Finally, some good news for options traders as the Institute of Chartered Accountants of India (ICAI), in its recent guidance note, has clarified the meaning of turnover for options writers. Here’s a comparison of the new meaning with the erstwhile:
Consequent to the above change, the premium received will now be considered only once, i.e. for determining net profit. Earlier, the premium was considered in both points (i) and (ii) above.
For better comprehension, consider this example:
| Trades | Purchase Value | Sales Value | Gain / (Loss) | Turnover |
| (1) | (2) | (3) | (4)=(3)-(2) | (5) =(4) |
| Call Option | 2,00,00,000 | 3,00,00,000 | 1,00,00,000 | 1,00,00,000 |
| Put Option | 55,00,000 | 52,50,000 | (2,50,000) | 2,50,000 |
| Call Option sold/written (Not squared off) | – | 15,00,000 | – | 15,00,000 |
| Total | 27,50,000 | |||
Here’s a quick brief on tax audit applicability for option traders:
Turnover up to Rs. 2 Cr
Trading Turnover is more than Rs. 2 Cr but up to Rs. 10 Cr
Trading Turnover is more than Rs. 10 Cr
Tax Audit is applicable regardless of the profit or loss.
For any clarifications/feedback on the topic, please contact the writer at ektha.surana@clear.in
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