Calculation of Trading Turnover from Trading Income

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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.

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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

Examples

Equity Intraday Trading

Equity Delivery Trading

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Equity / Currency / Commodity Futures Trading

Equity / Currency / Commodity Options Trading

ITR for F&O Traders
CA Assisted Income Tax Return filing for Individuals and HUFs having income from F&O/ Derivatives Trading.
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ITR for F&O Traders
CA Assisted Income Tax Return filing for Individuals and HUFs having income from F&O/ Derivatives Trading.
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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.

    • Anushka Shah says:

      Hey Amit,
      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.

  • Praveen says:

    Hi Sir/Madam

    I am new to trading can anyone is please clarify my below query.

    Intraday:
    ———
    Total buy Value : 11409009.03
    Total Sell Value : 11418705.23

    Short Term Trades
    ——————
    Total buy Value : 496553.59
    Total Sell Value : 494719.24

    How to calculate the turnover?
    buying values crossed 1cr am i applicable for tax audit ?

    • Anushka Shah says:

      Hey Praveen,
      Equity Intraday is a Non-Speculative Business Income. Trading Turnover is the Absolute Profit i.e. sum of absolute values of profit and loss. It cannot be calculated using the total buy and sell value.
      If equity delivery trading is considered as Capital Gains, trading turnover is not required to be calculated. However, if it is considered as a Business Income, the trading turnover is the Sales Value.
      If you can drop in your contact details at help@quicko.com, one of our agents would get in touch with you to resolve your questions.

  • Praveen says:

    Thank’s Anushka

  • NITIN KUMAR MAHATELE says:

    I am a govt employee .i have done intraday trading in year 2019-20,because of i didn’t know the rule .is there any problem in filing tax return.?

    • Anushka Shah says:

      Hi Nitin,
      The CSS rules prohibit a government employee to engage in intraday trading since it considered to be speculative in nature. You must check the provisions of the relevant Act. As per the Income Tax Act, such income is considered to be Speculative Business Income. You must prepare and report financial statements and file ITR-3.

  • Mohit says:

    Hi,
    I am a salaried individual (gross = 10.00 lakhs) and had bought 1 lot (75) in Nifty Options at Rs. 6470 and sold it the next day at a loss of Rs. 1695. I understand that i need to file ITR 3 form for AY 20-21.

    The income from trading in Options derivative is considered as non-speculative income and for computation of income under section 44AD, please let me know the business code to be selected. Moreover the Gross turnover would be premium on sale of option i.e. (Rs. 4775.00) + Absolute Profit (Rs. 1695.00 i.e. loss in my case.) = Rs. 6470/-

    My question is if i have incurred a loss of Rs. 1695/-, then too the presumptive income will be calculated as 6% of Gross turnover (i.e. 6% x 6470 = 389/-) and since i had incurred loss hence my profit would be less than 6% of gross turnover, will i be liable for Tax Audit

    • Anushka Shah says:

      Hey Mohit,
      If the turnover is upto INR 2 Cr, profit is less than 6% of turnover and total income is more than basic exemption limit, tax audit as per Sec 44AB is applicable. Turnover for Options has been calculated correctly as sum of absolute profit and premium on sale of options.
      Nature of Business Code – Since there is no specific code for trading income, you can select Retail Others (09028) and provide a description as ‘Trading in F&O’. You can read more about it here – Income Tax on F&O Trading

  • KUNAL MOHAN says:

    I am a Options Scalper and trades for small profit. My Question is that If I Sold Nifty 11400 Call at Rs.150 of 1 lot of 75 and squre off it with Rs.145. My profit will be 375. But as per Income tax my turnover is 11250+375= Rs.11625 so income will be 6% of turnover that is 697.5. So it means I am doing wrong thing?

    • Anushka Shah says:

      Hey Kunal,
      INR 375 is the realised profit from trading. As per the Income Tax Act, trading turnover is used to determine applicability of tax audit and calculate presumptive income if the taxpayer opts for presumptive taxation as per Section 44AD. So, if you opt for Presumptive Taxation, INR 697.5 is the taxable business income and if you do not opt for Presumptive Taxation, INR 375 is the taxable business income.

