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Budget 2024: F&O trade tax may be increased in the budget, thus increasing the burden on investors

Sagar Patel

By Sagar Patel

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Market share Image credit source: Freepik

This month, the Government of India is going to present the country’s full budget. Citing some reports, the government is expected to propose changes in the tax on Futures and Options (F&O) profits, which is aimed at discouraging retail participation in derivatives trading. According to a report by Financial Express, the government may consider shifting the income from F&O trading from the category of trading income to speculative income along with various options in the budget. Apart from this, Finance Minister Nirmala Sitharaman may also propose to introduce Tax Deduction at Source (TDS) in the upcoming budget.

The government may consider it speculative

The government and regulators have long been concerned about the increasing participation of retail investors in the derivatives market. It is said that there is a fear that if there is a crash in the market, retail investors may suffer huge losses, which will lead to a fall in overall sentiments. Income from F&O transactions is now taxed as trading income. This income is added to trading or salary income and then taxed as per the applicable tax slab.

What impact will this have on investors?

However, if F&O profits are changed from “trading income” to “speculative income”, they will be treated on par with lottery or cryptocurrency investment. This move may also negate the advantage of offsetting profits against any other losses. Under current rules, profits from F&O transactions can be offset against losses in other businesses and vice versa. Moving to ‘Speculative Income’ will change this and losses from F&O trading can only be offset against profits from F&O trading.

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A tax of 30% may be imposed.

According to the newspaper report, the government can also impose TDS on F&O income, as was imposed on cryptocurrencies in the Budget 2023-24. The point to note is that the amount paid as TDS can only be claimed at the time of filing the return. The report says other options include imposing a direct tax of 30% on F&O income like cryptocurrency.

Sagar Patel

Sagar Patel

I am Sagar Patel, specializing in business news reporting. With a keen focus on economic trends, market analysis, and corporate developments,

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