Can losses under F&O trading be set off ? (2024)

— B Mahesh Kumar Singh

Income / loss on account of future and option (F&O) trading may be considered as business income or capital gains (depending upon a detailed examination of factors such as volume of trade, frequency of transactions, average holding period, mode of funding, says Central Board of Direct Taxes (CBDT) press release dated 24 August 2019 etc). In the instant case, it is assumed that the income/ loss on account of futures and options trading is considered as profits and gains of business or profession.

As per the provisions of the income tax law, any expenditure incurred wholly and exclusively for the purposes of the business can be claimed as deduction from the business income.

Accordingly, in case the specified expenses are wholly and exclusively for the F&O trading, the same may be claimed as a deduction against the business income. Where any expense (such as software) is capitalized, deprecation as prescribed may be claimable against the business income.

Further, losses from business can be set off against income chargeable to tax under any head of income (other than salary income), during the same financial year (FY). Accordingly, in the instant case, current FY loss from F&O trading can be set off against dividend and interest income of the current FY.

Furthermore, depending on the turnover / gross receipts / income of the business, nature of business, applicability of tax rates (normal or presumptive tax rates), applicability of GST and compliance thereunder, applicability of maintaining books of accounts and conducting tax audit would need to be evaluated.

I am working in an IT company which works 5 days a week. I have got an offer letter today. The notice period that I serve in this company is 2 months. If I serve notice, by the time I release, I will be able to complete 4 years 195 days. So, am I eligible to get the gratuity?

— Prasannanjaneyulu K

As per section 4 of the payment of Gratuity Act, 1972 (‘the Act’), an employee is eligible for gratuity if an employee has rendered continuous service for at least 5 years.

Further, as per section 2A of the Act, an employee is said to be in continuous service of one year if the employee has worked under the employer for not less than 190 days (in case of establishment which works 5 days a week) / 240 days (in case of establishment which works 6 days a week). Considering that you will be completing 4 years and 195 days of service and your company works for 5 days a week, thus you should be eligible for receiving gratuity.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

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Published: 13 Feb 2022, 10:49 PM IST