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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Accounting and Taxation

For income tax purposes in India, how are transactions in equity derivatives (futures and options on stocks and indices) carried out on a recognised stock exchange by an investor as a trader generally treated?

Profits or losses from equity derivatives traded on a recognised exchange are treated as non-speculative business income, because such transactions are specifically excluded from speculative transactions. They are not capital gains or income from other sources.

  1. ASpeculative business income
  2. BNon-speculative business incomeCorrect
  3. CCapital gains only
  4. DIncome from other sources

Explanation

Derivative transactions in recognised exchanges are excluded from the definition of speculative transactions, so they are treated as non-speculative business income. Hence losses can be set off against other business income and carried forward accordingly. Capital gains treatment applies to shares held as investments, not to trading in derivatives.

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