery based trading and also speculative business income.

    1. Can Mr. A show delivery based trading income as STCG and at the same time speculative business income as business income?
    2. To calculate turnover for audit requirement in the case of Mr. A, does he need to include turnover from equity based trading which he wants to show as STCG, as well as turnover from intraday trading?
    3. My understanding from this module is, P&L and Balance sheet is required to be maintained by any one who is doing intra-day or F&O trading irrespective of audit requirement?
    4. Now my specific query:

    My Husband is salaried (30% income tax bracket), he did intra-day trading for turnover Rs. 1742.5 and also the profit is same as Rs. 1742.5. He did delivery based trading for turnover of Rs. 267589.3 and made profit of Rs. 59875.34. Now he wants to show Rs. 59875.34 as STCG and Rs. 1742.5 as speculative business income. Is it possible?
    Now, turnover for business income shall be only Rs. 1742.5 or Rs. 269331.8 (i.e. Rs. 267589.3+1742.5). What shall be the business profit = Rs 1742.5 or Rs. 61617.84(i.e. Rs. 59875.34+1742.5).
    Because if turnover is 1742.5 and profit is 1742.5 i.e. he had transaction of less than 1 crore and profit of 100% then no audit is required.
    But if the turnover is 269331.8 and profit is 1742.5 then turnover is less than 1 crore and profit is less than 8% and he needs to get the account audited.
    Further if he shows all kinds of trading as business income then the turnover is 269331.8 and profit is 61617.84 then he falls into category of profit of more than 8% of turnover of less than 1 crore. And thus audit is not required. But he has to pay more tax (because taxed @ 30% of delivery based trading instead of showing STCG and taxed at 15%).

    I hope I have not made the calculations complicated. Really a headache and seems strictly intraday and F&O should be avoided by a common person as lot of hassle of maintaining books of accounts, audit and calculations.

  19. Sonu says:

    Hi Nithin
    In one of the earlier modules, you had mentioned that possibly the reason many traders got notices from IT was because the algorithm just checked if profit is less than 8% of turnover and then automatically sent mails. From the q&a you have made it amply clear that if net income is less than 2.5 lacs, there is no need for audit. I assume that obviously stands true for losses also. For me this year its a loss (Trading as a business and no other source of income). So have there been instances or what is the probability (there goes the trader mindset!) that IT department would send a notice if I don’t get it audited. And btw, CAs are way too busy to handle small fish.

  20. Shashidhar says:

    Thanks, Nithin for your feedback.

    One further query to above and also in line with the query dated 22/08/15 from Priyanka reg non clubbing of delivery based trading turnover from Speculative and FnO while arriving at audit requirement.

    My case:
    – FnO – Turnover 21 lakh and profit 50 k
    – Speculative – Turnover 2 lakh and profit 1.6 lakh
    – Delivery based (Short term) – Turnover 12 cores and profit 1.9 lakh after paying STT, etc.
    – Long term loss – 1 lakh
    – No salary or other income except SB/FD interest.

    Summary:
    – FnO + speculative – Turnover 23 lakh and profit = 0.5 + 1.6 = 2.1 lakh, i.e. approx 9% of turnover
    – FnO + speculative + Delivery based – Turnover 12.2 crores and profit 0.50 + 1.6 + 1.9 lakh = 4 lakh, which is less than 1% of turnover

    My query:
    1. Can I exclude delivery based trade from total turnover and show STCG/STCL separately by allowing tax at 15%?
    2. If so, then the total turnover would be 23 lakh, which is less than 1 crore and profit would be 9% so I need not go for an audit. Is this permissible?
    3. The tax payable in either case would be nominal and would not be significant different. Main advantage, if it is permissible, I can avoid the hassles of audit and submit return before 31/08/15.

    The above situation is not at all a sign of healthy trading. This was as a result of very heavy short term trading by my broker for 4 to 5 months during the last financial year. I have since stopped this when I realised that the portfolio was getting eroded at the cost of short term profits he was showing me on daily basis. Initially I was sort of happy at the daily results over my emails, and was late in realising of the erosion of total portfolio value.
    Had I been on Zerodha, I am sure this would not have been the case, as I see you have very good reporting and support system.

    Thanks in advance
    Shashidhar

    • Nithin Kamath says:

      Thanks Shashidhar, I can’t give you the perfect answer as this topic is a grey area. But yes, you could show STCG/STCL for your short term delivery trades instead of showing it as a business if you think that the activity was not as if it was a full time business. But F&O has to be compulsorily shown as non-spec business income.

      Best,

    • Saurabh Goyal says:

      I have done few F&O transactions during the year. And i am a salaried person.I have shown the profits as short term capital gain and filed ITR 2. Can i be in any trouble from IT dept

      • Nithin Kamath says:

        No trouble as such, but showing F&O on ITR2 is not correct. You have to use ITR4. If by doing ITR2, your tax payable is reducing, suggest you to refile the returns. Any tax which is not paid can lead to a monetary penalty tomorrow.

  21. Rajesh Gambani says:

    Cleartax called me and said even though my turnover is less than a cr and there is a loss they can file itr 4 without tax audit they will do this by show balance sheet and p&l statement i am confused how they can do this, is there a way out like dis instead of an audit?

  22. Munisheb says:

    Have less than one crore turnover via f&o and less than 8percent profit and less than 250k profit..it is clear that audit is not needed..my question is will the losses get carry forward to next year..do i need to take some specialcare to ensure it happens..thanks..munish

    • Nithin Kamath says:

      To carry forward the losses, you just have to file your returns on time.

    • Munisheb says:

      a) I just today recvd ITR-4 defective love letter from I.T for AY 2014-15 ( last year) under 139(9) asking me to give P&L after getting audited .. my turnover was < 1Cr and profit < 8 % of gross ( i was in loss) and my total income was < taxable limit and Audit was not done.
      Not sure if turnover is < 1Cr and you have loss and no other source of income ( if some Fixed deposit then total of losses from F&O + FD interest < taxable) will get ur ITR4 processed and closed. Does not appear its that easy to evade audit ( read as audit fees). All response are welcome ..munish —9717898925
      CA is good for nothing..can u guide

  23. Mahesh Devani says:

    since last 2 years i have filed ITR2 and shown my F&O loss there.
    Is it possible to carry forward that loss in ITR4 this year.

    If not possible, can i re-file ITR-4 form for last 2 years ?

    • Nithin Kamath says:

      No you cannot carry forward that loss into ITR4, as on ITR2 you would have shown it as short term capital loss (applicable only for equity trading). Yes you can refile ITR4 for last 2 years.

  24. aysh says:

    Hello Nithin,
    I’m showing all my trading activity as business income in ITR 4. But total income for the year is below 2.5 l & no tax liability. Is it ok to select “No A/c case” for both balance sheet & P&L sections and file accordingly ?
    Thanks

  25. manoj saklani says:

    full value consideration Rs 6001200/-

    expenditure wholly and exclusively in connection with transfer Rs5938507/-

    net profit 62693/-

    upto 15sep = 53240/-

    16 sep to 15 dec = 19139/-

    16 dec to 15 mar = 11835/-

    15 mar to 31 mar = (21521)/- (negative)

    how to fill these figure in capital gain in itr 4 (enter value from item 5vi of schedule BFLA
    please suggest me.

    Regards

    • Nithin Kamath says:

      Go to schedule CG, row number 282, Section f, point 1. You can mention the above figures there (after expenses, and after carry forward losses).

  26. jaydivanji says:

    From the backoffice, what I understand about calculating turnover for intraday is this:

    Each individual SCRIP’s profit/loss added as an absolute sum.

    I would like a clarification whether the turnover formula should also applied to all the trades carried out for a scrip. That is, instead of a profit/loss, each individual scrip too will have an absolute sum.

    The reason I’m asking is that on the backoffice you say it’s calculated scrip wise, while the ICAI PDF document about 44AB you refer to says this:

    “In the case of an assessee undertaking speculative transactions there can be both positive and negative differences arising by settlement of various such contracts during the year. Each transaction resulting into whether a positive or negative difference is an independent transaction.”

    From this, I’m not sure whether each scrip should contribute its net profit/loss to the overall turnover or it should contribute its own turnover as well.

    I’ve seen my backoffice P&L statement & each scrip has contributed its profit/loss to the overall turnover.

  27. usha says:

    We at Zerodha have petitioned to the government through this campaign on Change.org, make sure to support it and also get your trading friends to do the same.Please let me know as how to do it.I shall do the need ful along with other traders at jammu.

  28. usha says:

    Showing 8% profit to avoid audit.Shall it not be questionable ? Are we safe from income tax department?
    Thanks

  29. K G Gupta says:

    sir,
    my income is from pension,interest ,rent +trading.ihave already filled ITRV during August 2015.I have not shown my trading activities.I have a turnover of about 3 lakhs and loss of 24000.00 I want to revise my return.Shall i be able to deduct my income8%x3lakhs =24000 +trading loss of 24000 from my rent & interest .Rent and intrest is Rs 100,000. please guide so that i can revise my return in ITR-4.
    Regards

    • Nithin Kamath says:

      Since you are trading, I’d advise you to revise the return and declare the trading activity. You can setoff only the loss of Rs 24000 (I didn’t get what was this 8% of3lks u did) with your other business income. But since you don’t fall under any tax slab, u don’t get any benefit of it.

  30. KG Gupta says:

    Sir, i could very well receive your reply . I thank you very much. I did not get clear reply on my Turn over of Rs 3 lakhs. Since i do not like to get my books audited. therefore i liked to add Rs 24000 ( 8% of my turn over of 3 lakhs) in my income.By doing this again i have not to pay any tax

    • Nithin Kamath says:

      Ah.. u mean u want to use ITR 4S and show 8% of turnover as ur presumptive income. Yes you can do it. But since your total income is less than 2.5lks and no tax liability, u don’t have to get audit done in any case.

      • Suruchi says:

        Hi Nithin,

        I am a new trader. And even more new to taxation. I have no other income of any type and fall below Rs2.5lakh/annum bracket.

        I have been receiving money from my husband and father-in-law as gifts using which i traded F&O. Overall, i closed the year in loss.

        Could you please explain in detail or else point me to income tax official resources using which i can prove that i need not get Audited my Balance Sheet, P&L and Books of A/Cs .

        Many thanks for your wonderful support.

        • Nithin Kamath says:

          You can read section 44AD and 44AB. You can also go visit the help center which is usually present at every Income tax office.

  31. Ritu says:

    Hi, In the case when I opt for the audit of F & O, I made P/L showing profits on settlement as turnover and Losses on settlement as purchases (As absolute some of profit and losses is applicable just to determine whether Tax audit is applicable or not or to declare profit u/s 44AD) . Then shown some additional exp like internet,mobile etc.Is this P/L account is in correct format for audit? Do I need to compulsorily prepare Balance Sheet including all personal assets and liabilities or should it include only assets and liabilities related to F& O business? If it is only F & O related Balance Sheet what are the items should form part of it?. Kindly suggest.My sincere thanks to you for giving such descriptive information which is very rarely available elsewhere.

    • Nithin Kamath says:

      1. Format for showing expenses can be anything, CA’s follow different formats.
      2. It is best to prepare balance sheet mentioning all assets and liabilities. (mandatory if income is more than 25lks).
      3. yes possible to create a balance sheet only related to F&O. If you do, I guess you will have to show all financial assets and liabilities (FD’s, Bank deposits, loans, etc).

      Cheers,

  32. ANWAR says:

    which figure taken from trade wise report for determine negative settlement & positive settlement (P& L ) in F&O TRADING

    • Nithin Kamath says:

      If you are trading at Zerodha, the tradewise turnover summary has all calculations already done. You just have to use that sum total.

  33. Anwar says:

    Yes i am tradding with zerodha Can u pls explan with an example
    For p&l

  34. Anwar says:

    Thanks for reponding
    Just need to know which amount be taken in possitive settlement and negative settlement
    Becouse in our tradewise report turnover shows total sales +profit + loss is this turnover only for audit purpose?
    In p&l taking only pure buying value in dr and sale value in cr side

    • Nithin Kamath says:

      If you are looking at the turnover statement, all calculations are already done. Yes this is required only to determine audit. Everything is explained on the blogpost link or on the post above.

  35. Anwar says:

    Umm thank u

  36. Abhishek says:

    Hi,
    For tax audit report in case of FNO trades, my CA is calculating Purchases and Sales and difference gives the P&L for one of the reports (income and expense sheet). Note: this is not question for turnover, but only purchase and sales

    Now for options, purchase and sales is taken as sum of all premium paid during buy and premium received during sales respectively. Premium paid is price of contract x contract quantity

    How do we calculate the same for futures? Price of contract X contract quantity is going to be HUGE. Eg. 1000 QTY @ 8000 Nifty Fut will be 80 lakhs and 100 such contracts gives 80 crore purchase– you get the point… So, again, how is the purchase and sale value of futures to be calculated? I think Purchase could be negative differences and Sale as sum of all positive differences (and then turnover will be higher than sale and purchase individually). Other way is to actually sum all the initial margin paid as purchase and Purchase+MTM as sales – but I don’t find such a report from Zerodha.

    Please let me know your thoughts on this.

  37. Shailesh says:

    How to consider trade for turnover when its carry over to next financial year?

    • Nithin Kamath says:

      You can MTM the trade to 31st March, and then consider the closing price of one FY as the opening price for the next year. Whatever the profit/loss until 31st march can be part of previous year, and from 31st march till end of next FY as the P&L.

  38. VED PRAKASH says:

    i have total pension 2 lac per annum. in year i did trading and incurred loss of 1 lac. now IT department sent notice stating they have noticed PAN base transaction in stock market and why not ITR filled. I replied I have no taxable income. It was ok or I need to reply something else. please guide

    • Nithin Kamath says:

      Yep that should be good enough

      • ved prakash says:

        The nitin. Could u please guide on one thing.

        I have recd lic and icici prudential maturity last year for Rs 40000 each. my pension is 2 lac per year. now in which column of itr1 should I show this amount to get exemption.

  39. Siddharth says:

    How do I fill balance sheet and P&L if I only have intraday losses / gains in business activity

    • Nithin Kamath says:

      Siddharth, how to fill a balance sheet, it is best you consult a CA for that. You can show all positive turnover as gross receipts and negative turnover as Gross sales, and put this under speculative business (if intraday equity trading).

  40. Siddharth Jain says:

    Hi,
    I have STCG and salary income and intraday losses. But I want to go for 8% profit for intraday. DO I need to put this in no accounts case in P&L and balance sheet. Also do i need to put anything in the section 44AD in Schedule BP

  41. vasanth says:

    Iam a nifty futures full time scalper from Tamilnadu.
    For Eg: If iam buying 75Lot of nifty futures @8000 and selling @8010, my profit will be 539rupees.The costs show below for the reference
    Brokerage-40
    SEBI Charges-2.44
    STT-Only on sell side-61
    Turnover Charges-25.61
    Service Tax-9.19
    Stamp Duty-73.17(0.006%)
    Total Cost-211.41
    If iam declaring as the Non-speculative Business with proper balance sheet & the FY15-16 gross profit crosses above 2.5Lakhs
    If so, can I rebate this paid 211.41 rupees/Lot.. Which mean if I done 75000Lots for the entire FY & the tax can be claimed max upto the level of 2.11Lakhs.
    Kindly clarify.

  42. neeraj talwar says:

    I am incurring losses on intraday trading and some short term capital losses which I want to show in capital gains , now since I am getting intra day losses I come under audit us 44ad and if yyes can I prevent ii by showing any other income as losses are of around 15000 and I have no other income ( I am within slab rate) . please help very tensed.Also please tell where to show intraday loss in ItR 4 (p/L schedule) weather in sales column. Or other income column.

    • Nithin Kamath says:

      If your net income for the year is less than 2.5lks, there is no need of an audit. You can show all positive turnover as gross receipts and negative turnover as Gross sales, and put this under speculative business in ITR4.

  43. Romeo says:

    Respected Sir,
    First of all I would like to thank you for helping and giving instant and accurate replies to queries of so many people.
    Sir my query is that I have (FnO) loss of rs 138000 and (intraday equity) profit of rs 8000 for the financial year 2014-2015, and my tax preparer has shown the overall carried forward loss of Rs. 130000.
    If I make profit in FnO in this current financial year, then my carried forward loss for Fno is rs 130000 OR rs 138000 ?
    Thank You.

    • Nithin Kamath says:

      Your carried forward business loss is 138000, upto this can be setoff this year against busines (F&O) profit. Hopefully you had declared Rs 8000 as speculative business last year, and paid taxes on it. You can’t setoff or combine Equity and F&O profit/losses.

      • Romeo says:

        Thank u Sir for your quick reply. Sir this year i will be filing my itr-4 form on my own. i am a trader and i trade from home. i have a doubt regarding the P&L in itr-4 form. I have used java utility to fill details in P&L in itr-4 form. i have attached pictures. Can you please tell me if this will be rejected or not ? Thank You.

  44. Romeo says:

    i have only mentioned my gross profit in F&O and then all the brokerage charges, will it be accepted like this.. Thank You.

  45. Ramesh Kumar says:

    hello, I am doing business of textile articles having turnover of about 50 laks and paying I tax on nett 8% of of TO less 80C deductions and mentaining sales purchase accounts and Bank Accounts only Is fine or I have to prepare P/L account and balance sheet also which is dificult for me Kindly adviser

    • Nithin Kamath says:

      Ramesh, we are keeping this module only in the context of trading/investing on the stock markets. Suggest you to consult a CA.

  46. parag says:

    Hi Sir
    I have a net loss of 175000 in F &O (equity, currency & commodity) . But my other net income is less than 250000 for Bank FD interest. No other income. My turnover is less than 1 crore. Do i need to get the accounts audited? THanks in advance

  47. Sumit says:

    Hi Nitin, request you to explain the taxation of Gold ETF and Liquid BEES ETF trading. Can I calculate turnover for these like Equity trading or only capital gains tax applicable for these.

  48. Rajkumar Rathore says:

    Please support Nithin’s campaign https://www.change.org/p/minister-of-finance-exclude-business-of-trading-in-securities-and-derivatives-from-section-44ad. I really want it to succeed. It is really such a pain in the ass.

  49. SARAVANA PERUMAL D says:

    Hi Nithin,

    I take notes about turnover concept in excel sheet. I uphold the screenshot here. is this correct or not? If not correct means. Pls correct me.

    Thanks in advance.

  50. RAJESH VERMA says:

    As you say turnover for the purpose of section 44AB in case of Intraday Share trading is sum total of absolute value of both positive and negative profit and for section 44AD also we have to consider this so far as turnover is concerned. Now, suppose one has actual loss from intraday share trading of Rs. 5000 and turnover as per above calculation is also 5000, so to avoid audit he had to show profit @8% onf 5000 i.e.Rs. 400 u/s 44Ad. Now question is in case he is maintain proper books of account, how to show this profit of Rs. 400/- (u/s. 44AD) instead of loss of Rs. 5000 (Actual loss) in accounts and balance sheet.

