F&O Tax Without Headaches: Turnover, Presumptive 44AD, Audit Thresholds
Master F&O taxation with clear guidance on turnover calculation, presumptive vs regular taxation, audit thresholds, and advance tax compliance for derivatives trading.
Published September 19, 20258 min read
F&O Tax Without Headaches: Turnover, Presumptive 44AD, Audit Thresholds
Most stress here comes from confusing terms. Get turnover right, choose the right regime, and respect advance tax.
What F&O Income Is
- Derivative profits and losses are treated as business income for most taxpayers. Books are needed unless you opt for presumptive where eligible.
Turnover: The Practical Definition Used by CAs
- Turnover for F&O is the sum of absolute profits and absolute losses across trades in the year. Ignore notional open positions at year end for turnover purposes.
Presumptive vs Regular
- Many traders use presumptive under Section 44AD where eligible. When in doubt, speak to a professional because rules evolve.
- Regular books allow expense deduction but require bookkeeping and possibly audit if thresholds are crossed.
Audit and Advance Tax Hygiene
- Watch audit thresholds tied to turnover and profit declaration. Keep contract notes and broker statements.
- If tax after TDS is at least ₹10,000, pay advance tax by due dates to avoid interest.
Records To Keep
- Broker P&L and turnover certificate.
- Bank statements for payout receipts.
- Expense logs for internet, systems, and research where claimed.
This is a compliance area. Consult a CA for your specific case.