Calculation of Trading Turnover from Trading Income

author portrait

Sakshi Shah

income from trading
Income Tax

Any person having income from trading in shares and securities should report it as income from business and profession. To determine the applicability of Tax Audit as per the Income Tax Act, we should calculate Trading Turnover for such income. It is important to note that tax liability does not depend on Turnover. The trading turnover calculation should be done only when the income from shares is considered as a business income and not when it is considered as capital gains income.

Not sure how to treat income from the sale of shares?
Read here to see how to define this income into Capital Gains or Business Income, depending on the intention of the trades.
Read More
Not sure how to treat income from the sale of shares?
Read here to see how to define this income into Capital Gains or Business Income, depending on the intention of the trades.
Read More

The method to calculate turnover for Income Tax on trading is different for each type of trade i.e. Equity Intraday, Equity Delivery, Equity F&O, Currency Trading, Commodity Trading, etc. To understand how it is calculated, we need to understand the meaning of Absolute Profit.

Absolute Profit for Trading Turnover Calculation

Absolute Profit means the sum of positive and negative differences. It is the sum of the absolute value of profit and loss of each trade during the financial year.

For Example:

Method of Trading Turnover Calculation for Tax Audit Applicability

Trading Type Trading Turnover
Equity Intraday Trading Absolute Profit
Equity Delivery Trading Sales Value
Equity F&O Trading Futures – Absolute Profit
Options – Absolute Profit + Premium on Sale of Options
Currency Trading (Equity / Intraday / F&O) Futures – Absolute Profit
Options – Absolute Profit + Premium on Sale of Options
Commodity Trading (Equity / Intraday / F&O) Futures – Absolute Profit
Options – Absolute Profit + Premium on Sale of Options

Examples

Equity Intraday Trading

Equity Delivery Trading

Invested in Equity?
Need to file you ITR? Don't worry, we can help you!
[Rated 4.8 stars by customers like you]
Invested in Equity?
Need to file you ITR? Don't worry, we can help you!
[Rated 4.8 stars by customers like you]

Equity / Currency / Commodity Futures Trading

Equity / Currency / Commodity Options Trading

FAQs

Is Trading Turnover same as Contract Turnover?

No. Trading Turnover is different than Contract Turnover.
Contract Turnover is the sum of the purchase value and sales value. It is not considered for income tax purpose. Trading Turnover or Business Turnover is the absolute profit i.e. sum of positive and negative differences. This turnover is considered to determine the applicability of the tax audit and the applicable ITR form.

I am an Intraday Trader. How do I calculate trading turnover to determine the applicability of a tax audit?

To determine whether a tax audit is applicable or not, calculate the trading turnover. In the case of Equity Intraday Trading, Absolute Profit is Trading Turnover. Absolute Profit means the sum of positive and negative differences. Eg: Loss from Scrip 1 is Rs. -5000 and profit from Scrip 2 is Rs. 8000, absolute profit = 5000+8000 = Rs. 13,000. If the turnover exceeds Rs. 1 Cr then tax audit is applicable.

I am an F&O Trader. How do I calculate trading turnover to determine the applicability of a tax audit?

To determine whether a tax audit is applicable or not, calculate the trading turnover. If you are investing in Futures, Absolute Profit is Trading Turnover. Absolute Profit means the sum of positive and negative differences. Eg: Loss from Scrip X is Rs. -5000 and profit from Scrip Y is Rs. 8000, absolute profit = 5000+8000 = Rs. 13,000. If you are trading in Options, trading turnover = Absolute Profit + Premium on sale of options. If the total trading turnover exceeds Rs. 1 Cr, tax audit is applicable.

  • jatinder singh says:

    you have good knowledge of subject very cleary answered

  • Vijay says:

    If I have purchase in commodity 1 lot (100 unit) @ 45000 & sale @ 45600 on intraday. What is my turnover for the same

    • Sakshi Shah says:

      Turnover in case of Commodity Trading for Futures = Absolute Profit
      Realised Profit = Rs.600
      Turnover = Absolute Profit = Absolute values of profit and loss = Rs.600
      Note: You must consider all the transactions to calculate turnover.

  • Lokesh says:

    If total buy value 85 lac
    Sell value 85. 3 lac
    Total trade value 1.73 cr
    TURN over intraday 30 k
    Net profit 24 k

    Is i require the audit?
    Is i have to file ITR

    • Sakshi Shah says:

      Based on your data, Tax Audit as per Income Tax Act is not applicable since the turnover is up to Rs. 1 Cr and profit is more than 6% of turnover. For any further queries, write to us on help@quicko.com

  • vj says:

    Hi Sakshi Mam
    im a grad student, this year i made profit around 10 lakh in Intrday and loss of 2 lakh.

    SO my total Turnover is 12 Lakh…. Do i have to pay Advance tax ?

    • Sakshi Shah says:

      You can set off the loss of 2 lacs against the Intraday Profit of Rs.10 lac. In that case, the total income would be Rs.8 lac. Since it is more than the basic exemption limit, you must pay the Advance Tax since the tax liability would exceed Rs.10,000.
      Summary:
      1. Calculate Total Income = Gross Total Income – Deductions
      2. Calculate Tax Liability
      3. If Tax Liability exceeds Rs. 10,000, you must pay advance tax to avoid interest and penalty
      4. Pay Advance Tax Online

  • Amit says:

    Hi, I want to ask you that turnover calculation in which audit is required for example if turnover is 2 crore or profit is less than 6% of the turnover.

    So it is only applicable to F&O Nse cash Intraday, MCX or it is also applicable to STCG AND LTCG. Because as we know In STCG we take sell-side value, not the absolute profit.

Leave a Reply

Your email address will not be published. Required fields are marked *

Close Bitnami banner
Bitnami