    • Nithin Kamath says:

      Rajesh, if you are showing presumptive income there is no question of maintaining books. You show a presumptive income because you don’t maintain books. If you are maintaining proper books of account, then you will need to use ITR4.

  51. Arvind Garg says:

    Hi Mr Kamath,
    Really appreciate your efforts in making this thread such an informative read.
    Sir my queries:
    1.) U/s 44AB if compulsory audit is required if profit is less than 8% of turnover less than 1crore, then is this profit to be considered ‘Gross’ or ‘Net”. For example if my turnover is 50Lacs and my Gross Profit (before reducing business expenses) is 5Lacs, which is 10% of turnover, and my expenses are 1.5Lacs thus resulting in Net Profit of 3.5Lcas which is 7% of turnover. Which profit is the benchmark to find out eligibility of getting an audit.
    2.) I am a partner in a profit earning business because of which until now I had been filing ITR3. This year since I have proprietary F&O business I have to use ITR4. Having gone through this form I was overwhelmed seeing the number of schedules. I want to know if there are different schedules to fill in for both types of businesses or do I have to club in income from both these sources and file in a single schedule? Ideally information from my partnership firm should be filed in a separate schedule as it is taxed separately. Maybe I have missed the appropriate schedule. Please can you highlight it for me?

    Thanks for you time and effort.

    • Nithin Kamath says:

      1. Net profit.
      2. Yes ITR4 has to be used. You will have to club all income, exemptions can be specified in the respective schedule.

      • Arvind Garg says:

        Thanks for responding.
        So to include interest received on capital and other remuneration from my partnership firm I add these figures to sale side of the proprietary P&L statement (which is called Positive Settlement in your sample ITR4)?
        Secondly, on going through ITR4 form I don’t think the net turnover figure (favorable + unfavorable + sale premium of options) is used anywhere. We just use positive or negative settlement figures. So how would the ITR dept know whether we have audited our accounts or not where it was required or not? Or do these things become important only if the case comes under scrutiny or when the dept has asked for an audit on demand?
        Thanks!

        • Nithin Kamath says:

          1. Interest, remuneration, etc will go under different heads on the ITR4. Suggest you to visit a Chartered accountant for this.
          2. The entire filing of returns is like self policing, you have to declare if you are getting the books audited or not. Like you said, these things become important in case of scrutiny.

  52. Kraj says:

    Hello Nithin,
    This question is from my friend.
    He has income of 3.5 lacs from private tutoring (not salary). and has put 1.5 lacs under 80 g .
    his F&O loss is 16 lacs.
    What is his tax liability and is audit required?

    Thanks

    • Nithin Kamath says:

      If you are showing this 3.5lks as a business income, you can netoff the loss with this gain. Essentially he will have 12.5lks worth of loss that can be carry forwarded to setoff against future profits.

  53. ShreyaDR says:

    >>Your tax liability does not get affected by your turnover.<< if that is the case, buying & selling one lot of Nifty future and squaring off those( profit / loss whatever) on daily basis will not attract attention of Income Tax department?

    • Nithin Kamath says:

      Exchanges share trading volumes to IT department. What will get attention is you trading the markets but not declaring it while filing your ITR

      • ShreyaDR says:

        ok…now how should i declare that? i m housewife and declaring the same till date..only this year i started trading in fno exclusively. To claim refund of TDS, i hv filed return also for AY 2015-16. Now do i need to choose myself between Trader or housewife for AY 2016-2017?

  54. Jayaprakash says:

    I have received a love letter u/s 139(9) for defective return for FY 2014-15. I would like to know how to prepare the P&L Account. As per Tax P&L Statement from my Zerodha Account – assuming the figures are (a)Futures Turnover 100,000, (b)Futures Realised Loss is (-)10000, (b)Futures Unrealised Profit is (+)3000, (d)Total Charges is 1000 — What figure should be shown on Income side of P&L Account and what figures on Expense side?

  55. Krishnan Nair says:

    Is there any change in the Total turn over of ! crore for audit Purpose in the recent budget . Has it been changed to 2 crores for traders also?

  56. MSP says:

    Thanks Nithin for your crystal clear guidance, i have collected all the materials mentioned by you and ready with Balance sheet and P&L. I had mentioned earlier also, varsity and service are the solid pillars of Zerodha.

  57. Yogesh says:

    Turnover in F&O?
    Say I bought 100 Nifty Apr future on April 1st @ 7600 and Sold on April 23rd @ 7900.
    Means my profit is 7900-7600=300*100= 30000
    And for IT calculation my Turnover is also 30,000/-
    or I have to take a total of positive and negative MTM on open position between trade opening and closing date?

    Thanks

    • Nithin Kamath says:

      You can just take this Rs 30,000 as turnover. Again like explained above, you can either take tradewise turnover or also do contractwise as well.

      • Yogesh says:

        Hi!

        What is trade wise turnover crosses 1 cr but contract wise comes around 75 lakhs… To avoid audit all will prefer contract wise only.?

        Thanks…

        • Yogesh says:

          Hi!
          What if* trade wise turnover crosses 1 cr but contract wise comes around 75 lakhs… To avoid audit all will prefer contract wise only.?
          Thanks…

          • Nithin Kamath says:

            You will have to take that call Yogesh, either way is okay to calculate turnover. Btw from this FY, the limit has been increased to Rs 2 crores for audit.

  58. Jay says:

    In the sample ITR4 form that you have provided, in the Profit & Loss account in the “Analysis of PL reports” tab – you have split the expenses (i.e. brokerage, STT, etc.) between F&O and Speculative trades by the proportion of each turnover to the total turnover.

    Since I want to show my short term trades as a business and not as STCG, how do I split the expenses between speculative & short-term equity trades?

    • Nithin Kamath says:

      F&O is non speculative. So you can show your short term trades as non-speculative business and mention it the same way on the ITR4.

  59. DS6494 says:

    assume that a person does trades 30 trades in F&O, per month that means average sale at contact value of 5 lacs and buy value of 5 lacs +/-, that makes turnover of 300 lacs ( my assumption) or 150 lacs ( as per zerodha varsity )
    which is correct one
    whether dealings in F &O is considered as speculative business or non speculative business ,? as only margin money needs to be arranged through broker or even 50 % as collateral from DP is OK,
    secondly as STT is paid , in bill of F&O to Govt.its consideration either profit or loss should be as STCG , ( a expiry is either 1 /2 /3 month is below than prescribed holding period of 1 year)

    • Nithin Kamath says:

      hmm.. your assumption of turnover is wrong. Like I have mentioned in the post, turnover is gross sum of all profit and loss. It is not contract value of turnover.
      F&O is non-speculative business.
      No, trading from F&O can’t be considered under capital gains. It is to be considered as speculative business.

  60. Manish Singh says:

    Hi Nithin,
    Before i ask my query i want to say my big thanks to you the way you are proactive and nice to clear all our doubts in this forum.
    I am an existing trader on Zerodha and an IT professional and use to do all kind of tradings(Interaday,delivery and FNO) as a trader mostly and dont keep position for too long but it is like a side business for me.
    My Tax P&L for FY 2015-2016 is as follows:
    Equity
    ——————
    INTRADAY TURNOVER: 38,750.85
    INTRADAY GROSS PROFIT: 10,001.85(Profit)
    SHORT TERM TURNOVER: 14,43,844.85
    SHORT TERM GROSS PROFIT: -33,214.05(LOSS)
    TOTAL CHARGES :8,199.97

    F&O
    ———–
    TOTAL TURNOVER: 3,99,235.00
    TOTAL GROSS PROFIT : -1,25,245.00(LOSS)
    TOTAL CHARGES : 23,501.98
    So from above it is clear that except interaday trading i have incurred losses in both Delivery and FNO.
    if aggregate all my turnover it is way behind 1crore figure but combind losses will be more than 2lac(including taxes,brokerage,etc)
    Now my question is which ITR form will be required to fil e my tax return and do i need get my account audited?
    My total income is above 2.5L.
    Thanks,
    Manish

    • Nithin Kamath says:

      Since you have traded intraday and F&O, use ITR4. You can get your books audited, but since your turnover is so little you can declare 8% of turnover (intraday+F&O) as profits and avoid an audit. So on 4.5lks turnover you can declare around 40k as profits. Even if you are in the 30% tax slab, that would be around 12k in taxes. An audit will probably cost you a little more. So you can opt for either, preferably get an audit.

      • Ramesh says:

        Hi Nithin – in one of the comments in the next chapter (time stamp August 9, 2015 at 5:06 pm) you have said it is not possible to do presumptive income in ITR4, it can only be done in ITR4S; but here you are suggesting do presumptive income while using ITR4… which one is correct?

        • Nithin Kamath says:

          Ah my bad, misunderstood your question. Presumptive income only possible on ITR4S.

          • Ramesh says:

            Thanks for the quick reply Nithin. So just to clarify my understanding: Capital Gains and Income from business are 2 separate topics. IT law does not state anywhere that having or not having CG in anyway changes the way your business income tax calculations work. However, there is no ITR Form to claim both CG and presumptive income. So even though the IT law is fine with it, just because there is NO ITR FORM to do it, we cannot claim both CG and presumptive income ?

          • Nithin Kamath says:

            Yep you are right. Can’t claim CG and presumptive income on ITR4S.

  61. Manish Singh says:

    Hi Nithin,

    Thanks for the reply.
    just wondering about do i not bother with short term turnover(14 lacs+ here) as well while including it together with intraday+F&O turnovers and pay 8% taxes on all of them to avoid audit or short term turnover is not considered for audit.Please answer it.

    • Nithin Kamath says:

      Short term trading can be shown under capital gains (and not business). If you decide to show capital gains, question of turnover doesn’t come into place. Turnover only for business.

  62. Manish Singh says:

    Actually 8% taxes in above comments should be read as showing 8% profit on (intraday+F&O+ short term) turnovers and pay taxes on them to avoid an audit.

  63. Jay says:

    You have said that for intraday & F&O, you show the positive turnover & negative turnover as gross sales & receipts. If short-term trades are also declared as business income, how are they shown up in gross sales/receipts? Since every turnover for short-term trade is positive, how does one show it?

    • Nithin Kamath says:

      If you are showing short term equity as business, then again buys under receipts and sales under sales.

  64. Akshay says:

    Hi Nithin,

    Thanks so much on behalf of everyone for guiding us.

    I have few queries and I would request you to answer all please:
    1) If we dont trade in F&O, only trade intraday & delivery of equity, can we merge intraday & delivery turonver & their profits, and show in ITR form 2 instead of ITR form 4? as intraday is speculative… OR can we show intraday in Income from Other sources in ITR 2?

    2) My only source of Income is F&o, intraday & delivery of equity, and hence filled ITR 4, ……… Below is my example figures
    F&O turnover 60 lacs with -10,000 loss, Intraday turnover 20 lacs with 20,000 profit & equity delivery turnover 90 lacs with 2,00,000 profit
    —can I show equity delivery turnover & its profit in STCG?
    —if yes, total business turnover will be (F&O + intraday) and including equity delivery or excluding equity delivery?
    —should I need to fill Balance sheet and P&L both?
    —do I need to just fill ‘No account case’ for Balance sheet and P&L?
    —If yes, for Balance sheet, what details exactly needs to be filled in Amt of sundry debtors,creditors,stock-in-trade & cash balance?
    —If yes, for P&L, what details exactly needs to be filled in Gross receipts, Gross Profit, Expenses? (as per example figures)

    3) As per my above case, will audit be liable and if yes, please let me know the reason?

    4) Suppose, I am not liable for audit and still income tax dept gives notice because of computer algorithm issue or whatever (turover is less than crore & profit is less than 8% and total income is below 2.5 lacs)?

    5) In the above case, we need to show Yes or No for below question asked i.e
    Are you liable to maintain accounts as per section 44AA? (Select)

    Thankssss in advance.

    • Nithin Kamath says:

      1. IF you do intraday equity trading, it is speculative business. You will have to use ITR4 to declare this. You can use ITR2, only if you have capital gains (short term equity trading) income.
      2. Yes you can show equity delivery as short term capital gain. There is no concept called turnover for capital gains, only if you show it is a business income.
      Excluding
      Yes, best to fill in BS and P&L
      Since in your case, even though turnover is less than 1 cr and profit <8%, u have no taxable income. Hence no audit required. So you can fill No account case, but like I said best to fill it.
      Exactly what needs to be filled, I have explained in the chapter on turnover/audit. You can look at the sample ITR4 form as well.

      3. No, as explained above
      4. If you still get a notice, you have to meet the ITO and explain. If you were to ask me, it is best for everyone to get an audit done.
      5. No

  65. Akshay says:

    Thankyou….
    To be precise, my salary income is 225000, bank interest is 2600, dividend on equity is 2500, STCG is 20000 & intraday turnover is 58100 with 25000 profit. 80C is 11000 & 80TTA is 2600
    Filling ITR4
    1)Is tax audit applicable in this case? –(I dont want tax audit and its fees is too expensive)
    2) And in this case can i ignore filling Balance sheet ? and just fill P&L (no account case) i.e Gross receipt – 58100 & gross profit as 25000

    • Nithin Kamath says:

      1. No audit since turnover less than Rs 1 crore and profit > 8% of turnover
      2. Yep, no need to fill B&S

      • Akshay says:

        1)As you mentioned, I will just fill P&L (no account case) i.e Gross receipt – 58100 (intraday turonver?) & gross profit as 25000
        Correct? and what can be filled in Expenses? Can I fill monthly internet charges of Rs. 500 p.m under expenses?

        So as I understand, please let me know if I am correct on all the below points:

        2) Short Term capital turnover is not to be considered while calculating total business turnover.

        3) Tax audit is required when turnover of business income(F&O+equity intraday) is more than 2 crore.

        4) Tax audit is required when turnover of business income(F&O+equity intraday) is less than 2 crore and profit is less than 8%.

        5) Tax audit is NOT required when turnover of business income(F&O+equity intraday) is less than 2 crore and profit is less than 8% and total income(incl. business profit,salary,short term gain etc. minus 80C, 80TTA etc.) is less than 2.50 lacs (minimum tax slab).

        6) Tax audit is NOT required when turnover of business income(F&O+equity intraday) is less than 2 crore but profit is more than 8% irrespective of whether total income is less than or more than 2.50 lacs (minimum tax slab).

        7)And MY Last question:-
        Now considering a scenario where is business turnover is less than 2 crore but profit is more than 8%, under which circumstances should we have to fill the complete Balance sheet and P&L statement.
        In which condition a person is required to fill just P&L (no account case).

        • Nithin Kamath says:

          1. Can’t help you on all details on what you have to file. Yes you can show all expenses that you incur towards trading like internet, maybe the books related to trading you buy, depreciation of your computer, etc.
          2. It is short term capital gains, and hence no turnover need to be calculated.
          3. From FY16/17 it is Rs 2 crores. For FY 15/16 it is still Rs 1 crore.
          4. Less than 1 crore and profit less than 8% for FY15/16
          5. Yep if turnover less than 1 crore and if not in tax slab, no audit requried.
          6. 1 crore and yes.
          7. It is mandatory only if turnover is more than 1 crore (Rs 2crore from FY16/17) or if less than Rs 1 crore and profit less than 8% of turnover. Not required if you don’t fall in tax slab in this case (less than Rs 1crore case)

          • Akshay says:

            Thankyou for the response.

            While I was filling ITR 4, STCG is 20000. And under CG sheet, (column F. Information about accrual/receipt of capital gain), upto 15/9- my STCG was negative -30000, 16/9 to 15/12- it was positive +60000, 16/12 to 15/03- it was negative -10000, 16/03 to 31/03- it was 0………….. As in the excel sheet, we cannot enter negative figures, so in this case, can I leave upto 15/9, 16/9 to 15/12 as 0 ….. and 16/12 to 15/03 as 20000 ?

          • Nithin Kamath says:

            Yep, u can.

  66. Arun says:

    Dear Nithin Sir
    I was wondering if you have any idea how much a CA charge (approx. range) for auditing my accounts? I just want to be mentally prepared to know beforehand about this? I searched on net but no satisfactory answer. Can you please provide some range based on your experience?

  67. Sheeraz says:

    Dear Nitin Sir.
    I have a doubt, I am a salried person and in tax slab of 20%.
    I do trading in fno and my annual turnover is less than 1crore and running lossesof 2lac in annum. Should i get my tax audited or not. And should I use ITR4 for filing, as I want to carry forwardmy losses

    • Nithin Kamath says:

      Yes, you will have to use ITR 4 and get it audited also.

      • Sheeraz says:

        And sir what if I dont want to carry forward my losses

        • Nithin Kamath says:

          Even then Sheeraz, it is best to declare all trading activity and file your returns.

          • Sheeraz says:

            I will declare the trading activity but sir I dont want to get it audited , already in loss n less than 1cr turnover. Again audit going to cost 10k. Is it possibe to file return and declare trading activity without audit in my case..

          • Nithin Kamath says:

            Without audit you will not be able to carry forward the loss. When you are filling the ITR4, it will not allow you to file without an audit in your case.

    • Harini says:

      F&O is non-speculative business income. ITR 4 for tax audit/ ITR 4S for non tax audit is applicable.
      Non speculative business income will be taxed as per your slab rate.
      Non speculative business loss can be carried forward and set off in the future years against speculative/ non-speculative gains.
      To carry forward loss, you need to file ITR by July 31 for non tax audit and Sept 30 for tax audit cases.
      First, calculate your turnover from F&O trading. It is the sum of all profits and sum of all losses, both added. (Profit Rs.30000, Loss Rs.50000 implies Turnover Rs.80000).
      If this turnover is more than 1 crore, you need to get tax audit done.
      If turnover is less than one crore, you may show profit @ 8% of turnover(No tax audit required)
      If turnover is less than 1 crore AND actual profit made is less than 8%, any of the following options may be used:-
      1. in case of profit, to show the actual profit, tax audit is to be done.
      2. if loss is made, to claim loss in the IT Return and carry it forward for set off against gains of future years, tax audit is to be done
      3. you may still use benefit of Sec 44AD and compute profit @ 8% of turnover and pay tax according to your slab(No tax audit required) Also, you can’t carry forward loss under this option.

  68. Atul says:

    Hi, Last year I made a loss of Rs 10,000 in options trading, where the turnover is calculated on premium paid and received, which was nearly around Rs 20,000 only. But the CA asked me to go for an Audit. IS it necessary in this case or not? please help!

