F&O, intraday and delivery trading: How different types of trading are reported

livemint.com:

Mint gives you a rundown of how the different types of trading incomes are reported in tax returns. Trading in stocks derivatives counts as business income for income tax filing. It is to be reported in ITR-3, or ITR-4 when you opt for a presumptive income scheme.

Apart from filing the more complex ITR-3 or ITR-4, you may also need to maintain books of accounts or get tax audit done under different conditions. The books of accounts—or, in simple words, the profit and loss (P&L) statement—is to be made when the F&O turnover exceeds ₹25 lakh or income exceeds ₹2.5 lakh. Both these criteria are to be checked for the last three financial years.

So, if your F&O turnover was below ₹25 lakh in FY24 but exceeded this threshold in FY23, you still need to submit accounting records in the current assessment year. The taxpayer doesn’t need a chartered accountant (CA) for creating books of accounts and can just use the P&L statement given by the broker. Turnover is the net sum of both profit and losses made on various trades throughout the year.

This method of computation has been adopted after the Institute of Chartered Accountants of India (Icai) released a guidance note in 2022 that excluded the sale amount of options from the turnover calculation. This has come as a relief to most derivatives traders as including the sale amount of options easily inflated the turnover to the threshold above which tax audit is required. Though the income tax department has not released a circular reinforcing the same, Prakash Hegde, a CA and principal consultant of direct taxation at Acer Tax & Corporate Services LLP, Hegde advises that taxpayers only consider the profit and losses, and not the sale amount.