  • VIJAY PATIL says:

    Thanks for Explaining easily

  • Kuldeep kharbanda says:

    Hi,

    I had loss of Rs. 490596/- of trading turnover Rs. 4215374/- from f&o and equity. Please help me which ITR need to file in FY 2019-20

    • Anushka Shah says:

      Hey Kuldeep,
      F&O Trading is a business income. You must prepare and report financial statements and file ITR-3.

  • Anusha says:

    Hello madam,if my total taxable income(including profit s from trading) is less than 2.5 lakhs in that financial year then i dont need to file INCOME TAX returns irrespective of multiple Intraday and positional trading??

    • Maharshi Shah says:

      If the total taxable income is less than INR 2.5 Lakhs, it is not mandatory to file your income tax return. However, the income tax department has the data of all your trading activity which is also reflected in the e-Compliance portal of the income tax website. Thus, it is recommended to file the ITR and report all your income including trading activity to avoid any tax notice.

  • Krishna agarwal says:

    In intraday trading, Turnover through absolute profit method is calculated as scripwise or tradewise ? PLease help what’s correct as per the income tax act. Because many other articles on the internet says tradewise is more accurate than scripwise. Pls advice

    • Anushka Shah says:

      Hey Krishna,
      As per the Income Tax Act, taxpayer should report the tradewise turnover and not scripwise turnover in ITR. However, if the broker report provides a scripwise data, turnover is reported on scripwise basis.

  • Jhansi says:

    Hello Madam,

    I am an Individual with income less than 2 lacs. I have incurred the following loss:
    1.Short term & Long term trading loss around – Rs.1.8lacs
    2.Intra day trading loss of Rs. -13000 (Sales value more than 2 crores and Purchase value more than 2 crores, but absolute loss is Rs. 13000 )
    So which ITR is applicable for me?
    Do I need to maintain books of accounts or Tax audit will be applicable?
    If so, can I choose to ignore intraday loss of Rs.13000, and report only related to Short term & long term Loss by filing ITR-2?

  • Manuj Kulshreshtha says:

    I am trading in F&O with ICICI direct. To calculate the turnover for tax audit applicability check, I need an statement where I can have trade wise buy value and respective trade sale value so that I can calculate the profit or loss on each specific trade and then compute the absolute profit. But I am getting no such statement where I can get the buy value linked with the sell value of the same lot in single row to calculate profit or loss at each lot or trade level. I can find daily net P&L statement for F&O or seperate buy or sell trades detail in seperate lines where it is not possible to map that which buy is against which sell.

    Can somebody help me that where I can find such statement in ICICI direct site so that I can compute the turnover on my F&O trading. Thanks

  • Veerraj says:

    Hello mam,

    How do i calculate my overall turnover as i have started doing intraday in margins.
    My overall buying value is crossed more then 6.31cr and selling value is 6.33cr then pl let me know my turnover and am i applicable for audit.

    • Anushka Shah says:

      Hey Veeraj,
      To determine tax audit applicability you need to 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.

      Check out our tool to Determine Tax Audit applicability.

      Read more about Tax Audit of Trading Income on our Learn Center.

  • Ujjwal says:

    I m doing mcx intraday trading please tell how can l calculate turnover for tax

    • Anushka Shah says:

      Hi Ujjwal
      Multi Commodity Exchange is an exchange for trading in futures and options of commodities. For intraday trading and futures, trading turnover is considered as absolute profit. While in case of options trading, it is considered as absolute profit plus premium on sale of options.

  • dhruvan says:

    Suppose i am doing intraday trading where in i am selling 60 lots of banknifty i.e. 1500 ce sell at premium 400 and 1500 pe sell at premium 400 in the morning and i am exiting ce and pe. at 380 each with profit of 40 points i.e. 40*1500=60000.

    How much will be my turnover in this case?