    • Nithin Kamath says:

      If your option turnover is only Rs 20,000, declare 8% of this as profits. This way you can avoid an audit. It is best you speak to your CA and do this only if he gives a green signal.

  69. Sooraj Jogendra Mishra says:

    Sir, My last year loss is arount 1,90,000 and my turnover is around Rs 53,00,000…do I require to conduct an audit or filing ITR-4 is enough…??

  70. Sooraj Jogendra Mishra says:

    Because This was the only source of my income and I do not have any other source of income (except annual stipend Rs 22000)
    whatever trading I did was from my savings ( Rs 2,00,000)

  71. Grey lively says:

    I trade only fno I am trading from March 2016 my turnover is 40 lakh and loss of 11500 broker charges 8000-do I need to file for it return I am considering to file from next financial year

    • Nithin Kamath says:

      It is best to file IT returns, if you don’t there are higher chances of getting a scrutiny notice from IT department. Exchanges share trading data with IT department.

  72. Ajay Gupta says:

    I have around 1.1lac income from pension. I have loss in commodity markets Rs 8000 Turnover around 3.0 lac. Intrady Equity Loss Rs 1400 turn over Rs 50000. Loss in Forex Currency Market Rs 1950 Turover around 5.0 Lac. Which ITR form I need to fill and whether I need to get my accounts audited

    • Nithin Kamath says:

      ITR4, and since you have no taxable income, no need of audit. But if your turnover is over Rs 1 crore, you will need an audit (from 2016/17 this limit is over Rs 2 crore)

  73. vimal says:

    I have an tution income of 1.4 lakh/year I have no other income what it form I can fill

  74. Ajit says:

    hi, I have an delivery nse volume of 98.3 lakhs and a loss of 60K only, can I fil in itr4 only as a short term capital loss as60k instade of putting full turnover figure of 98.3 lakhs,can -figure r enterd by me in excel sheet or not,any chance of it query if I don’t put full delivery volume of 98.3 lakh and give only loss figure of 60 thousand.

  75. Priya says:

    Hi Nitin

    Query on Turnover Calculation on options premium

    Case 1: BANKNIFTY Call option of 1 LOT bought @312 and sold @ 330
    Buy Amount: 9,360.00 Sell Amount:9,900.00 Profit: 540

    Case 2: Put option
    Buy amount: 1320 Sell amount 450 Loss of 870

    Explain on how is turnover calculated for put and call options , in case of profit and loss

    Thanks in advance

    • Nithin Kamath says:

      Case 1: profit of Rs 540 + Sell amount of Rs 9900 = 10440
      Case 2: loss of Rs 870 + sell amount of Rs 450 = 1320

  76. Hari Priya says:

    Hi Nithin.
    Could you provide a P&L a/c for Income Tax purpose for the following details.
    Equity: Buy 800000 , Sell 830000
    F&O:Futures- Buy 10Cr Sell 8.6 Cr Options- Buy 9 Cr Sell: 7cr
    Commodities: Buy 2.5 Cr Sell 1.2 Cr

    • Nithin Kamath says:

      Your P&L will be available on our reporting tool (if you are trading at Zerodha). Check for tax P&L by logging into Q.zerodha.com

    • Hari Priya says:

      My friend is trading at Zerodha. Iam filing his IT retun. I need your guidance what are the debits and credits to P&L incase of F&O.
      If -ves and +ves total is Turnover , then what is to be debited to show the Net Loss on F&O Transactions.

  77. VISHAL says:

    Dear Sir,

    I am sorry I didn’t understand your turnover sheet for Option.
    Can you please explain the turnover for the following transaction.
    Nifty 15Jan8800Pe Bought @ 9.45 on 20/01/15
    and sold @ 12 on 24/01/15.

    thanks
    Vishal

    • Nithin Kamath says:

      Two ways to do this

      1. Just use the profitability of the trade for calculating turnover. In ur case profit of Rs 2.55 x lot size as the turnover.
      2. If you want to be extra careful, (2.55xlot size)+ (12xlot size)(selling value of options)

  78. VISHAL says:

    great help.

    thanks a ton

  79. Prasanthi says:

    Govt has made a modification in “Presumptive taxation scheme” for Section 44AD. Is it applicable for 2015-16 financial year…i.e. for the IT returns we are about to file now in this month? Can a Futures positional trader who made much more than 8% profit on turnover take advantage of this scheme and file ITR4S instead of ITR4….Or it is only applicable from FY2016-17 only.?

    • Nithin Kamath says:

      This year (from FY 16/17) the limit for 44AD has been increased to Rs 2crores, but this presumptive income option upto Rs 1crore of turnover exists. It is a grey area – a loophole of sorts, if you are saving a lot of taxes by taking this benefit of 8% of profit, I’d say it is probably best not to use this. Do discuss this with your CA.

  80. Prasanthi says:

    Thank you Nithin,
    I am unable to find out, where can I add the details of “Income from LTCG”, ‘Interest on Savings account’, Interest on Fixed Deposit’, ‘Dividend income from equities’ in the ITR 4S….I am confused…

  81. abdul azeez says:

    Sir
    can you suggest CA in Mangalore ?

  82. Nikhil says:

    I want to declare Internet expenses, but i don’t have a payment receipt for that, so can i declare it without receipt?

  83. kunal says:

    Please give some guidelines on depreciation, i.e. how to calculate it, and how to declare ?

  84. D says:

    Dear sir, earlier I trading in f & o through other broker. Now I m with Zerodha. When I see my trading statement given by that broker, I see credits and debits on that statement. My question is total of debits and total of credits my total turn over? Is the difference between total credit and total debit my profit/loss?

  85. D says:

    dear sir, can we show f & o trading’s profits as short term capital gain? (to avoid an audit).
    thank you in advance.

  86. rohit bhatt says:

    Sold nifty 7900 put at Rs. 30 on 1-June-2016. Option expired worth less on 30-June-2016. Now (1) What is the turnover for this?

    Sold Nifty 7800 [email protected] Rs. 30 on 1-06-2016. Option expired worthless on 30-06-2016. Total premium received= (75*30) =2250. (1) What is the turnover for this trans? Is it 2250+2250 or only 2250? (2) Does ZERODHA charge on expired leg of the trans. ?

    (2) Does ZERODHA charge for expired tranaction?

    • Nithin Kamath says:

      1. Two ways you can determine, which one to choose is on you as explained above.

      Selling value of option + profit from trade or just profit from trade. So either 2250+2250 or 2250.

      2. NO charges on expired transaction which is worthless.

  87. rajeev says:

    Hi,
    1. is networth calculated the same that we need to enter in the “Proprietor’s capital” in the BS section of the ITR4. Thanks.
    2. for Fixed assets – should we include only assets purchased during the FY in consideration for tax? thanks.
    3. What is “drawing ” under the section “schedule A Capital account” in the sample ITR4 attached by you in this tutorial. thanks.

    • Nithin Kamath says:

      1. Networth and propreitor capital is the same.
      2. Opening fixed assets + addition – sold – depreciation
      3. Money drawn from income for personal purpose (like household expenses)

  88. afjal says:

    query 1
    on turnover of more than 1 crore in F &O trancaction and loss of 5 lakhs with other interst income at 3 lakhs , Whether tax audit is required and which itr form is to be filled
    query 2
    in case of itr 4 ,will Balance sheet will cover all personal assets including residential house etc. etc. ?
    in case of itr4 , where the net loss to be shown ? , whether under other expenses with description or positive MTM as sales and negative MTM as purchases . There are zero expenses. Should it be shown as no accounts needed case

    query2
    In

  89. TAPAS KUMAR BASAK says:

    Request u to answer four questions.
    1.I have purchased Nifty50 on 01.07.16 300 units at Premium of Rs. 150 per unit and sold same 300 units by squaring off on the same day at Rs. 160- per unit. I think my turnover value is difference of Rs. 10- x 300 units.
    2. I have purchased Nifty50 on 01.07.16 300 units at Premium of Rs. 150 per unit and sold same 300 units by squaring off on the 2.7.16 at Rs. 160- per unit. I think my turnover value is difference of Rs. 10- x 300 units.
    3. I have purchased Nifty50 on 01.06.16 300 units at Premium of Rs. 150 per unit. The contract expired on 30.6.2016 at a sale (premium) price of Rs. 160 per unit. Here, I think my turnover value is Rs. 160×300 which is premium received.

    4. All above calculation is for determination whether TAX Audit provisions are attracted or not?
    However for Profit and loss Account, Purchase Cost of premium wiill be debited and Premium received on Sale will be credited alongwith additional impact of brokerage, STT etc.

    Would u kindly comment ?

    • Nithin Kamath says:

      1. yep
      2. yep
      3. No, same Rs 10 x 300 units
      4. Yep, turnover is to just determine audit requirement. Yes P&L etc is done including all costs, and etc.

  90. Aky says:

    My speculative gains are Rs 2.9 Lakhs and Short term capital loss Rs 2.5 lakhs. And,my Short term trading turn over[total sell value of all short term trades] is around Rs. 2.55 Crores. The trading is my major source of income other than interests., as I am retired. In previous FY 2014-2015, I filled in ITR4 ,my speculative gains under Speculative Business income and STCG under head Capital Gains and paid 15% over it. After new CBDT circular, I am confused whether I should fill my losses under head Capital gains and carry them forward or fill them under business losses, as frequency of trade was high. Please suggest

    • Nithin Kamath says:

      The new circular is actually quite good. It now gives you the tax payee to decide how you want to show this, capital gain or business income. Whatever way you show it, ideally you have to continue the same way in the future. If you are doing very actively, i’d suggest to show as business income.

      • Aky says:

        Thanks for replying. My Net tax liability is zero but short term trading turnover is 2.55 crore , Do I still need an audit ?

        • Nithin Kamath says:

          Yep, if it is more than 1 crore for FY15/16.

          • Aky says:

            Ok. I was going through all the articles and you have mentioned in some comments that If Net Tax liability is zero or no taxes are need to be paid, then there is no need for audit. Please clarify,

          • Nithin Kamath says:

            If turnover is more than Rs 2 crores (Rs 1 crore until last year), audit is mandatory. If turnover lesser, and there are no taxes under any head to be paid, then no need of audit.

  91. Sivamani says:

    Hello Nithin,
    This is the nice article i have seen till now

    But still i have some queries

    1. I have salary income of 4 lakh and i have loss in F&O nearly 1.17L is tax audit applicable to me..?

    2. How should i do my P&L
    should i enter sales 224716
    (-) puchases 342020
    Loss 117303
    (or) should i show -117303 as my turnover as well as loss in my P&L..?

    Thanks in advance

  92. aarif says:

    sir, I am actively trading in nsecash and fno my question to u sir,
    1)I have an btst del vol of 1.9cr and loss of 3.45lakh can i fill this detail in itr4 as a capital loss and not audited for my books
    2)if simply file the itr4 without audit and only filed the colume by losse figure of 3.45 lakh and not giving full detail of turnover
    and filled the itr then what will happened ?
    thanks

  93. Rachit Sharma says:

    Hello,
    I am doing trading (MCX Non-Agri Commodity) since September 2015.
    Earlier it was through other brooking company’s account from September 2015 to December 2015.
    After that I’m doing trading (MCX Non-Agri Commodity) through Zerodha account and very happy with the service 🙂 since December 2015.
    My query is that during trading through previous company’s and present account I’ve incurred losses. So do I have to submit ITR even I’m incurring losses in MCX Non-Agri Commodity trading.
    Loss of almost 2+ Lacs and Profit of almost 50+ Thousand INR. (Approx Figures)

    Both MCX Non-Agri Commodity trading accounts were opened with same PAN no.

    Also I’ve opened an Equity, Dmat account with Zerodha in previous month but not Started trading as I’m learning the basics right now.

    Please provide me some info in this issue, Info is much needed.

    • Nithin Kamath says:

      Best to declare the losses on ITR. Do go through all the chapters on this module, you have all info that you need to know of.

  94. Gaurav says:

    Hello,
    If the non speculative income for the year is 4lacs and i am taking 80c deductions of 1.5lacs, so my taxable income becomes nil. Also the turnover is below 1cr, will the audit be required ?

  95. Sachin says:

    While it’s great otherwise, your turnover statement doesn’t provide dates for short-term tradewise turnover. Why is this? The CA said that it was necessary.

    • Nithin Kamath says:

      Hmm.. don’t think turnover statement can have dates, as in which date do we put, entry or exit?

      • Sachin says:

        Well, the other segments within the turnover statement have dates, except for the short-term turnover, so I guess that’s what he was talking about.

  96. javed02 says:

    Hi,
    I am salaried person with annual income more than 10 lakhs. in last financial year I was involved only in F&O trading with turnover around 22 lakhs and loss of 26 thousand rupees.

    My question is do I required to be audited or I can simply file ITR4 before 31july ?

    thanks.

  97. Ganga Charan says:

    You have opined that gold etf could be treated as equity for turnover calculation. In that case gains for etf held more than one year is tax exempt

    • Nithin Kamath says:

      Ganga, I have corrected my comment on the above post. “Ah my bad, I forgot about Gold ETF’s and liquid bees. Index ETF’s (anything based on stocks), taxation works just like stocks. Gold and Liquid bees, taxation works like for debt funds. What that article says is right. Yes you can consider turnover as sales value for non equity ETF’s.”

  98. Ganga Charan says:

    I got my account audited because turnover calculated based on full value for commodity trading. However,turnover will be below one crore ,based on sum of positive and negative difference for ay 2014-15 and 2015-16. Can I get my accounts audited in revised manner.presently account for ay 2014-15 is under scrutiny.

    • Nithin Kamath says:

      AY 2015/16 you can revise the return if filed within time. AY 14/15, until the case is presented to the assessing officer, you cannot revise. IF the AO agrees you can revise.

    • Ramya shetty says:

      ganga , how much it costs you to get your account audited? because i am also thinking about it. thanx

      • Nithin Kamath says:

        Anywhere upwards of around Rs 6000 and can go much higher based on the size.

        • Ragavendran says:

          Hi Nithin,
          I have an intraday loss of Rs. 1.6 lakhs in the FY 2016-17. The charges calculated and shown in the Q backoffice application is around 1.3 lakhs. Can I carry forward the loss of 1.6 + 1.3 lakhs for the next 4 years? To carry forward the loss, should I need to get an audit done? My turnover(calculating the profit and loss) is less than 1 crore.

          Thanks,
          Ragavendran

  99. Sandeepgfr says:

    Hi Sir,
    If one is trading in USDINR will they have to check for audit based on turnover (sorry if its an off topic ques :))

  100. Vijay Prasad says:

    In P&L Account Statement can the total of Gain/Loss Column at the bottom considered as Turnover for Future and for Option respectively or we have to caluate for each trade separetly

    • Nithin Kamath says:

      Turnover calculation is to determine if you need an audit or not, that you can do separately outside the ITR form.

      • Viajy Prasad says:

        Thank you for your reply.

        I am not using ITR P&L sheet.
        What I meant was I received P& L Statement from my broker in which there is a Column header Gain/Loss at the bottom is Total of this column.
        This total can be considered as Turnover or not

        • Nithin Kamath says:

          You have to take the absolute sum of all the individual rows. So if one row has -1000 and another 1000, turnover has to be 2000.

  101. Thomas says:

    hi Nithin,

    Very informative article. I have a few queries.
    1)If one cladssfies himself as an investor, does he has the audit obligation if he trades only in long term buy/sells if his turnover crosses 2 cr or his profit is less than 8% of turnover.

    2)If a person classifies himself as investor, and if he is having income from F&O, he still need to fill ITR4 right ?. In this case can he carry forward his F&O losses to next year.
    3)If a person is classifed as an investor and he does 1.5 crore turnover (including delivery F&O and Intraday). He makes 20 lakh profit in LTCG and 2 lakh in F&O. Does he qualify for a audit as technically he made more than 8% profit but tax liability is only for 2 lakh profit .

    • Nithin Kamath says:

      1. If classifying your investment as capital gains, no need of audit/turnover and all.
      2. yes
      3. LTCG doesn’t play any part in turnover or profit or determining 8%. If turnover more than 1 crore, then audit required. This 1crore limit is increased to Rs 2 crores from this financial year.

      • milu varghese says:

        Thanks for the quick reply Nithin. There is still confusion with query 3, which I’ll rephrase.

        An investor has a turnover of Rs 1 cr for LTCG (where his profit is just 1 lakh) and 2 lakh turnover in F&O (with Rs 20,000 profit). So for arrving at this presumptive income, total turnover is considered ? Meaning in this case his total turnover is 1.02 Cr and total profit is 1.2 Lakh (which is below the 8% mark) so what should be his presumptive income in case he fills 4S.

        In case he settles for ITR4, Does he has the audit obligation? Note-his profit in just F&O is exceeding 8% of F&O turnover limit (20000/2 lakh). But if we take overall turnover (LTCG+F&O) his profit of Rs 1.2 Lakhs is below the total turnover of 1.02 crores)

        • Nithin Kamath says:

          If you are using ITR4S, you have to show all income as one. So yeah, turnover will be 1.02cr. In case of ITR4S, you have to minimum show 8% of turnover as profits. So I guess it would not make any sense .
          If you use ITR4, capital gains can be shown separately and it is not considered as part of turnover. Turnover is only for business income. So no, you would not need audit for Rs 2lk turnover with 20k profit.

  102. Sujit kumar jena says:

    sir my wife is doing f&o trading she is a housewife she has no other income she made loss in trading.she is below eximt tax llimit.sir for her is itcompulsurry to fill it return.she didnot want to carryforward the loss.
    2.my primary income is salary i want to trade in F&O .i want to pay 30% tax if i get any profit from trading .sir want to show this in other inome in itr form.
    3 sir is it compulsurry for me to declare as bussiness income.

    • Nithin Kamath says:

      1. It is advisable to file ITR, even if in loss.
      2. Not possible, you have to show this as business income.
      3. yes

  103. MKS says:

    My taxable salary income after all deduction =9,19110.00.
    Full tax paid by employer from my salary = 112090.00

    Profit and turnover breakdown

    Futures realized profit 165372.00
    Options realized profit 37715.00
    Total realized profit 203087.00
    Futures unrealized profit -4511.25
    Options unrealized profit 0.00
    Total unrealized profit -4511.25
    Futures turnover 687209.50
    Options turnover 10663188.75
    Total turnover 11350398.25

    Total charges

    Brokerage 21998.69
    Turnover charges 45831.86
    STT 85006.74
    Service tax 9483.45
    Stamp duty 7442.88
    SEBI charges 3379.62
    Total charges 173421.77

    Profit and turnover breakdown

    Intra-day / Speculative profit 2520.90
    Intra-day / Speculative turnover 32702.90
    Short-term profit 12461.35
    Short-term turnover 92737.85
    Long-term profit 0.00
    Long-term turnover 0.00

    Total charges

    Brokerage 1476.81
    Turnover charges 460.01
    STT 1920.61
    Service tax 264.98
    Stamp duty 678.00
    SEBI charges 28.32
    Total charges 4831.76

    Nithin Sir, my auditor is asking me to pay more than 13,000 as tax for F&O + intraday trading + shortterm capital gain tax. But as per ur method tax should be much less. Can u just go through the above numbers ?.

