Taxability of Non – Delivery based transactions

Speculative transactions and Derivative transactions or Non – delivery based transactions, as the name implies, does not involves settlement of transaction through actual transfer of commodity or scrips dealt in. In other words, only the net gain or loss is being known and the same is accounted for in the books and dealt in Income Tax Act. Following derivatives are exempted from the definition of speculative transaction:

  • Trading carried electronically on screen-based system
  • Through stock broker registered with SEBI
  • By banks or MF on a recognized stock exchange
  • Supported by time stamped contract note indicating Unique Client Identity No and PAN

Tax Treatment:

  • The total of positive and negative or favourable and unfavourable differences shall be taken as turnover.
  • Premium received on sale of options, difference of reverse trades entered etc is to be included in turnover.
  • All the differences whether positive or negative are aggregated and the turnover is calculated. Thus, profit or loss from such business will be taxable as income under the head “Profits and Gains of Business or Profession”, but it will be shown separately as “Speculative Business”.
  • Any loss from speculative business can be set – off against only profit from speculative business.
  • Loss from speculative business can be carried forward for a period of 4 years from the assessment year for which the loss was first computed.

However it is important to note that trading in derivatives has been kept away from the ambit of speculative income, and are accordingly treated as normal business profit/loss. Hence any income / loss from F & O transactions will be excluded from the definition of speculative business and the same is considered for determining the threshold limit of audit requirements. provides full fledged comprehensive tax planning service wherein we suggest the best investment and tax saving plans, which would minimize your total tax on income.

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