    • Anushka Shah says:

      Hey Dhruvan,
      Turnover is considered as absolute profit (sum of the absolute value of profit and loss of each trade during the financial year) plus premium on sale of options.

  • Surinder Singh says:

    Madam Sakshi,
    I asked for queries on option trade in shares for turnover under section 44AD for two trades
    1 sold nifty call option for rupees 10 received premium 750/- on expiry goes out of money/worthless.
    2 sold nifty call option for rupees 10 received premium 750/- bought back after some days at rupees 20.

    What would be turnover for both the trades individually for the purpose of 44AD, kindly reply and oblige. Thanks.

    • Aakash Lalchandani says:

      Hey Surinder,

      Options turnover = Absolute Profit/loss + Sales Value
      In both your cases, the turnover for the trades will be 1500/-
      Hope this helps 🙂

  • Surinder Singh says:

    Madam instead of replying my queries my question is removed from here no reply. My question was:
    1 nifty call option sold for rupees 10 goes worthless on expiry premium 750/-
    2 nifty call option sold for rupees 10
    Bought at rupees 20 premium received rupees 750 and paid rupees 1500/- what would be turnover in both the trades.

    • Aakash Lalchandani says:

      Hey Surinder,

      Options turnover = Absolute Profit/loss + Sales Value
      In both your cases, the turnover for the trades will be 1500/-
      Hope this helps 🙂

  • K Porselvi says:

    I am a housewife, doing intraday trading with small amount, getting profit/loss, when calculate the overall profit, so far it is loss around 4k in intraday, got some profit on short term trading around 15k. but not aware of any books of account. No other income for me. How tax audit will work in this case? is it mandatory to maintain books of account even my overall profit (intraday profit + shortterm profit) is less than 2.5 lakhs?

    • Maharshi - Quicko Customer Success Representative says:

      Tax Audit as per Sec 44AB(e) is applicable if there is loss or profit is less than 6% of Trading Turnover and total income exceeds the basic exemption limit.
      Tax Audit is not applicable if the profit is more than or equal to 6% of Trading Turnover.
      For more information, you could refer to the article of tax audit for trading income.

  • B Mehta says:

    Hi,

    My Turnover of Equity, FnO, Currency FnO and Mcx FnO all together is 2.50 crore and there is trading loss of 5 lac.

    My other income is one lac in Cash and so I am below basic tax limit.

    I have taken NEFT loan from my relative for this trading loss.

    Do I have to go for audit ? and Can I still file return of F.Y. 2018-2019 ?

    • Maharshi - Quicko Customer Success Representative says:

      The last date to file the ITR for FY 2018-19 was 30th November, 2020. In regards to your tax audit query, please refer to the tax audit article.

  • Swapnil Kothari says:

    I can see you guys at quico are very quick, smart and of clear thought.
    I appreciate the way you are explaining things and resolving queries.

    Your every single effort will pay you in millions. Period.

  • Gaurav says:

    Whether books of accounts need to maintained under section 44AA for intraday trading income or loss
    Pls reply

    • Maharshi Shah says:

      Hello Gaurav, you need to maintain your books of accounts if:
      1. Trading turnover < 2Cr, you are having losses less than 6% of your total trading turnover and if you are having income which is more than the exempt limit
      2. Trading turnover is more than 5 Cr

  • Gaurav says:

    Books of accounts needs to be maintained if income is above basic exemption limit and there are losses in intraday and delivery trading

    If yes, then why books of accounts needs to be maintained if one has totally losses and infact one does not want to carry forward the losses

    What is here the meaning of books of accounts

    Also let us know , why there a need of audit arises if he or she has incurred losses in intraday trading and has income above basic exemption limit

    Pls reply

  • Gaurav says:

    For financial year 2018-19

    Books of accounts needs to be maintained if income is above basic exemption limit and there are losses in intraday and delivery trading

    If yes, then why books of accounts needs to be maintained if one has totally losses and infact one does not want to carry forward the losses

    What is here the meaning of books of accounts

    Also let us know , why there a need of audit arises if he or she has incurred losses in intraday trading and has income above basic exemption limit

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