    • Nithin Kamath says:

      Above 10lks income means tax of 30% and from 5 to 10lks is 20%. So if your net profit is around 60k to 70k, yeah u will have that much liability.

  104. sonali says:

    I have salary more than 250000 for the year FY2014-15 but having speculative loss 44000 short term loss 122000. My total turnover is (spec profit+spec loss+short term sale) is rs.82lakh. I have filled only itr1 for FY2014-15. I recieved notice for limited scrutiny for Securities Transaction. Please give guidlines. Should they panalise me on turnover becasue of not get audited?

    • Nithin Kamath says:

      you don’t have to worry of any penalty. You just have to explain that you didn’t file because there was a loss, and that you will do it in future.

      • sonali says:

        Thank god for your reply. I was in heavy tension because of not auditing and filling itr1 insted of itr4s and i have to give penalty 0.5% on turnover of Rs.82lakh i.e. Rs.41,000/- + auditing charges. Please confirm the same. They called me for scrutiny on 10 aug 16.

        • Nithin Kamath says:

          As long as you can convince them that you haven’t evaded paying taxes, there is nothing to worry. You just have to explain that when you meet.

  105. santosh says:

    I am salaried person having rs. 320000 per year. One years ago I have intraday and delivery based trading in stock market. But having losses in both speculative and short term. I have turnover more than 70 lakhs. But I have filed Itr1. I got notice from IT for scrutiny for subject speculative transaction. What to do and what will be final result.

    • Nithin Kamath says:

      You will have to go explain to the AO why you didn’t show this stock market activity in your ITR returns. Show them that you had a loss, show them the source of the money you lost, as long as you haven’t evaded paying taxes, it is okay.

  106. ankur garg says:

    nitin sir
    i am full time trader trade in f&o , cash,(dilivery & intraday) commodities ,currancy yearly gross turnover rs.1000 caror
    last year i trade at two broker (3+9month) so both broker issued seprate global report for full year
    i also trade in demerger shares (adani enterp. max , crompton) and ipo so global report not show clear picture
    can i file return on base of my banking payment or reccipts (means total payment less total recipts from broker)
    if no, please explain how can i keep my books (currently i keep only broker ledger and bank ledger)
    please guide
    thanks in advance
    ankur

    • Nithin Kamath says:

      Yeah you could file your returns based on the banking/ledger entries. You will still have to show intraday/speculative, delivery/capital gains, F&O/non-speculative separately on the ITR.

      • ankur garg says:

        thanks sir for your prompt reply
        i have global report for f&o and commodities but eq .cash have confusion due to (ipo demerger bonus split previus stock balance ).please help how seprate dilivery and intraday trades (while broker issue global report include all trades)
        however i show business income (business head) capital gain apply ??
        please guide

  107. arvind says:

    hi
    every stock/currency trader liable to maintain book of accounts ? ( irrespective of income slab, turnover , profit etc ?)
    . i mean pure trader . ( no income from salary etc )

  108. aarif says:

    Dear sir, I have issued a notice from it dept under sec 143(2) , for a,y, 15/16query rearding
    1) derivative transection
    2)securities transection
    sir, what is the meaning of 2 one and I have filled 4s at that time I have put a profit in that return of 2.6lakh but if I
    include my fo and delivery trade I have an loss of 5.5lakh , what can I do

  109. SARAVANA PERUMAL D says:

    Hi Nithin,

    Good day,

    I’ve one doubt about the speculative and non-speculative in F&O section. If i do F&O on intraday basis (MIS, BO, CO in F&O Instrument), it’s consider as sepculative or non-speculative?!!!

    Thanks in advance.

  110. Manish says:

    Sir I got notice from I.T. Department stating that my turnover is very high and according to their calculations suppose nifty is 8600 and call
    price of the 8600 is Rs. 50 and my bought qty is 1000. Now they have calculated 8600*1000 = 8600000 (they are calculating index plus qty) instead of multiplying 1000*50=50000 (qty plus price ) so please tell me who is right.

    thanks

    • Nithin Kamath says:

      They might have told you turnover is high, but I don’t think IT notice would have a turnover calculation. If you have any, do email me on [email protected]. Turnover the way I have explained above is the most conservative way to calculate.

  111. SAILAJA says:

    Sir,
    I am a housewife but trade in F&O segment of markets. For FY2015-16, unknowingly I filed ITR-2 showing the losses of around 50000 (Excluding STT) under CG schedule. Now (i.e. 20/08/2016), I want to file revised returns under ITR-4 showing this losses plus STT & other expenses (being business income) , wherein my losses under this computation works out to be Rs. 1.3 lakhs. Will I be able carry-forward the newly computed loss of 1.3 lakhs to the next year or only 50000/- as declared in original ITR-2 return ?

    • Nithin Kamath says:

      Hmm.. you have to file your returns in time to be able to carry forward your losses, so yeah only 50k can be carried forward. Also, F&O has to be shown as business income ideally.

  112. sankar says:

    sir,

    Futures realized profit -1887702.50
    Options realized profit 0.00
    Total realized profit -1887702.50
    Futures unrealized profit 0.00
    Options unrealized profit 0.00
    Total unrealized profit 0.00
    Futures turnover 2737977.50
    Options turnover 0.00
    Total turnover 2737977.50

    no taxable income other than stcg loss of equtity

    do i get tax audit

  113. SARAVANA PERUMAL D says:

    Hi Nithin,

    I modified your statement corresponding to the Short position (option writing) and turnover below calculation is correct or not? Please clarify me.

    In options, if you Sell (Short Position) 100 or 4 lots of Nifty 8200 calls at Rs.50 and buy at Rs.30. Firstly, the unfavorable difference or loss of Rs 2000 (20 x 100) is the turnover. But premium received on sale also has to be considered turnover, which is Rs 50 x 100 = Rs 5000. So total turnover on this option trade = 2000 + 5000 = Rs 7000.

    Thanks in advance.

    • Nithin Kamath says:

      Saravana, Rs 7000 is the most conservative approach of declaring turnover. A lot of people also show only Rs 2000. It is upto you, maybe ask your CA.

  114. SAILAJA says:

    Sir,
    I filed my F&O losses under CG for AY2015-16. Received a notice for IT for limited scrutiny of Derivative transactions in this month. Can I revise my returns by filing ITR-4 now.

    • Nithin Kamath says:

      Now it is late Sailaja.

      • SAILAJA says:

        sir,
        but unknowingly I submitted revised ITR-4 for my original filed ITR-2 for AY2015-16 after receiving limited scrutiny notice u/s 143(2) after realising the mistake regarding FNO transactions. What may be the impact. Can you please advise?

  115. RAGHUNATH says:

    Sir,
    I trade in fno where my turnover was 18lakhs and incurred a loss of 40000/-. I don’t have any other income. Am I liable to maintain accounts as per section 44AA for ITR-4 . Can I file ITR-4 under “No ACCOUNT CASE”. Please clarify.

    • Nithin Kamath says:

      Yeah you can file under no account case.

      • RAGHUNATH says:

        BUT SIR, SEC-44AA SAYS BUSINESS TURNOVER>10LACKS IS LIABLE TO MAINTAIN ACCOUNT. SO, IS IT POSSIBLE TO FILE ITR-4 UNDER “NO ACCOUNTS CASE” WHEN MY FNO TURNOVER IS 18LACKS?

        • Nithin Kamath says:

          Yes you can choose no account case. But you have to still maintain account if more than 10lk turnover,P&L, bank statement (with details of credits/debits) etc is enough for that.

  116. Ome says:

    Sir,
    I am looking for nifty chart of last 20 years, line chart, but it is difficult to find. Can you please tell me any website for the same?
    Also can you upload excel file with formula for fundamental analysis, that you have mentioned in your modeule? Or may I request a small module for excel, how to use it for calculation? I tried to Google but it is not as simple as your modules. Your modules are very simple and easy to understand.

  117. Roy says:

    If my turnover is less that INR 2 Crore, and if my profits are more than 8%, can I presume profits to be 8% as per provisions of Sec 44AD?

  118. PRADEEP says:

    If somebody makes 5000 rupees profit in intraday Commodity trading daily for one year, is tax audit is compulsory for him. Also give one example of tax auditing for intraday commodity trading

    • Nithin Kamath says:

      Pradeep, audit requirement is based on turnover, do go through all the chapters on taxation, have explained with examples.

  119. Mohit says:

    My total income is more than 2.6 lacs but my taxable income is less than 2.4 lacs because of deductions for my Pf and health insurance . I have made loss in intraday trade. Do I need to get my audit done ?. I am already in big loss ..Auditor will ask for 20-30 k.

  120. MN Karia says:

    Dear Nithinji, I am entry level investor. I applied L&T IPO and allotted 20 shared @ rate of 700/Share so average cost become 14000/-
    But in Holding, it shows N/A. so P&L gives wrong value. Same happen with allotted Sovereign Gold Bond. Why don’t you pick IPO allotment value there to calculate P&L correctly or How we can update avg. cost for IPO/Bonds? screenshot at http://imgur.com/a/bSHBE

    awaiting your guideline to solve this with aim to show/calculate actual correct P&L

  121. Akash says:

    Profit less than 8% of turnover-means 8% of 1Cr=8Lakhs?OR The actual profit I’m earning from F&O??
    I’m confused here.My CA filed ITR under 44AD without audit case.
    After deduction tax is nil.
    Income from Business/Profession is 220000+FD Interest 80000=3Lakhs
    Gross Receipt=240000
    Actual Profit 220000
    Deemed Profit %=90
    Profit against Turnover (8%)=17600

    So,here turnover he showed on Profit and declared it abv 8%,but after deduction the is Nil.
    it it a wrong way Sir?Few friends saying that its wrong,I fall under audit case(44AB)

    • Nithin Kamath says:

      Akash, it is 8% of turnover and not profits. Turnover can be calculated in different ways, it is a grey area, so it is upto you on how you calculate. Two ways are mentioned in the above chapter. As long as you haven’t avoided paying taxes, you are okay.

  122. Rajiv M says:

    What code for Trading F&O and Equity Cash?

    • Nithin Kamath says:

      Code: 0204 for trading F&O. If you are showing equity cash delivery trades as capital gains, you can fill that under capital gains. If intraday equity, there is a separate section for speculative income.

  123. Joshi says:

    Sir,under which section do we file a return if audit is not applicable?

    • Nithin Kamath says:

      if it is before due date 139(1) First Option in Drop Down of ITR and if it is late 139(4) Second Option. Sl No “11” 139(1) or SL No. “12” for 139(4).

  124. dhananjay says:

    sir, i was a salaried person in year 2013- 2014. my annual salary was 4 lakhs and income taxable after deduction was 218000. since i that year there was a tax credit of 2000. i had no tax to pat. i also did intraday trading i financial year, 2013-2014. my turnover was 250000, and profit was 180000. my business expense in trading was around the same as breakup is here-
    laptop depreciation- 15000
    inernet charges- 15000
    electricity charges- 6000
    fees of jobber, as i had hired a jobber who was doing jobbing in my account- 150000
    so in net i have loss of one thousand.
    i have received notice unnder 142/1
    my query is –
    do i need a audit
    i have not kept document of expense, so can they be accepted,
    i also paid jobber i cash, so will it be accepted?
    what i need to do?
    if i dont show expenses, then i will have to tax on 180000 income
    so please advice me. what to do ?

    • Nithin Kamath says:

      No audit since profit >8% of turnover and your turnover less than 1crore.
      Yes cash can be shown (it is only 1.5lks for 1 year).
      Show all your expenses and file return correctly. Yeah, if you don’t show expenses, you will have to pay taxes on 1.8lks

  125. BALAJI KARUNAKARAN says:

    hi nithin. i made a turnover of 1.9cr in 2015/16. i had a loss of about 150000. my tax liability s zero.1. should i get my ac audited compulsarily as my profesion s dentistry.
    2. if i dont get it audited is that a penalising fault.
    3.can i still carry forward my losses if i get it audited.

    • Nithin Kamath says:

      1. If you show your turnover as 1.9cr on the ITR4, it won’t allow you to file. It will ask for audit.
      2. Not really a penalizing fault, as long as you haven’t avoided paying taxes.
      3. Yeah you can carry forward, they have extended the last dates to file IT returns with audit is Oct 17th.

  126. dhananjay says:

    sir, i was a salaried person in year 2013- 2014. my annual salary was 4 lakhs and income taxable after deduction was 218000. since i that year there was a tax credit of 2000. i had no tax to pat. i also did intraday trading i financial year, 2013-2014. my turnover was 250000, and profit was 180000. my business expense in trading was around the same as breakup is here-
    laptop depreciation- 15000
    inernet charges- 15000
    electricity charges- 6000
    fees of jobber, as i had hired a jobber who was doing jobbing in my account- 150000for showing cash expense, do we need to produce reciept. i dot have receipt of cash payment. so will it work ? income tax will not ask for producing documet to prove my point ?

    • Nithin Kamath says:

      Expenses that are paid through your bank account, as long as there is an entry on your statement should be okay. Paying salary in cash is okay, but you will need to have details of who it is paid (maybe corresponding entries in bank statement as well)

  127. Ram says:

    Hi nithin /zerodha
    can i request you to show turnover report in Q By using bothe 2 methods currently it show 1 method

    • Nithin Kamath says:

      It has both the methods, download the tax P&L only, it has the other method.

      • RAM says:

        thanks for the quick response

        • AMIT says:

          Dear sir
          1)is it necessary to show expenses (stt,turnover tax,etc) in profit & loss a/c or we can directly deduct from f&o income & only give the net figure.
          2)if one is getting accounts audited,anywhere in audit report he has to give turnover(derived from plus & minus of future ,sale of options,+- of options)

          • Nithin Kamath says:

            1. You need to show expenses separately.
            2. No, there is no specific column for reporting turnover. Turnover you have to determine separately to decide if you need an audit or not.

  128. VIRENDER says:

    Dear Nithinji,

    Net Salary Income Rs.515K.
    Short Term /Loss – Shares Rs. 38K
    Bank Interest Rs.24K

    I also have Intra day Loss Rs.15k. (Profit Rs.24K and Loss Rs.39K)
    How can I make P&L A/c & Balance Sheet for filing Income Tax return in Form4?

  129. aarif says:

    i have a profit of 5.5 lakhs in intraday nse and a loss of Rs 3.25 lakh in nse delivery what is my liability my turnover is 80 lakhs

  130. Rajesh says:

    Why is loss added to selling value of options to determine options turnover? What is the logic behind it?
    moreover why is computation of turnover different for futures and options? Why not apply the same method for both in arriving at the turnover?
    Income tax does not provide any rule on how to compute the turnover? So would they accept any method prescribed by say ICAI? Arethey bound to accept?

    • Nithin Kamath says:

      Rajesh, the ICAI guideline is the only thing out there. Again people decipher the meaning of this differently. I have suggested the two most conservative way to calculate turnover. Turnover is only to determine audit, so as long as you stick to the way you determine it, you should be alright.

  131. Himanshu says:

    Hello Sir .. I am intraday trader from june 2016 . my turnover for intraday till date its showing on Q Tax P&L is 9000 ..I am in Loss of 4000. ..I a Salaried with 1,50,000 per annum .. Do i need to filr incomr tax in March 2017..

  132. ravindran says:

    Hello , I am a senior citizen with salaried income pension 312000 fixed deposit interest 60000 section 80c 150000 plus 80d 5000 i had short term capital gains of 200000 i.e intradaY AND DELIVERY BASEDequity (not f&o) within turnover less than 1cr .whether i have paid @15%specified tax rate for this gain as investor or as traders amt to be added with my income .kindly reply which one is correct.FORM ITR4 IS OK YA

    • Nithin Kamath says:

      Ravindran, intraday equity trading is not short term capital gain, it is speculative business income. So you will have to show that and capital gains separately and use ITR4.

  133. P. Manmohan says:

    Irrespective of turnover (over the prescribed limit) if one trades on delivery based transaction and other wise, can the loss be put under capital loss and avoid tax audit.

  134. Vishal says:

    Dear Nithin
    Is it possible to download these chapters as pdf for offline reading ? I find these extremely insightful and would want to have a soft copy handy.

  135. vijay says:

    Dear Nithinji,
    I am salary person and trading in cash equity inter day & delivery basis and cross turnover more than 2 crore net loss 2 lac in short term and net profit in inter day trading 0.40 lac please suggest audit required

  136. vijay says:

    Dear Nithinji,
    In inter day equity trading both side buy and sell value include in my turnover or only difference amount add in my turnover please suggest

    • Nithin Kamath says:

      If it is delivery based equity trading, sell side value gets added as turnover. Btw, if you are showing equity delivery trading as capital gains, there is no need to calculate turnover.
      Ah.. you meant intraday trading. For intraday, difference amount (gross sum of profit and losses) adds to turnover.

  137. P. Manmohan says:

    Dear Mr. Kamat
    I do delivery based trading and my turn over is more than Rs 4 crore. I show capital gain / loss. Is it okay and do I need to do tax audit. Also can in this case show brokerage as expenses while calculating capital gain/loss.

    • Nithin Kamath says:

      If you are showing this as capital loss, then no question of audit. Yes you can add this expense as cost of your holdings.

  138. Aditya Kumar Narayan says:

    Hi,

    From the above module I have understood that declaring turnover trade-wise is a more compliant way. But I have a few queries:

    1. While I was going through the Tradebook, I noted that though I put only 2 order numbers that got executed, there more than a 100 trade numbers. So just wanted to clarify If the above definition of turnover is for every order that I put or for every trade number that the system throws/executes?
    2. Also needed clarity as to how to disclose turnover when there is part-purchase and part sale.
    Ex: Buy 4000 shares of Idea at 80
    Sell 1000 shares at 79
    Buy another 2000 shares at 78
    And final square of 5000 shares at 81
    So, in the above example, my net profit for the day is = (79-80)*1000 + (81-80)*3000 + (81-78)*2000 = Rs. 8000 (this will also be considered as turnover(scrip-wise))
    But, if I take order-wise, my turnover would be = (80-79)*1000 + (81-80)*3000 + (81-78)*2000 = Rs. 9000 (this will be turnover trade-wise).
    Hence, there is a huge difference. Kindly clarify.

