A person working in an organisation will have a salary. In such a case paying tax by calculating as per rules is easy. But when the same person is having other income also then it is a little difficult and we may have to consult the IT consultant. Some people may have a trading business and the gains from this as gains in Future and options (F&O).
The gains from this business are considered as business gains but not as capital gains. The income tax will be charged as per the applicable tax rates. For F & O tax calculation, there are two methods to be followed.
Method 1: Normal system of computation. The income will be calculated by taking the turnover and subtracting the purchases, other expenses and depreciation if any.
Let us say a person purchased Rs. 5,00, 000/- worth shares in a year and sold shares worth of Rs.6,00,000/- On the face of it we feel he gained Rs.1,00,000/- and that is his income. But during this purchasing and selling, he might have incurred some expenses like subscription, phone calls, consultation etc. Let us assume that he incurred Rs.20.000/- expenses. Then his income will be Rs.80,000/- only.
If we use this system we should maintain all the records of expenses and bills for the expenses and all the account books including balance sheet, P& L account are to be maintained perfectly. When our turnover is less it will be very difficult to meet all these obligations.
So for such cases, there is the second option.
Method 2: In this method option we need not maintain any records. The tax will be to be paid on an assumed basis. This method is known as presumptive tax.
This method can be used by the business people whose turnover is less than 2 crores. we can declare our income as a percentage of the turnover. The minimum percentage to be declared is 6% of the turnover. Earlier this minimum percentage was 8% but from the last three years, it was reduced to 6%. In F & O transactions all the payments are received through the bank. SO calculating the turn over is very easy and on that, we have to pay the percentage as we declare and it should not be less than 6%. If we feel that our income will be less than 6% we have to go for method 1.
The total turn over is to be calculated based on profitable transactions and nonprofitable transactions also. For example, you purchased shares worth of Rs.50.000 and sold at Rs. 60,000/-. The gain is Rs.10,000/-. Another share you have purchased at 5000/- and sold at Rs.4000/-. The loss is Rs, 1000/-. So the total turnover will be calculated as Rs. 10,000/ + Rs.1000/- = Rs.11,000/-.
If there is a loss in these transactions, that loss can be reduced from the income you have from other sources during that year. If we are not able to do this in the same year. We can carry forward for the next year and it can be continued up to eight years and can be set off against your business income only.