ITR
Commodity and currency derivatives taxation
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Facts
Commodity derivatives traded on a recognised association where commodities transaction tax is charged are not speculative transactions. Exchange traded currency derivatives are also treated as non-speculative. Both are business income like F&O.
Provisions and law
- Sec 43(5), Income-tax Act 1961Speculative transaction means one settled without delivery; derivatives on a recognised exchange are excluded
- Sec 28 (now Sec 26)Business income
Analysis
If MCX futures gave a profit of ₹2,00,000 and NSE currency futures a loss of ₹50,000, net non-speculative business income is ₹1,50,000. Turnover is computed the same way as F&O. Losses follow the 8 year carry forward rule. Off exchange or foreign platform trades may be treated differently, so check.
Conclusion
- Get exchange wise P&L for commodity and currency trades
- Treat them as non-speculative business
- Add to F&O turnover for audit check
- Report in Schedule BP
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