    • Nithin Kamath says:

      1. Order or trade doesn’t matter. If you combine them or look at it individually, the turnover number will still be the same.
      2. Firstly, if you are doing equity delivery trades and showing them as capital gains, there is no need to calculate turnover etc. You have calculated both correctly. You have done a mistake in calculating value, but logic is correct. Both cases it is Rs 8000 only.

      • Aditya Kumar Narayan says:

        Hi Nithin,

        Thank You so much for the reply. But please note, in the 1st case I took (79-80)*1000 because I am calculating at a SCRIP LEVEL. Therefore, If I have also traded for any other stock, I will take the absolute favourable/unfavourable differences of the two scrips as my net profit/loss.
        But, when I take at a TRADE LEVEL I am taking the favourable/unfavourable differences at a “TRADE LEVEL” and not at a “SCRIP LEVEL”. Hence, there comes a difference of Rs. 1000 in the above two cases.

        • Aditya Kumar Narayan says:

          To simplyfy the above,
          Idea stock trades: Buy 1000 shares at 79
          Sold the above at 80
          Again Buy 1000 shares at 81
          Square off loss at 80
          So net profit (at scrip level) = 0
          But, net profit (at trade level) = 2000

          • Nithin Kamath says:

            Like I have explained before Aditya, you can either look at scrip level or trade level to calculate turnover. The most compliant way is trade level.

  139. Aditya Kumar Narayan says:

    Hi Nithin,

    Just to give a background, I was trying to see that difference (between scrip level and trade level) in the Zerodha P/L Report or the Tradebook. So I tried putting pivot tables and all. But I concluded that only scrip level is possible.
    So in my 1st example above, I noted that there is a difference of Rs 1000 in the turnover (Rs. 8000 at scrip-level and Rs. 9000 at trade level) and was trying to compute turnover at “Trade level” as you mentioned, but failed. I had to manually do it in excel to identify the difference. So is it possible to compute turnover at “Trade level” using the Zerodha Reports?

    *(As per my understanding, the difference of Rs. 1000 is arising only because of the fact that in one case we are calculating the absolute favourable and unfavourable differences at a scrip level and in the other case at a trade level).

  140. shobha says:

    How to tally our ledger with our P&L statement.total of obligatio-net opening balance +net closing balance. Kindly clarify. How you calculate p&l in q back office.

    • Nithin Kamath says:

      Download the tax P&L report on Q. Download your ledger. So starting balance of year + fund deposit-withdrawal+sale of shares held from before-purchases of shares this year = starting balance of the year + P&L for year. P&L on Q is calculate based on trades and on First in first out principle.

      • shobha says:

        Kindly clarify you have mentioned starting balance of year + fund deposit-withdrawal+sale of shares held from before-purchases of shares this year = starting balance of the year + P&L for year. P&L on Q is calculate based on trades and on First in first out principle.Both side it is starting balance of year.Ithink one side shold be closing balance.

        • Nithin Kamath says:

          ah yeah, typo, closing balance on the right hand side.

          • shobha says:

            Above formula is not working. I have requested several times and called at support, but still awaiting answer. Kindly send me my computation for current year or last year applying above formula to understand and deposit tax if any at my mail address.
            ds1292

          • Nithin Kamath says:

            Shobha, you will have to do the reconciliation yourself, we don’t have a tool/utility yet for this. You can pull the tax P&L yourself from Q. When doing recon, some things to remember. IF you have open option positions on starting or ending date, you have to add premium value if long options and reduce if short options on both the dates.

  141. Samir says:

    Hi Sir,I had a total income from f&o and other source is only Rs 3lakhs.My turnover was very low as I never traded option.(10Lakhs turnover)
    After deduction,I have NIL tax.I filed ITR4 under section 44AD.
    But I got a notice of Defective Return.The message was-Please upload Balance Sheet and P&L statement.
    I wonder,as I dont fall under audit case,why IT dept want me to upload BS&PL statement.

  142. Suresh says:

    Hi Nithin,

    Can one file ITR4 under No Accounts option if one is eligible for Sec 44AD (presumptive income), or does one compulsorily have to file ITR4S for 44AD cases? ITR4s does not have provisions for capital gains declaration.

    Thanks and Regards

  143. Sudarshan Prasad says:

    In TAX P&L report under short term equity turnover, LiquidBees (Liquid ETF) is getting included. For the purpose of turnover calculation to find the audit requirement – Is it correct?

    • Nithin Kamath says:

      If you are showing these as capital gains, no need to bother about turnover. This is showing in turnover report for those who want to show this as a business income. You can disregard it.

  144. Samir says:

    sir,little confusion,we are filing return under 44ad means we have to upload balance sheet,P&L??

  145. Raj says:

    Need Kind Help … I received “Limited Scrutiny” Notice under section 143 (2) of income tax, for AY 2015-16. Notice asked me to present any evidence related to Securities transaction & Derivative transaction done by me. I did few delivery based share transactions (resulting in ST Capital Gain of Re 32,000/-) and mostly Futures & Options Transactions (resulting in net Loss of Re 4,80,000/-, from total per scrip based Turnover of Re 80,00,000/-). I am salaried person with net income of Re 10,00,000/- and complete TDS for salary is deducted by employee. So zero refund tax return was files by me, without showing any Securities transaction. My queries are –
    1. As my Turnover is less than 1 crore, and there is no Tax liability, Tax Audit under Sec 44AB was not required, Right ?
    2. What all documents should i present to the tax officer ? I do not any any books of account. I can get P&L statement and Ledger statement from my broker, and my linked bank account statement. Will it suffice or any other document might be required ?
    3. Will there be any Penalty on me ?
    Kindly reply all 3 queries urgently. Thanks

    • Nithin Kamath says:

      1. Since your salary is 10lks, you would have had tax liability, which I guess your employer has paid on your behalf. Theoretically, audit would have been required.
      2. Yeah get those statements, put it all up in such a way that you can show that you are not evading any taxes. Essentially these statements itself are books of account.
      3. No penalty since you haven’t evaded any taxes.

  146. chaitanya says:

    I trade in futures,STCG, equity turnover is less than 1 cr and margin is PROFIT margin is 8%
    Can use ITR-4S 0R need ITR-4 Want to show as business income

  147. Sudipta says:

    Hi Nithin,
    For business income, I have a query regarding the transaction charges, STT etc. Kindly help me to understand.

    1) Let us say, I bought an option of 1000 lot size at Rs 5. So my buy value is Rs 5000. The transaction charge including brokerage, SST etc. everything is X. Then I sold it at 6, so my sell value is 1000 X 6 = Rs 6000. The transaction charge (all inclusive) is Y on the sell side. So, my profit is (6000 – 5000 – X – Y). Is this correct ? Or should I only take (6000 – 5000) as my profit ? I am asking this from Income Tax perspective.
    2) In the above example, what is the Turnover value ? Let us say the profit is P (whatever value is comes from above calculation, let us call it P). So my turnover will be (P + 6000 – Y) or just (P + 6000) ? Please clarify.
    3) I have included the Brokerage, STT, Education cess bla bla everything in the “transaction charge”. Hope all these components are equally eligible for deduction wherever applicable & no difference among these individual components from Income Tax perspective. Kindly confirm if this understanding is correct.

    Thanks a lot in advance for your help !

    • Nithin Kamath says:

      1. Income side you need to show (6000-5000), expense side show all charges including transaction charges. Taxes only on net profit
      2. Turnover will be your profit/loss, in this case 1000.
      3. Yes, as business income, all of them can be shown as expense.

      • Sudipta says:

        Thanks Nithin for your kind reply. I could not get the answer to Qs 2 and it now raises 2 sub-questions based on your reply. Please help:
        2a) You said Turnover is only the profit (6K – 5K). But in this article it is mentioned that the option premium which we receive is also to be included into the Turnover. In fact you have given an example – QUOTE “In options, if you buy 100 or 4 lots of Nifty 8200 calls at Rs.20 and sell at Rs.30. Firstly, the favorable difference or profit of Rs 1000 (10 x 100) is the turnover. But premium received on sale also has to be considered turnover, which is Rs 30 x 100 = Rs 3000. So total turnover on this option trade = 1000 +3000 = Rs 4000.” UNQUOTE. So in my case, it will be (6000 – 5000) + the premium received on the sale side (6000) i.e. Rs 7000 is my Turnover. Is that not correct ?
        2b) While calculating the Turnover, we cannot consider the transaction charges, STT, brokerage etc. is it ? Do we need to only consider the script prices excluding all transaction charges ? In the example I have given, do we need to completely ignore X and Y amounts (transaction charges) while calculating Turnover ?

        • Nithin Kamath says:

          2 a. I didn’t realize you were asking for options. Yes, in case of options, the most conservative way of calculating turnover will be the way I have mentioned (Rs 7000). But many people out there use only Rs 1000. Best to consult your CA for this.
          b. Yeah you can exclude all charges when calculating turnover, gross profits and losses. Your charges will anyways add up on your expense side on your ITR form.

  148. RAGHUNATH says:

    Sir,
    I am an employee and trade in F&O segment keeping my equity holdings as security. Due to higher tax problems, I wish to transfer my entire equity holdings (~ 10 lakhs under current rate) to my wife’s (housewife) DP account and trade in her account. Can I transfer my shares under heading ‘Gift transfer’ to her account ? If so, will it attract any tax? Please clarify.

  149. Sudipta says:

    Hi Nithin,
    I understood the calculation for the intraday (speculative) and delivery based (non-speculative) equity transactions. But what about BTST or STBT situations ? In BTST, we actually sell the shares before they are credited to our demat account. So will it be considered as Speculative trade or Non-speculative trade ? Hope the same logic would follow for STBT, otherwise please clarify that part as well.

    Thanks in advance.

    • Nithin Kamath says:

      Hmm.. this is tricky.

      When you do BTST, Shares bought on the 1st day gets credited on T+2 day to you, Shares sold on the 2nd day then gets debited from what was credited. So even though for u it seems there is no exchange of delivery happening, but there is. Similarly with STBT. This is debatable, but can be shown as non-speculative or capital gain. Best to consult a CA.

      • Sudipta says:

        Thanks Nithin for your reply.

        I think in such case, it is actually beneficial to show the BTST or STBT as Speculative trade. The reason is, in speculative (intra-day), we calculate the turnover as the absolute value of the profit or loss. Hence the turnover will be less. The chance of requiring an audit is less. But if we show it as delivery-based trade, we need to show the sell-value as the turnover – which is obviously much high. So the profit % may become less than 8% after adding all such trades. So showing them as speculative trade makes more sense. What do you think, please suggest.

        Yes, by showing the BTST or STBT as speculative, we also lose the chance of offsetting the loss against non-speculative trades, but at least in my case I am always in net profit. So that part is not worrisome to me. The 8% funda for audit is really driving me crazy. Although I am making good profit, I am having a tough time to maintain that 8% formula.

  150. Nikhil says:

    hello Nithin
    im intra day trader having loss of rs. 30000 in cash and loss of rs. 36000 in future , turnover is about 9cr. …. and having income from other source is about 3 lac. for FY 2015-16 . IM going to file IT Return now . I know it is not possible for me to carry forward my losses , so what to do now …. to mention my trading details in IT return or just show income of rs. 3 lac.? pls. clarify

  151. Siddharth Saboo says:

    Hi Nithin

    I have received notice from income tax under section 139(9) mentioning error 14. The error says that: ” tax payer has entered negative number in gross profit or net profit in si no 51b and 51d of part b of profit and loss account”. Probable resolution offered is :Assessee has claimed loss under the head profit and gains of business or profession, however he has to fill Balance sheet and Profit and Loss account. Incase assessee’s falls under section 44AD assessee also has to get his books of account audited if his income is less than 8% of the gross
    receipts.”

    My turnover was 1,83,000 (which I didnt mention in the return) and loss was -4500 rs which I mentioned in the gross profit section. My total income is less than 2,50,000.

    1.Do i need to get audit done? Which I think is no, but still want to check if the rules change after section 139(9) error
    2. If i dont need audit what is the resolution in the current situation ? Just submit turnover details or Also submit complae balance sheet and profit loss account.

    Thanks in advance.
    BEst
    Siddharth

    • Nithin Kamath says:

      1. I am guessing you have filled the ITR form wrong. You don’t need an audit if total income is less than 2.5lks and turnover of 1.8lks.
      2. You can just refile your ITR. Consult a CA to do this.

      • Siddharth Saboo says:

        I am consulting one, but you know awareness on these subjects is really scarce.

        I filed ITR 4, do you think it should have been 4s?

  152. ajit says:

    I bought 2 lots Banknifty 19000PE @ 110
    and sold 2 lots @ 135
    How much is my turnover in this example sir?

    • Nithin Kamath says:

      your profit on the trade = 80*25 = 2000 + Selling premium = 80*135=10800

      Some people only take the P&L side, so only Rs 2000.

      It is upto you on which route you want to take.

      • ajit says:

        Sir,if I take 2000rs as a turnover then I will never fall in a audit case.But If I consider adding selling premium,then I will easily cross that 2Cr mark as I may take 8-10 intra trades.
        Ok,my query after reading this whole article by you and a abv reply is that-
        If I consider 2000rs as turnover and file a return,dont you think IT dept will cause a trouble for me?A fine for not maintaining books of account and all that?

        • Nithin Kamath says:

          Ajit, IT department doesn’t care if you get books audited or not, they care if you are paying taxes or not. Also, IT department doesn’t have a guideline on how to calculate turnover, the link I have shared is from ICAI

  153. Anshsan says:

    @ nitin : which is good platform for IPO analysis& discussion? any blog or site or something?

  154. Aaron Noronha says:

    Where do I find the journal entries for equity intraday trades, and F&O for recording the same?

    • Nithin Kamath says:

      Hmm.. didn’t get what you are asking for. If you login to your trading account, you will get P&L, ledger, this is all you need.

  155. dilip says:

    sir,I have a question,suppose
    1)speculation income =5.5lk gain
    2)non speculation income =6.5kgain
    3)stcg =8.86lk loss.
    do i need audit done as total turnover crosses 5cr,but overall income is loss as i have no other source of income other than trading or i show intra and fno as business income and delivery based equity as stcg.pl advice me sir

    • Nithin Kamath says:

      Best to get your account audited. Also if you are trading actively you should show STCG as business also. Unfortunately you will not be able to setoff speculative income (intraday equity) with other non-speculative losses.

      • dilip says:

        dear nithin thanks for prompt reply but here regarding offsetting speculative and non speculative bussiness income you had clearly mentioned that speculative(intraday equity) loss can not be offset with non-speculative gains but speculative gains can be offset with non speculative losses.regarding audit can i have as these figures are of FY 2015-16 and till now i have not filled IT return.thats why asking you how to show this trading activity in IT return either show it as speculation and non speculation(fno) as bussines income and delivery based trading as STCG.As for not able to carry forward this loss i have left trading as i have no money left for trading as this ruined my life.pl help me out to sort this problem.

        • Nithin Kamath says:

          Hi Dilip, since the last dates for filing returns are over, you cannot carry forward the loss. Best to file ITR even if you are in losses as you seem to have traded actively. You can take an aggressive approach to calculate turnover, if it is less than Rs1 crore, no audit required.

          • dilip says:

            hi nithin,by aggressive way what you want to say.if i show intra +fno as business income then i have to pay taxes on business income and total turnover will be way below 1cr mark as delivery based transaction will not be counted there if i show it STCG but i will escape from audit penalty thats why asking you which way to go so that in future i have not to face any difficultes as i left trading forever.pl help me in deciding with detail.thanks for your prompt reply.

          • Nithin Kamath says:

            There is no clear guideline on how to calculate turnover, what I have shared is what is shared on ICAI guideline book. Also there is nothing called audit penalty, audit costs you little extra money. I have explained different ways in which we can calculate turnover, you can take a call on this.

  156. dilip says:

    if i show turnover over 1cr and as i can not get book audited as time is lapsed then as per rule ito will put penalty for non audit of books under sec 271b though i am in loss

  157. Pradip says:

    Hi Nithin,

    Need your kind help please. I have done several trading in FnO. The net loss is 26K. Turnover is less than 1 cr. But since it is a net loss, I need to get my books audited. The cost of audit and the associated hazards – seem to be relatively high. I am in Kolkata and no reputed firm work here (they are costly also). I have spoken to 2 such firms but both of them denied to work for Kolkata-based client. I can take help from local CA, but unfortunately CAs think themselves as god and they take full advantage of the penal threat system. I want to avoid them as far as possible.
    .
    So I decided to show a net profit of 8% instead of the loss. The turnover is 4 lakhs. So 8% profit will mean 32K profit. I am in 20% tax category so I have to pay 6.5K which is much lesser than hiring a CA (and associated hazards). Now I need to figure out the technicalities where I need your help.
    .
    My loss is actually coming out of 3 specific trades. If I remove them, it is a net profit and higher than 8%. However, I will not entirely remove those trades. I will enter them with manipulated sell price so that the turnover remains almost equal but instead of a loss, it will show a profit. So overall my turnover will remain same but the outcome will be net 8% profit. So audit won’t be needed.
    .
    Question 1. What is your suggestion as a friend ? Does it look ok ? Or do you think I may face a problem later for false reporting ? Please share your thought.
    Question 2. Do you know what data is reported by the exchange to the income tax department ? Do they share only turnover or the profit/loss as well ? Any details on this will be helpful because that data will decide whether the manipulation I am doing will be easy to catch or not.

    • Nithin Kamath says:

      1. hey you don’t have to remove trades or manipulate anything. While filing ITR, you are not asked for trades. You can enter any profit you want, there is no problem if you show more profits. Problem is when you evade tax, if you pay more taxes, no one has a problem 🙂
      2. Exchanges share trade details. Like I have said earlier, as long as you file your returns and show this trading income (profit or loss), you are okay.

      • Pradip says:

        Nithin,
        Thanks for your clarification. 1 more question. While doing the turnover calculation, I have followed your approach (specifically for Options you said it is the profit/loss + the total premium received on sell of option). Since I have incurred net loss and I am showing a net profit of 8% to avoid the audit, it will benefit me if the turnover is less. So, for options, if I only take the profit/loss absolute value as the turnover (not including the option premium), it is better for me. I understand that the IT dept does not have any clear guidance on this. Do you suggest that I can take a chance in this ? Have you personally come across cases where someone showed the turnover for options in this way and the IT dept raise a question ? What is the route most of the people in your circle are following ? Just in case you can suggest something (I know you cannot say anything for sure, but just your idea).
        .
        Thanks as always !

        • Nithin Kamath says:

          🙂 hmmm.. tricky to answer on a public forum. What I can tell you is I haven’t come across any case where there was an issue because someone showed lesser turnover.

  158. ASHOK KUMAR says:

    hi zerodha

    I’m a full-time trader.I have the following query regarding taxation and auditing.

