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

For tax audit turnover purposes in futures and options trading, how is the turnover of a trader commonly computed for options contracts?

Turnover for options is the sum of favourable and unfavourable differences (absolute values) plus the premium received on sale of options. Notional contract value and net profit are not used, and premiums paid on purchases are not the basis.

  1. ASum of favourable and unfavourable differences plus premium received on sale of optionsCorrect
  2. BTotal notional value of contracts traded
  3. COnly the net profit for the year
  4. DSum of premiums paid on options bought

Explanation

As per the ICAI guidance, turnover for futures is the absolute total of favourable and unfavourable differences, and for options it is the same absolute differences plus the premium received on sale of options. Notional value is not used.

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