Skip to content

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

Under the Income-tax Act as applied to equity derivatives, profits or losses from trading in index futures and stock options on a recognised exchange are generally treated as which type of income?

Profits or losses from index futures and stock options traded on a recognised exchange are treated as non-speculative business income or loss. They are not capital gains or income from other sources, because derivatives trading is regarded as a business activity and is excluded from speculative transactions.

  1. AShort-term capital gains
  2. BLong-term capital gains
  3. CNon-speculative business incomeCorrect
  4. DIncome from other sources

Explanation

Equity derivative transactions on a recognised stock exchange are not treated as speculative transactions; the income or loss is taken as non-speculative business income (or loss). They are not capital gains, and they do not fall under other sources. Speculative treatment applies mainly to intraday trades in cash-market shares settled without delivery.

Did you get it right without looking?

One question tells you little. A timed set on Accounting and Taxation shows your real accuracy, how long you take and where you lose marks.

Practise Accounting and TaxationFree diagnostic mock

More Accounting and Taxation questions