    Net Profit (Intraday + Short Term trading) = Rs. 2,37,117
    Total Turnover (Intraday + Short Term Trading)= Rs. 57,00,162
    Recurring Deposit Interest = Rs. 43,000

    Therefore total Income = Rs. 2,80,117
    Now my queries :
    1. tax I have to pay = 30117 x 10/100
    = 3011.70
    Rebate Rs. 5000 if total income less than Rs 5 Lac. As my income is less than 5 Lac. Therefore tax is Nil.

    Or
    30 % flat tax on Rs 280117, as one of the CA whom I consulted told me, that I have to pay 30 % flat tax if
    I show my income as Business income. Kindly clarify me, if I show my income as business income then
    my tax slab will be 10/20/30 or flat 30. Trading is my only source of income.

    2. Do I have to go for auditing as my income is more than 2.5 lac and profit is less than 8% of turnover.

    • Nithin Kamath says:

      1. Of course you can get a benefit of tax slabs. You wouldn’t have to pay any taxes.
      2. Hmm.. you could look at a more conservative way of calculating turnover. Make sure to file your ITR even if no taxes have to be paid.

  159. Saurabh says:

    Hi Nitin,
    Thanks for this initiative… Keep it up
    In your experience how much does a CA charge to Audit tax book for a salaried person who has <500 transactions in F&O and intraday equity and yet in loss 🙁 …. in Mumbai region?

  160. dilip says:

    hi nithin, can deduction of demat charges,as a expense,claimed against STCG?

  161. dilip says:

    hi nithin,pl also suggest some other expenses which can be shown for STCG.

  162. dilip says:

    hi nithin,can we show as bussiness expense for transaction charges,stamp fee,service taxes paid on stocks while showing intra +fno as bussiness income and STCG(Delivery based trade).if no then how to classified how much amount is for intra and how much amount was for delivery as it is shown as cumulative in contract note or broker report.i mean to say can we show all expenses occured except stt as bussines expenses whether it was on intra or delivery based.i am showing myself as trader(for intra and fno) and investor(for delivery based trade) both.demat charges paid for delivery of shares from my dp a/c can be shown as expenses against STCG.Pl reply sir.

    • Nithin Kamath says:

      For capital gains, you can only show cost of improvement (brokerage, exchange charges, DP charges etc, all related to purchase on exchange). But for intraday and F&O trading, which are business, you can show all charges (including STT) as expense (ur mobile, newspaper, etc etc aswell).

  163. Nishant Arora says:

    Hi, It’s a nice article and all the associated concepts are lucidly explained. However, I’ve a query with regards to calculation of turnover in Futures. Sure, I know the difference between trade-wise and scrip-wise turnover calculation. But I think, there is another level of clarity and that is lot wise turnover calculation. So, lets say, you get Long in a stock futures with 10 lots. Now, it’s not necessary that you’d square off all the lots at the same time. There would be things like pyramiding and so on. So lets say I square off 3 lots at some price, 2 at some other price and 5 at some other price. Then how to calculate turnover? Should I now calculate it lot wise or should I take the average of all the 3 sell trades and then calculate the profit/loss for 10 lots? An answer will be well appreciated.

    • Nithin Kamath says:

      Lot wise is trade wise isn’t it? Every time you are adding or removing lots, you are essentially executing a trade. So it is as good as tradewise.

  164. Nishant Arora says:

    This is in continuation to my above query. So having said that, as to my understanding, there are 3 ways to calculate turnover:

    1.) Scrip Wise (Most broad way)
    2.) Trade Wise (Moderately detailed)
    3.) Lot Wise (Molecular)

    What do you suggest?

    • Nithin Kamath says:

      Lotwise and tradewise as I said is the same. You could do this anyway you want. Maybe whatever best suits you. But whatever method you use, stick to that in the future as well.

  165. Nishant Arora says:

    Thanks, you’re right. It’s the same thing. One more thing concerning income booking. The income gets booked in the month of contract settlement (calender) or in expiry month. Lets say, On 28th March, I buy 2 lots of a futures contract of April’s expiry and square 1 lot off the same day and carry 1 lot till April. What will be the modus operandi here?

    • Nithin Kamath says:

      It is upto you, either consider MTM profits or booked P&L. I’d say consider all positions as closing price of 31st March to determine P&L. Next financial year you can start off with starting point as closing price of 31st march.

  166. Ramesh says:

    Nithin Sir,I got Defective Return notice.My return was filed under 44AD,but the nature of business code was selected different.My CA didn’t notice it and replied to defective return.IT dept wanted BS and PL statement.
    I think,my response to Defective Return will be rejected and my return will be treated as invalid.
    My query is-will I attract any penalty now for not maintaining of books? I had nil tax after deduction.Income was just 4lakhs.
    My CA is not accepting his mistake,so asking you this query.
    will I attract any penalty now for not maintaining of books?What will be the next step by IT dept in such cases?

    thx

    • Nithin Kamath says:

      There is no penalty for nonmaintenance of books in your case. As long as you haven’t evaded paying taxes, there is nothing to pay/worry. You might have to go meet an ITO and explain that you haven’t evaded taxes and this a mistake.

  167. arunkuma65 says:

    Nitin Sir,
    In a single Trading Account, can I trade both in F&O and also invest for long term in stocks. Is it allowed to get long term capital gains from investment in Stocks.

  168. viju says:

    i am an NRI , I have Mutual fund investment on repatriable basis. Doing trading with Zerodha. How I will show my total income file filing. Nri excepted from tax

  169. dilip says:

    hi nithin sir
    For calcultaing bussiness turnover in intrday case it aggregate of both positive and negative difference.now question arises whether it is derived from gross buy and sell or after adding brokerage charges

  170. Arun says:

    When we carry forward the losses, then does these losses also include the charges (like STT, Brokerage) or only the absolute loss?

  171. Sai Sreedhar says:

    Hi Nithin
    In the calculation of turnover, first we are calculating profit or loss, and then we are again taking the trade value of the sale. Doesn’t that mean we are accounting the profit/loss twice? I mean if we have to consider the trade value of the sale, then don’t we have to adjust it for the profit or loss already considered?

  172. Jay says:

    Is this statement correct that-

    If income comes under professional income then you are required to maintain books of accounts(AY 2016-17 onwards)
    Stock Trading fall under the head Professional Income,be it Speculative Income or F&O Income?
    That means we have to do audit even if the profit is just 2 Lakhs
    Pls Confirm.

    • Nithin Kamath says:

      Stock trading is considered as a business income. Audit required only if turnover more than 1 crore or if profit less than 8% of turnover.

  173. Mohan says:

    Sir, I have salary income of 2.5 lakhs . I did f&o turnover of 35 lakhs with profit of 1.5 lakhs . So
    1) do I have to do tax audit ?
    2) if yes , can I get tax audit exemption by investing in NSC for 1.5 lakh to bring net taxable income less than 2.5 lakhs ?
    3) or can I get tax audit exemption by showing profit of 8% ( I have not done any equity trading ) ?
    4) if no, than can I do some equity trading for 50k till 31 March so that I can get tax audit exemption by showing 8% rule ?
    5) if (4) point is applicable than I have to do intra or delivery based equity trading ?

    Sir, please guide me .

    Thank you.

  174. Lini says:

    Sir,if a trader is not liable to maintain accounts as per 44AA or not fall under 44AB to undergo audit,then while filing a return he/she has to upload Balance Sheet and P/L Account details?

  175. vimal says:

    sir, My turnover is 1.10 crs ( I trade only options). After calculating the brokerages and stt I had a loss of 23,000 and I had no other income. Do I need to get audit for this or I will just file the return.

  176. aja says:

    Nithin Ji,pls clear my these 2 doubts-

    1)If the profit is less than 8% of the turnover but overall income is in excess of the exempted slab rate (2.5 Lakh at this moment) the audit is required or not?
    2)If the profit is greater than 8% of the turnover and overall income is also above 2.5L,do we need audit or not?

    Thanks

    • aja says:

      Pls consider Turnover is 10L in 1) and 2) to clear my doubt

    • Nithin Kamath says:

      1. Required
      2. Not required. But you will need it mandatorily if your total turnover for the year is more than Rs 1 crore.

      • aja says:

        Last doubt on this series,pls do reply-
        I read above that-“if you declare profit equivalent or more than 8% of turnover, no audit is required…”
        Here the word declare means,we dont have actual 8% profit made,We are just making it up to save ourself from audit,am I right?

        Say,My Turnover is 20L,8% of 20L=Rs 1.60L
        But profit is less 8%
        Now,I’m declaring Rs 1.60L as a profit+Rs 90,000 as FD Interest and filling a return.
        In such a case do I need to maintain books of account?
        Will AO/ITO will trouble me asking ki Rs1.65L profit kaise aaya?
        Because in actual legder,P&L statement,you can clearly see my loss.

        Thanks Nithin Ji

        • Nithin Kamath says:

          Aja, there is no issue in declaring more profits. You have if you reduce. So should be alright to do that. But do speak to a CA once.

  177. Manohar says:

    Hi Nithin,
    I am having 2 trading accounts, one with Zerodha and another with ShareKhan. I recently opened account with Zerodha. I have one long turn gain of Rs. 1000, Rs. 10000 gain in short term in ShareKhan and I have Rs. 1000 as both speculative and short term gain.
    I am a software professional.
    Here my doubt is, which form should I have to fill and can we deduct brokerage charges from gains?

    Thanks in advance!!!

    Regards
    Manohar

  178. sujata says:

    Wondering why there should be any auditing at all since all transactions go through NSE and everything is tied to PAN. A requirement for auditing in this case, especially in the case of losses (since no expenses, etc. can be claimed) is similar to requiring that the TDS from banks have to be audited.

  179. Suraj says:

    Sir, The total income should be less than 2.5 lakhs to avoid tax audit. Here the total income is ( all income heads less 80c deductions or only all income heads )

  180. Suraj says:

    Sir , if the income ( salary+FD interest+f&o profit) = 3.9 lakhs & 80c deductions = 1.5 lakhs .
    F&o turnover < 1 crore & profit < 8 % of turnover .
    Tax audit required or not ?

  181. HARSHA says:

    how to arrive at the assessable turn-over in future trading, in context of income tax

  182. Sai Sreedhar says:

    Hi Nithin
    You have mentioned that “if your turnover is less than Rs 2 crore (was Rs 1 crore until FY 16/17) and if your profit is less than 8% of turnover an audit is not required if your total tax liability for the year is zero.” If we have only derivatives income and the overall profit is less than 8% of turnover, and also less than 2.5L slab, do we get an exemption from getting the audit done? Is there any clause which states this? Kindly clarify a bit further on this please.

    • Nithin Kamath says:

      Sai, if turnover is more than 1 crore and profit is less than 8% you need an audit. Check for section 44 AB and 44AD. If profit is>8%and turnover less than 2crores, no audit required.

      • Sai Sreedhar says:

        Sorry forgot to mention, Turnover is LESS than 2 Cr.
        Profit also LESS than 8% of Turnover, and LESS than 2.5L slab limit.

  183. Suraj says:

    But, sir ( salary+FD interest+f&o profit-80c deductions) = 2.4 lakhs . Is audit required ?

    • Nithin Kamath says:

      Depends on your turnover also. If it is more than 2 crores and F&O profit less than 8% – yes, if more than 8% No.

  184. Ravi says:

    Hi Nithin,

    Thanks for your tutorials. They have been helping me a lot.

    Quick query:

    Fno Turnover = 25 lakhs
    FnO P/L = -5 lakhs (all loss)
    Other income = 50 thousands

    Total income = -4.5 lakhs (loss)

    Is Tax Audit required under ITR4?

    Thanks again.

  185. Suraj says:

    F&o turnover < 1 crore & profit < 8% but ( salary+FD interest+f&o profit-80c deductions) = 2.4 lakhs .
    Now audit required ?

  186. Satheesh Kumar says:

    Hi,

    I am trying to find my turnover and capital gain from Q back office to pay tax. I do only equity trading, I clicked Tax p&l and for the fy 16-17 it is showing only the total charges, all other fields are displayed as N/A. I have some short term profit and intraday profit but i am not sure about the exact amount. I am not sure why the values as coming as N/A is this a bug in your software? or am i doing something wrong here?
    Please help me 🙂

    Thank you
    Satheesh Kumar

  187. Priyam says:

    Hi Nithin,

    My salary income for the F.Y.16-17 is Rs.2,75,000/-

    My F&O turnover during the year was around Rs.30,00,000/- and my loss during the said period was Rs.10,000/-.

    Will I need to maintain books of accounts under section 44AA and get my books audited under section 44AB just because of this Rs.10,000 loss?

  188. VIVEK KUMAR says:

    Hi, I have a query regarding P&L tab in Zerodha… I have traded in MIC daily from last 1 week making a profit somewhere between 250 to 900… When I checked the same in P&L then I found my Realized profit is 3550 but Net Realized profit is 305 only.. Why is such a difference. Please explain.

  189. tushar mody says:

    Dear shri NITHIN KAMATH,

    PRESENTLY I do ONLY & ONLY…CNC & SELL ONLY when SHARES reach T2 ( DEMAT ).

    I show this INCOME as “”SHORT TERM CAPITAL GAIN “” & pay TAXES accordingly.

    NOW,,,in ZERDHA UNIVERSITY…CHAPTER 6…..

    IN DELIVERY BASED TRANSACTIONS…you have mentioned…this STATEMENT as follows :-

    ALSO…there is NO NEED of an AUDIT if you have ONLY CAPITAL GAINS IRRESPECTIVE of TURN -OVER OR PROFITABILITY.

    So…does it mean,I can do this sort of TRADING upto even very high turnover like TEN CRORES without the NEED for any AUDIT OR BOOKS OF ACCOUNT.

    This SHORT TERM CAPITAL GAINS is …..”” MY ONLY INCOME “”…..I have NO OTHER INCOME.

    please clarify whether I will need any AUDIT if I do BIG turnovers like TEN CRORES.

    thanks

    TUSHAR MODY

    • Nithin Kamath says:

      As long as you are showing this as capital gains, there is no need of an audit as this is not considered business income. But if you start doing this as if it were your primary business, maybe you should start showing this as business income and not capital gains. In which case you will need an audit. I don’t unfortunately have a concrete answer if you should show it as capital gains or business income if you are doing a lot of turnover. I’d advise to show it as business income and get audit done.

  190. Raman says:

    Sir,
    First, I want to thank you for this elaborate tutorial. I have certain questions regarding Intraday Equity Turnover calculations, please clarify.

    1: I traded Andhra bank multiple times, and getting confused, what is the turnover? example of transactions are given below for single contract note:
    a: ANDHRA BANK Buy 100 @ 52.10 = 5210
    b: ANDHRA BANK Sell 492 @ 52.55 = 25854.60
    c: ANDHRA BANK Buy 400 @ 52.05 = 20820.00
    d: ANDHRA BANK Sell 98 @ 52.50 = 5145.00
    e: ANDHRA BANK Buy 90 @ 52.40 = 4716.00
    For this contract note(Transaction settled other than Delivery): 590
    How Should I calculate the turnover here as transactions are overlapping?

    Thank You,
    Raman.

    • Raman says:

      I am Newbie. Well I tried calculating the difference of sum of amount of all buy transaction sum of amount of all sell transactions once, then once by splitting transactions step by step, The result came to be same as 253.60. So, this 253.60 is turnover for these Intraday transactions. Am I correct?

  191. arvind says:

    hi nithin
    thanks for this wonderful module . i have some confusions :

    1 . in profit & loss of ITR3 form , should i also include bank interest in other income . and separate it in schedule BP & also show it in schedule OI income from other sources section of ITR ?

    2. regarding section 44AD : 6 % profitabilty of turnover means : net profit after taking out all expenses ( telephone , rental , brokerage etc ), depreciation expenses ? if so it would be harmful to include expenses as they may reduce profit & thereby inviting CA audit cost

    or its gross profit ( 6 % direct cost of purchase ) ?

  192. tushar mody says:

    sir,

    Since the TURN OVER limit is …. NOW…….. 2 CRORES…

    the CARTOON at the TOP of the CHAPTER SHOULD BE CHANGED with a GIANT 2 CRORE………???????

    REGARDS

    TUSHAR

  193. SAILAJA says:

    Sir,
    I trade in FNO & Cash segments.
    My F&O turnover is < 2.0 cr;
    My F&O profits are < 8% ;
    STCG in equities : 15000
    My total income < 2.5 lakhs

    From the information provided in the chapters, I understood that I have to file ITR-3 for the AY2017-2018 and there is no need for my books get audited as I have business income along with STCG and as my total income is less than 2.5 lakhs. Request you to confirm.

  194. Gouri sankar says:

    Hello Nithin,
    1. I have total yearly income < 2.5 lks
    2. Loss in FnO 2.8lks
    As per my understanding i don't need audit, but a representative from cleartax said if income from business or profession is negative then audit is mandatory.
    Is it true? am i need audit?

    • Nithin Kamath says:

      Depends on your turnover, if it is less than 1 crore and your total income is below 2.5lks, not mandatory.

  195. Pranay Mangal says:

    Hello Sir
    I have been trading for 3 years now, recently my CA suggested that I should open a current account since I am doing trading as a business. Also I received notices from income tax department in the past regarding high value transactions. What is your view on that? If I am opening a current account as an individual (sole proprietor) , can you also suggest what business proofs are applicable to me while opening current account since usual proofs like service tax registration or shop act license( gumasta license ) are not applicable to me. I apologise if my question is a little vague but I hope to learn from the traders associated with your firm who may have faced similar problems in the past.

    • Nithin Kamath says:

      Pranay, if you are only trading and CA is asking you to open current account, i don’t think it makes sense. Btw, we don’t allow individual investors to map their current account to the trading account.

  196. Vikas Kothari says:

    Dear Nithin,
    All this is awesome useful Info. To get my trading activity audited, CA is asking for Rs. 17000/- This after I incur a trading loss of Rs. 5 LAKHS. Any suggestion on how do we save this money?

    Regards,

    • Nithin Kamath says:

      hmm.. no real way around this. If your turnover is less, you can declare 8% of turnover as profits and get away from audit. But if turnover is more, this wouldn’t make sense as it would mean paying taxes on those notional profit declared.

  197. Waqaar says:

    Hi Nithin,
    If I am salaried person who also do delivery based trading, sometimes short term and sometimes for long term purpose and also indulge in Options and Future. So in that in condition he has file ITR 4 form. Right ? I will consider myself as Investor and is there any field in form which ask if you are a trader or investor ?

    Thanks

  198. vishal says:

    Sir, I had got my books audited last year. Do I have to get it done this year also. I have traded in F&O, but my total income is less than 2.5 lacs?
    thanks
    Vishal

  199. Debu says:

    My CA(Taxman.in) is telling that the total turover in Equity intraday trading and equity derivative trading is by summing the sale value which is different as you have mentioned. Does that makes sense to argue with him??
    But since incurring losses i have to go for tax audit so its better to go for it(He is charging 8.5k+service tax). Any recommended for CA who specifically handles tax filing cases for share traders like us would be highly appreciable.

  200. Namita says:

    Sir, I had done trading in F&o in 2014-15 and 2015-16. Very less only 20 transactions in total. Not after that. I my total income was below 1 lac. What to do now. I can still file for 2015-16. But what about 2014-15 pl help

  201. Arun says:

    Dear Sir
    I have no income and no liabilities. All the assets I possess are from my fathers income. Cash in my bank account is my fathers through which I do trading. So in that case what will be my net worth?

    • Nithin Kamath says:

      If cash in your bank is gifted to you by your father, that is your networth. Similarly any other assets like that.

  202. Vivek says:

    Nithin Sir,Which ITR form do we use to show presumptive income 44AD?
    My Turnover is 6lakhs and I made a loss of 88k.I just want to declare 8% of TO to avoid audit.My overall income is below 2.5L

  203. Vivek says:

    One more question Sir-Can we apply for Refund if we are filling under presumptive income scheme?

  204. Manish says:

    Nithin Sir,
    My turnover is only 165600.I made a loss of 38000rs.Though I’m in a small loss,I want to declare 8% profit.

    Pls tell me-

    Gross receipts=165600
    Gross profit=13248(8% of TO)
    Expenses=0
    Net Profit=13248(8% of TO)

    is it right?
    I’m filling under ITR4(Sugam).

    no other income other than this.

    Sundry debtors=0
    Sundry creditors=0
    stock in trade=0
    amount of the cash balance=75000

    did I put all these main 8 entries correctly?

  205. Benson says:

    Hi Nithin,

    My total turnover is 97 lacs and i am in a big loss of around 6 lacs. Do I need to pay any tax? Please note that i am a NRI and using normal trading a/c which is linked to my SB a/c.

  206. manoj.s says:

    Hi Sir
    For FY 2016-207, I had a professional income of 690000 & other business turnover of 295000. Also my F&O turnover for the year was 2,40,000 wherein I made a loss of 20K & paid total expenses (as per Zerodha tax P&L) of 69,245K. Can I simply calculate my tax liability as 345000 (50% of professional income)+ income of 23,600 from business (8% of 2,95,000) less loss of 19K from non speculative income less expense of 69K incurred in trading business . This makes my total tax liability as 3,45,000+23,600-20000-69495=2,79,105. Do i need to audit in this case or it is fine to fill ITR 4 without it

  207. manoj.s says:

    If i need a audit then can i simply calculate my tax lib as 345000 (50% on profession income of 694000)+42800(8% profit on other business turnover +8% profit on total turnover of non speculative income)=3,87,800. I hope in this case I surely dont need any tax audit..But let me know if 1st case is also fine so that my net tax liability reduces…

    • Nithin Kamath says:

      hmm.. you can’t bifurcate it that way.You have to combine all your income (professional+ business) and then calculate audit requirements and/or pay taxes.

  208. Amarnath says:

    Can you explain the positive settlement and negative settlement in detail.

    why i go to zerodha and see the report. Options turn over and Gross profit. i do not see any thing called positive or negative settlement.

    When you mean settlement, you are referring to EOD Settlement or something else.

    Thanks for good article in advance

    • Nithin Kamath says:

      Profit or loss against each contract is the settlement.

      • Amarnath says:

        When you mean a Contract. you mean – NIFTY-FUTURE-APR2016 as contract

        or

        Contract of 14th April Purchased 1 Lot and sold on next day. ( Profit – 5000 )
        Contract of 16 th April purchased 1 lot and sold on next day. ( Loss – 1000)

        Currently Zerodha shows net amount – 4000

        we need to show in tax return – 5000 as gross sales and 1000 as negative settlement.

        Zerodha has any plan to give details by contract trade wise.

        Regards
        Amar

        • Nithin Kamath says:

          Amarnath, there are different ways to do this. You can follow either of the ways. Make sure whatever method you follow, you stick to it.

  209. Jignesh Patel says:

    Sir,

    What is limit for filing ITR4 with ‘no account case’? Till what turnover and profits, I can file ‘No account case’?
    For e.g. I have salary income of 15lac and 2lac gain from Options with turnover of 10lac. Can I file ‘No Account case’?

    Regards,
    JIgnesh

  210. Trader cum investor says:

    Hello Nithin
    I am great fan of you now. After reading all this information at one place, I feel blessed to have opened account on zerodha.
    I read your modules two three four times….I love the way everything is written. Thanks for all your efforts. I wish I can meet you. 🙂
    I have small queries:
    1. If I show intraday equity as speculative business income and short term delivery trades as capital gains (it happened to me), How then all my expenses including STT can be shown as charges as one have also done short term investments? will be difficult to segregate STT of your intraday equity and short term equity. Also, other expenses, room rent, internet bills (which are not used fully for business only) can be fully shown in the ITR form?
    2. Suppose, Income is 2 lakh, Intraday equity loss is 4 lakhs (business) and short term equity loss is 2 lakhs, by showing all respective losses in ITR, this filled ITR can be avoided with Audit reqd as total income is less than min exemption limit. Lets suppose in next year, same income is 2 lakhs, intraday equity profit is 4 lakhs and short term equity profit is 5 lakhs, assuming no other expenses shown. Total income will be 2+3= 5 lakhs which will be above the exemption limit and as intraday equity is done, so audit of accounts will be required (net profit from intraday trades is still zero). Main point is here, Anyways audit has to be done by CA, may be this year or next years once we started showing intraday equity as business income. Also point here is this section 44AD is such a rubbish move made by govt of india, how india can grow if illiterate types of laws are created to burden retail investors.
    please reply me on above two points. Thanks Nithin.

    • Nithin Kamath says:

      1. It isn’t tough to segregate. You will have all the trades on you. Yes all business related expenses can be shown on ITR3.
      2. If you are actively trading the market, yeah audit is kind of mandatory. The turnover calculation method, you can be extremely aggressive in terms of calculating it since IT department doesn’t really define set method. Some people even use just all ledger credits+ debits. Speak to a CA for this. I can only post the most conservative approach to calculate.
      🙂

  211. Prasanthi says:

    Hi Nithin (Our only trustable Tax consultant, I really mean it. Thank you),

    I have salaried Income, Professional Income, Short Term Capital Losses, Short Term profits on Buy back of stocks (I donno where to and how to categorize these profits, the stocks were bought back through Zerodha by the respective companies), I have Futures trading profits, Liquid bees dividends as well as Liquidbees trading turnover (SHORT-TERM TURNOVER₹15 Lakhs) on Liquid bees buying and selling.
    I am going with ITR 4S. Presumptive income.
    My problem is if you include Liquidbees buying and selling total volume turnover as part of my business turnover, I will fall very much short of 8% profit, so I need audit by CA. If you don’t consider Liquid bees turnover I am comfortably above 8% profits on my turnover and I don’t need an audit by a CA.
    Other than Liquidbees turnover, my rest of the turnover in F&O and short term capital gains/losses are very small and I can simply show 8-10% profits in my total turnover and avoid audit. Where as if I need to include Liquidbees total volume turnover in my business turnover, then I can’t show 8% profits and so I should face a CA Audit and pay a CA for that.

    What do I do? Should I show Liquidbees 15L volume turnover as part of my business turnover? or can I simply show the paltry dividends that I got from Liquidbees as my income some where in ITR 4S (Is it possible to show this way?)

    • Nithin Kamath says:

      All equity investments including liquid bees can be shown as capital gains. There is no concept of turnover/audit for capital gains. Applicable only for business. Show only F&O turnover as business income. Also you can take an aggressive approach to calculate the turnover and keep it as little as possible

  212. debabrata says:

    Hi nitin,
    My turn over is below 1 cr and I have a loss of 2 lakhs. do I still need a tax audit as my profit is less that 8 percent?

    • Nithin Kamath says:

      If you have no other income not needed. But if you have other income and you have taxes to pay, then yea.

      • Ramya shetty says:

        Sir my turnover in less than 2 crore but i faced net loss of 30 thousand in FY 2016-17 which is less than 8% of my turnover, but i have salary income also which is above 3 lakh but after eligible deduction it fall below 2.5 lakh although i`ve already submitted ITR1 but which form appropriate to me ITR3 or ITR1, . Is there will be any problem ? can i submitted ITR3 later. thanx

  213. Prasanthi says:

    Thank You Nithin,

    I have 3 stocks in my portfolio which constitute more than 91% of portfolio holdings. Highly concentrated portfolio. I hold most of those 3 stocks without doing any trade in them for more than 6 years and they are multi baggers to me.

    I have recently started booking profits of less than 10% of total stocks that I hold and bought back when the stocks corrected again. This kind of trading volume all put together does not even cross 30% of my total holdings. Doing like this, will it lead to the income tax department considering my whole Long term capital gains as trading/business income (somebody suggested, if you want to do trade on your long term portfolio, better do it by opening a separate Demat account and not trade in the same demat account which is for long term holding, to avoid litigation with Income tax department).

    The second question is, if I trade in Futures of the same stocks where I have very long term holdings with multi bagger profits, using the same trading account (Zerodha) will it lead to Income tax department considering my long term holdings also as business and not as LTCG, as and when I book profits from my long term holdings?

    • Nithin Kamath says:

      I have given link to a circular in the module where it is clarified that a person can have trading and investing potfolio at same time. So should be okay in both cases.

  214. Aditya Jain says:

    Sir,
    I have a loss of Rs. 40000 in last financial year from trading and I have a business income of Rs 200000. Do i need to audit my accounts? Also, can i set off the losses for next year if i don’t audit my accounts?

  215. Anupam Garg says:

    Hi Nithin
    I am in need of a professional Chartered Accountant who understands the nuances of filing ITR for retail traders engaging in F&O segment. Request for suggestions.

    Thanks in advance

  216. tushar mody says:

    sir,

    please explain calculation of BUSINESS TURNOVER for AUDIT PURPOSE………..only for BTST TRADES

    thanking you

    • Nithin Kamath says:

      If you are showing BTST as speculative business then turnover is essentially the sum of profits and losses. If you are showing it as capital gains, there is no need of calculating turnover on it.

  217. Nee says:

    Please help. I am salaried person and trade in equity only.
    The turnover (absolute value of buy and sell for delivery trades and absolute differential of intraday trades) exceeds 2 crore. The profit before deducting STT 46779 /- and limit charges 27000 /- is 61385/-. The breakup of 61385/- is as under:
    Intraday trading 126,631.01
    Short term capital gain 162,252.30
    Long term capital loss -227,498.36
    Total 61,384.94
    My query is
    1. Which head of income do I show the income and loss for each of the above. I understand I can set off short term and long term. What do I do for long term capital loss balance.
    2. Is tax audit mandatory irrespective of the head of income under which the income is treated. (profit is less than 6% of turnover.). And if it is under sec 44AD?

    Please help if there is a clarity provided in Income tax act.

    Thanks you.

    • Nithin Kamath says:

      1. Since long term capital gain is exempt, there is nothing you can setoff your long term losses to.
      2. Tax audit only for business income. Not for capital gains.

      • Nee says:

        Thank you Nithin for help.

        My worry is since turnover has exceeded 2 crore, will the ITO consider it as business and not capital gain (considering the number of trades). And want me to have tax audit done. Also since the profit is less than 6%.

        Also request help for speculation income. Thank you.
        Also can I carry forward long term capital loss to set off against LTCG in future years.

        Please guide.

        • Nithin Kamath says:

          For delivery trades, there is no concept of turnover if you are showing it as capital gains. It applies only on business income. So for you turnover will be only absolute differential of intraday trades (sum of P&L). Also this turnover is only to determine audit.
          Intraday equity has to be shown as speculative business.
          No use carry forwarding LTCG losses as the gains are exempt.

          • Nee says:

            Thank you Nithin for the help.

            Please let know if there is a guiding rule for treating income under capital gain head / business income head.

            If there is a choice for the assessee to treat income under capital gain head / business income head, I understood it will be tax saving if I have the tax audit and treat it as business income. This way I will be able to claim STT and the limit charges which are actually part of cost but not allowable if I treat it as capital income.
            My turnove6 is as under:
            LTCG 1501950/-
            STCG 24578867/-
            Speculation 126555/-

            Please let know if my understanding would be okay.

            Thank you.

          • Nithin Kamath says:

            But whatever way you consider this income, ideally you have to follow the same in the future. This can’t be used as per your convenience/saving taxes.

  218. Dhrutika Patel says:

    As per AY 2017-18, ITR3 should be used for income from f&o trading. Up to what turnover and profit, I can file ‘No account case’? I have profit more than 8% and turnover around 5 lac.
    In P&L section 53 for no account case, there are 2 sections added – For Business and another for Profession. For share trading, which one to use?

  219. Nitesh says:

    Nithin,
    1. Can you please provide example of ITR3 (FY17-18) with ‘no account case’? I believe most retail traders can file no account case provided they have less turnover and net profit >8%. I can’t file presumptive income ITR 4 (FY17-18) as I have capital gain also.
    2. Please confirm my understanding on no account case:
    a. Gross Receipts = turnover provided by zerodha (f&o + intraday)
    b. Gross Profit = Profit as provided by zerodha excluding Brokerage, STT and taxes
    c. Expenses = Brokerage, STT, taxes and other expenses if any
    3. What is meaning of this statement in terms of turnover for retailer:
    “In respect of any reverse trades entered, the difference thereon should also form part of the turnover.”
    Apologies for lot of questions.
    Thanks
    Nitesh

    • Nithin Kamath says:

      1. Hmm.. let me find out if our CA can put this out
      2. On ITR 3, you can show all positive turnover (profits) as gross receipts and negative turnover (losses) as Gross sales
      3. I have explained in detail in the module itself.

  220. Rama D says:

    Dear Sir, I am a home maker since last 5 years, Before that have worked in IT for about 15 years. Since Jan 17, I have become a short term investor. I never do intraday trading, but sell stocks if I get more than 10-15%. My income involves F.D interest, STCG and LTCG only. I read your module on taxation and have the following queries for the F.Y 17-18. For this year my F.D interest + STCG is < 2.5L and hence I have no issues. But this year, want to get involved more as short term investor and hence want to clarify about tax/audit requirements.
    1. Since my F.D interest is very small amount, can I show part of STCG as my income up to 2.5L ( upto 4L with 1.5L of tax saving investments ) and get exemption ? For the rest of the STCG I need to pay 15% tax and I need not worry about the total trading amount as I am not treating this is business income ? Am I right here ?
    2. If I treat F.D + STCG as business income, then if total turnover crosses 2cr OR turnover less than 2cr and profit < 8%, I need an audit ? Am I right ?
    3. If I treat it as business income, since all my transactions are delivery based, as per your module, turnover is net sales value for the year ? Pl clarify.

    1. My F.D income is very less ( less than 1lk),

  221. manmohan says:

    I have got a notice under IT 143(2) asking if i disclosed my profit from security transaction during the assessment year 2016-17. I have been doing cash based and delivery based trading and turn over is above 3 crores. Actually I made a loss of 5 lakhs and did not declare this loss in the ITR. Will they ask me to do auditing now.

  222. Mani says:

    Hi, I have 2 lac loss on 35lacs turn over for short term F&O trading. Also I have 8 lacs capital gain on long term held equities. Also rental income of 4 lacs. No other source of income. Can you please help me 1) what is the right form to use, is it ITR3?, 2) do I required to do audit? 3) since long term capital gain has exempt from tax, do I need to include it in total income or not?

    • Nithin Kamath says:

      1. yes ITR3
      2. Yes, best to have an audit.
      3. Not include. But you need to declare this income on your ITR.

      • MANI says:

        Thanks for replying. However I am not clear about audit. Is it required in my case because my rental income offset with F&O loss and net income is below tax liability.?

  223. Pavitra sahu says:

    Can I file the ITR showing intraday, short term, long term & FnO trading as investments? I had incurred loss in intraday trading this year. I want to know if its possible to show it as an investments and thus save the extra cost of tax audit?

    • Nithin Kamath says:

      No you can’t. Intraday equity has to be shown as speculative business, F&O as no-speculative business, investments as capital gains on ITR3.

  224. gurvinder.dadyala says:

    I want to confirm whether I need to get my audited or not. As per documentation in Zerodha I guess I have to get an audit however I want If it can be avoided becuase in F&O I have incured a loss of 2925 so even I get my account audited it will not cost me more than 5000 believe. Is there a way to avoid an audit in my case.

    Following are my turnover and profit details
    Profit and turnover breakdown

    Intra-day / Speculative profit 12096.35
    Intra-day / Speculative turnover 35237.75
    Short-term profit -4189.50
    Short-term turnover 234000.00
    Long-term profit 0.00

    Profit and turnover breakdown

    Futures realized profit 0.00
    Options realized profit -2925.00
    Total realized profit -2925.00
    Futures unrealized profit 0.00
    Options unrealized profit 0.00
    Total unrealized profit 0.00
    Futures turnover 0.00
    Options turnover 47875.00
    Total turnover 47875.00
    Long-term turnover 0.00

    Salary – 600000

  225. Ganesh says:

    Hi Nithin, Need your advise.

    My F&0 turnover = 17 laks
    My F&o loss =2 laks
    Rental income + interest income – 3.5 laks
    So total profit = 3.5 laks – 2 laks = 1.5 laks
    1.5 laks is greater than 8% of turnover which is .08*17laks =1.36 laks
    So i dont need to tax audit

    Is the above understanding correct.? please help

    • Nithin Kamath says:

      Ganesh, you will need to audit it. You can’t look at this 8% profit of turnover by combining all other income of yours. F&O is business income, audit requirement has to be calculated just based on this. Not by combining all other income.

      • Ganesh says:

        Thanks you so much Nitin, Appreciate your prompt response. Just to clarify. even if I had incurred f&o lossess, which I dont want to carry forward, can I just straightaway declare 8% profit and file IT return without tax audit. I know i will paying more income tax.

  226. Neha says:

    Today i met to my C.A and he told that bcoz your turnover is below 2 crore and profit less than 6% ( i am in net loss) you have to get audited your account and file only ITR3 , he further add that i cannot show my loss into income and use ITR 4 as a presumptive income because person having speculative business income cant use ITR4, it is mention also in Instruction under ITR4 on income tax site at point (g) under point 3 i.e who cannot use ITR3 here is the link
    https://incometaxindiaefiling.gov.in/eFiling/Portal/StaticPDF/ITR4_Sugam.pdf

    • Nithin Kamath says:

      Yes he is correct.

    • Hiren says:

      hi neha , my situation is the same as yours, i too have loss in FNO and turnover below 1 crore, so just wanted to ask that in ITR 3, after getting audit done , will u be showing FNO as business? this will give me an idea as how to proceed furthur, thanks

  227. Vinay Mathur says:

    I have loss of 60000 in options trading and no other income will my account be audited and which form I should file. If not required audit then can I file without CA.

  228. Hiren says:

    Hi Nithin , I m very thankful to you that u created this session, which gives traders like me a great relief regarding return filing , Anyways , Having a loss in FNO around 2lacs and commodities derivatives around 15000, and speculative intraday gross gain of 2000 and after deducting other charges like brokerage and taxes its showing negative 8000, Turnover for the year is below 1 crore , Income is below taxable limit ,I have few questions 1) Is gross loss considered while filing returns? or brokerage and other taxes are added in loss to come up with a bigger figure ? 2)If i use section 44AD, will i be able to use the loss to offset with next years gains?
    3) if i use section 44AD , do i need to include equity spot intraday Profit/Loss in that section 44AD? 4) Do I need to get my accounts audited in this case (my turnover less than 1 crore and income less than taxable limit)4) Suppose if i dont need audit in section 44AD then will i be able to carry forward the loss and will i be allowed to use the loss to save taxes on profits in next year? 5) Is there any other option or any other way to carry forward derivatives loss , incase if i dont use section 44AD? 6) Which ITR needs to be filed if i go for section 44AD ?

    • Nithin Kamath says:

      1.You add all charges up and then come to a bigger loss figure in this case.
      2. No. You have to declare loss and carry it forward using ITR3.
      3. If you have equity intraday, you can’t use section 44AD.
      4. Yes.
      5. You can file ITR3, get an audit if required, and then carry forward the losses. Best way to to it right.
      6. ITR4S but since you have speculative/intraday loss/gain, you can’t use ITR4S

      • Hiren says:

        Suppose i follow 44Ad and declare FNO losses as business loss , will i get to use the loss for next year FNO profits and save my tax, for example in next year i made profit of 8lacs in FNO , so will i be able to deduct 2lacs Fno loss that i declared the prevois year from 8lacs? example 8lacs minus 2 lacs, taxation amount 6lacs, will it be dont this way?

        • Nithin Kamath says:

          No, if you use ITR4(44AD) you can’t declare loss. You have to show 8% of turnover as profit. So no there is no carry forwarding the loss. You need to use ITR3 to do this.

          • Hiren says:

            So if i cannot use the loss for profits in next year , then there is no point in going for 44AD, but then if i dont use 44AD , will i be able to use the loss just by filing ITR 3, i just want to know confirm 100% that by going in which way i will be able to use loss , because amount is 2lacs , and 30% of it is 60000, i cannot leave 60000 discount on taxes, if its not possible to explain here can i contact you? so that i can talk one on one with you and get a clear 100% confirmation,Thanks

          • Nithin Kamath says:

            If you declare your losses on ITR3 on time, you can carry it forward for 8 years and setoff agains future profits.

  229. Hiren says:

    In my case i m not sure whether i need audit or not for FNO losses ,, So suppose if i don’t do audit and declare my losses, and suppose if i get a notice from IT that i need audit , and then after paying fine of 0.5% i get the audit done , in this case after getting the audit done and paying the fine, will THE IT department allow me to use the loss to set off against future profits?

  230. Hiren says:

    my turnover is only 8lacs , so even if i get fined of 0.5% i’ll fined 4000 rs approximately , m i right?

  231. sureshm says:

    Received an email from IT Department –
    subject: File your IT Return to report your income
    (It is seen from your 26AS statement that there are TDS deductions on payments received by you during F.Y. 2016-17.)

    I’m a self-employed person and doing part time job also, (Truly trading is primary activity)

    A) self-employed income – 1.2 lac ₹
    B) doing part time job also, as per my FORM 16 Total income 50,000 ₹
    my total income = 1.2lac + 50k = 1.7 lac ₹ only
    i take some money from family and from my friends too.

    My total trading (equity,F&o) turnover is 19,46,590 ₹ There is no capital gains
    my trading loss is 95,000 + 70,000 trading charges.

    a) some TDS deductions happens with my part time job.
    b) i can’t show my self-employed income in documentation (there is no bills or receipts to show this)

    NOW,
    1) it is compulsory on me to file IT returns or no need.
    2) my intention is not to show my trading losses in IT returns. ( fear about banks don’t give me a loan in future )
    3) want to show only my form 16 income 50,000 or along with my self-employed income.
    4) what happen if i filed my trading losses and form 16 income both+self-employed income.
    5) what happen if i’m not disclosed my trading activity in IT returns.

    suggest me best solution. ♥ u Zerodha.

    • Nithin Kamath says:

      1. It is not compulsory, since you have no tax to pay.
      2/3/5. You should show your trading income/loss on ITR. Income tax department will know that you have traded, and if you haven’t declared that might mean an automated notice asking why. This can be an inconvenience as you would have to then meet an ITO to explain why.
      4. You should file/declare everything properly.

  232. Vijay Prasad says:

    Dear Sir,
    I have an Account with Zerodha
    I do not have any other source of Income other than Trading in Stocks.
    I am using ITR 3 for filing
    I have some Quries BS and P & L sheet. I have chosen No Account Case annd No Auditing.
    Kindly help:

    Case Equity Trade
    I had made some trade in Equity and sold it within a weeks time from purchase.
    Where is the gain shown, In STCG or just add up with others i.e Amount from F & O trade and Commodity and reflect in Gross Receipt and Gross Profit in P & L Sheet.

    BS
    a) Amount of total sundry debtors
    Who is the debtor Me or Zerodha and which values goes in here. Is it balance Amount in Ledger?
    b) Amount of total sundry creditors
    Who is the creditors Me or Zerodha and which values goes in here. Is it Amount I owe to Zerodha, if not then what?
    c) Amount of total stock-in-trade.

    My understanding is the Stock I am holding in my DEMAT Account and the Value is the buy price or the market price as on 31 Mar 2017. Is that correct, if not please help.

    d) Amount of the cash balance
    Total cash balance in all bank account.

    IN P & L sheet.

    a) Gross receipt.
    My understanding is
    Amount = Total Profi plus Total Loss from all segment.

    Is this correct, if not kindly help.

    Thank you,
    Vijay

    • Nithin Kamath says:

      First task is to classify ourselves as trader ,investor, or trader cum investor.
      Trading in Equity Delivery based can be classified under Investment (Capital Gains) or Trading (Business). If you classify as Investor then the turnover wont come under P & L it will to straight to Capital Gain Schedule.
      a. Debtor is a person who owes money to you , with Zerodha your money is given as Deposit/ Advance towards your own purchases. There is no Debtor unless you you have any other receivable.
      b. You are Correct , If you owe money then Zerodha is creditor.
      c. If you classify yourself as trader , the portfolio will be your stock in trade. yes as trader either market price or buy price.
      d. yes
      a. yes

      • Vijay Prasad says:

        Dear Sir,

        Thank you for your prompt reply.
        I am seeking a bit clarification:
        Regarding First Task as mentioned by you.
        a) In ITR 3 I have chosen 0204 as Nature of Business, does this classify me as Trader or Investor or both ,

        Kindly let me know where this classification is shown in ITR 3.
        b) Is the positive Balance in the Ledger owed to me by Zerodha, and thus Zerodha becomes debtor as that amount is my receivable
        and thus can be reflected in Sundry Debtor.

        Please clarify.

        Thank you,

        Vijay

        • Nithin Kamath says:

          a. It doesn’t depend on the code. You can show your investments under capital gains and trades under business income.
          b. No Debtor is a person who owes money to you , with Zerodha your money is given Deposit/ Advance towards your own purchases. There is no Debtor unless you provide some other service and you have receivable.

  233. Vijay Prasad says:

    Dear Sir,

    Again Thank you for the enlightenment on this.
    Sorry to bother you again with 2 queries.

    1) In this case the Sundry Debtor should be zero amount
    2) Where does the Balance Amount shown in the ledger provided by Zerodha goes i.e reflect in the BS.

    Thank you,

    Vijay

  234. R. Ganesan says:

    Nice write up.

    What would be the turnover in case an option is allowed to lapse being out of money on the day of expiry?

    Pl. clarify.

    Thanks.

    • Nithin Kamath says:

      Turnover will be 0 on expired worthless options.

      • Ganesan R says:

        I am afraid it will be premium received in case of short positions. Premium received and difference between sale and purchase is turnover. There is no reverse trade in this case.

        • Nithin Kamath says:

          Ah I thought what was the turnover for that expired trade. Yes, profit on that trade will be the turnover as per definition. But this turnover is only to determine if you need an audit or not.

  235. Gurvinder says:

    I want to know where do I mentioned loss from futures and options in no account case. Can you provide column number in schedule BP or schedule P&L

    • Nithin Kamath says:

      In No Account case there is no option for Negative Amounts . You need to declare your profits as turnover (atleast 6%)

  236. Daljeet Singh says:

    Hi Nithin,

    Please help me out. My turnover on adding the absolute values of profits n loss was 45 Lks (F n O), with net loss of 5 lks. I am an NRI with fully exempted Salary income and no other income above exemption limit. Am I still required to go for Tax audit.

    • Nithin Kamath says:

      In case of Substantial losses its better to file with Audit. In your case its not applicable as turnover is less than a Crore.

      • Daljeet Singh says:

        Thanks Nithin for your prompt reply. Its a relief not requiring the tax audit. Hope so Tax Authorities as well have the same stance.

        Shall I submit my income tax return in Form 4 then.

  237. Prashant Shende says:

    Hi sir,
    I very confused that I can make audit or not-
    1. I am state government employee gross income per annum – 6.62 Lakhs
    2. My turnover is bellow 1cr.
    3. Intraday loss is 40 k and F&O loss is 75 K
    4 . Capital gain above 12 month profit rs. 46.
    Please sujjest audit required or not and which itr must fillup and for what is last date. Please Reply sir I am in so much depressed mood because I already take shock of IT office.

  238. Vijay Prasad says:

    Dear Sir,
    Again Thank you for the enlightenment on this.
    Sorry to bother you again with 2 queries.
    1) In this case the Sundry Debtor should be zero amount
    2) Where does the Balance Amount shown in the ledger provided by Zerodha goes i.e reflect in the BS.
    Thank you,
    Vijay

  239. ARUN says:

    Dear nithin ,
    for NRI, if net income in India is less than 25k
    STCG profit is rs 70,000 F&O loss is 2.5 lakh so net loss is 1.8 lakh

    so while filling ITR3 in balance sheet and Profit & loss statement ,shall i fill only “no account case” column or need to fill all others

  240. VijayK says:

    Hi Nithin,
    Can you please clarify me
    My Tax P&L
    INTRADAY GROSS PROFIT₹-19,404.55
    INTRADAY TURNOVER₹31,036.05
    SHORT TERM GROSS PROFIT₹-756.25
    SHORT TERM TURNOVER₹14,400.00

    I am assuming Gross turnover or Gross receipts in 44AD in ITR 4 is (INTRADAY TURNOVER ₹31,036.05 + SHORT TERM TURNOVER ₹14,400.00) = 45436 , is this assumption correct ?

    Does Presumptive income calculates to 6 % or 8 % of above Total ?
    Since its electronic transactions , i am assuming 6 %,

    Could you please clarify

    Thanks,
    Vijayk

  241. Suyash Tiwari says:

    Hi sir,

    1. I am IT employee gross income per annum – 6.35 Lakhs
    2. My turnover for Future = 3454, Option = 583025 and Intraday = 2820, hence total = 589299
    3. Intraday loss is 1 k and F&O loss is 26 K
    4 . Short term profit is 4K
    Please suggest audit will be required or not. Can I mention No Account case.

  242. Nandhakumar says:

    Cash balance in demat account to be shown as cash in hand or cash at bank for preparing balance sheet

  243. Vyom Gupta says:

    I have a query regarding taxation. I am a salaried employee with taxable income in the highest slab. I do occasional trading in options and some short term delivery based trades apart from long term investments in stock market. I have been filling ITR 4 for the last 3 years declaring the losses made in options or short term delivery. This year also, I have incurred loss in options. I was not aware of the requirement of audit of the books and have not got any audit done for previous ITR returns. I wish to know whether Audit is required to be done if I have incurred losses in the current year too. Also, if I want to avoid audit, what is the way out for that? If I do not declare losses and do not claim carry forward of earlier year losses, then can I fill ITR 2 from this year onwards. Or do I need to fill ITR 4 only since I traded in options occasionally?
    Kindly help me out.
    Thanks a lot
    Vyom

    • Nithin Kamath says:

      You have to use ITR3 (it is renamed from ITR3 to ITR4). To carry forward losses, you will need an audit. Otherwise you have to declare 6% of turnover as profit.

  244. Sagar says:

    I am self employed and my income is around 8 LK , But I suffered losses in FNO and intraday 40K and 70K. Turnover is less than 1 cr. But as you said we need to do audit since gross income is taxable. To avoid audit is it fine if I don’t declare losses I suffered in FNO and intraday ?

    • Nithin Kamath says:

      If you don’t declare the loss, there is a chance of getting a notice asking why you haven’t filed when you have traded.

  245. Sagar says:

    Btw,
    1: FNO loss is more than 8% of FNO turn over.
    2: Intraday loss is more than 8% of Intraday turn over.
    3: Gross turn over (FNO bussiness and intraday ) don’t exceed 1 cr.
    4: Total income is more than 8% of gross turnover.
    Still I will need audit ?

  246. Ram says:

    Dear Nithin,

    I beg for apologies if this question is repeated but would like to be sure before filing the return for my wife who is a dependent and has no other source of income.
    1. Done trading in both FNO and Equity – both day trading
    2. Total of purchase + sale value equates to about 108Cr (due high volume of trading)
    3. There is only loss incurred about Rs. 5 Lakhs
    4. There is no other source of income. Want to carry forward the loss.

    In the above case, does it attract an audit by CA? Which ITR is applicable (ITR2/3/4)? Please confirm. Your response is highly appreciated.

    Regards,
    Ram

    • Ram says:

      After ‘re-reading’ the above article and example a bit more closure, I understood that the turnover I believed is wrong (purchase value + sale value) and I need to calculate the business turnover which is totals of positives and negatives which are differences of (purchase and sale of a contract). In my case it is below 1Crore (for FNO + Equity).
      Hence I am assuming that no Audit is required. Please correct me if I am wrong.

      Note: The 108Cr mentioned earlier is Contract turnover which I got confused. Thank you for a the great article and information.

      Thanks,
      Ram

    • Nithin Kamath says:

      ITR3 and yes best to get it audited. Btw are you calculating turnover the way I have asked in the post above? It is not contract turnover, it is sum of all profits and losses.

      • Ram says:

        Thanks Nithin for the prompt response.
        Yes, I have wrongly calculated the turn over.
        However, I have been told that there is another clause that make the audit mandatory if F&O outcome is a loss due to following factors,
        1. F&O trading is treated as “Business”
        2. Per section 44AB any (profitable) income less than 8% of “the turn over” should be tax audited by an auditor
        So, in my case both are true, because I have incurred only loss and to carry forward the lass to next FY, it seems tax audit is mandated by IT department.

        Audit is not required in case profitable income is 8% or more.

        Am I rightly informed? Please let me know.

        Regards,
        Ram

  247. karan sharma says:

    hi Nithin
    my salary 2.5 lk
    f&o loss -1.5 lk
    to carry forward loss i should file itr 3 and for this i would need audit through CA ? am i right
    or if i dont carry forward loss then itr 4 .
    what should i do any suggestions please ?
    thankyou

    • Nithin Kamath says:

      Since you don’t have any taxes overall to pay, assuming your turnover is not much, you don’t need an audit. You can use ITR4, but you’d let go of the benefit of carrying forward the loss.

  248. Anurag Garg says:

    Dear Sir,
    I have a turnover of 6 Lac (as per the calculation of realized profit and loss but have a loss of 25K including speculative equity and FnO. Do I need an audit as the profit is less than 8% of turnover.
    Regards,
    Anurag .

  249. Nazeer says:

    Sir, I have no source of income traded FnO with barrowed money got loss of 8000. as per your earlier reply no need of audit, But does it attracts scrutiny for trading with borrowed money. What are the records required to show borrowing. Thanks in advance.

    • Nithin Kamath says:

      File your ITR showing this loss. The chances of getting a notice is when you trade and not declare that. Similar to putting money in the bank without filing ITR. Bank statement and trading account statement is all that you need.

  250. Nazeera says:

    Also please clarify is lending for non speculative trading ,futures, is wrong? as my brother who lend me money is worried.T hanks

  251. Pankaj Desai says:

    Sir,
    Futures realized profit -1158402.00
    Options realized profit 0.00
    Total realized profit -1158402.00
    Futures unrealized profit 0.00
    Options unrealized profit 0.00
    Total unrealized profit 0.00
    Futures turnover 9762422.50
    Options turnover 0.00
    Total turnover 9762422.50
    Proprietary business income(Apart from share trading) 400,000/-
    Do i get tax audit?
    Please consider this urgent.

    • Nithin Kamath says:

      Btw, you can setoff your profit from other income with F&O loss. Since turnover is more advisable to get audit done. But do consult a CA.

      • Pankaj Desai says:

        Thanks for a speedy reply Nithin.
        Consulted 3-4 CAs. Unfortunately none in my contacts is aware of this situation.
        If audit is not needed, can i still do it voluntarily? (Googled this but did not find the answer)
        Please help.
        Regards,
        Pankaj.

  252. Jay D says:

    Hello Nithin,

    Now that we have the tax filing deadline I had few questions/doubts after going through multiple sources of information (including varsity).

    I am a private salaried individual and I come under 30% slab. But since the last almost three years I have been trading in Options with zerodha. And net-net for this financial year individually and the previous financial years individually I have been on a loss 7 lac + cumulatively summed up 🙁

    Now my questions here are as follows:

    -> As I am making a loss on Derivatives which is less than 8% of the turnover, do I need an audit from CA for this FY?

    -> And I have never filed losses from the previous years as well (my bad). Now I want to file the losses from the previous financial years as well so that I can use it as set-off against any profit in the future for the coming 8 years. Can I do that?

    -> Another question which is a bit different from the above ones is that when I was going through q.zerodha.com -> Tax P&L report, I saw that on the page (script wise) it is showing me a turnover of around 20lacs and the respective loss in the F&O segment which is correct. But when I downloaded the excel report (tradewise), it does show me the trades but it shows the summed up turnover as zero “0”. Any thoughts on that as its puzzling me a bit?

    Many thanks in advance for looking into my queries 🙂

    Thanks,
    Jay.

    • Nithin Kamath says: