Budget 2024 / Tax on F&O trading may increase in the budget, this is how the burden on investors will increase

Budget 2024: This month the Government of India is going to present the full budget of the country. In this, citing some reports, it is expected that the government may propose changes in the tax on income from Futures and Options (F&O), which aims to discourage retail participation in derivatives trading. According to a report by Financial Express, the government may consider changing the income from F&O trading from the category of business 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 as speculation

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

How much impact will this have on investors?

However, if F&O earnings are changed from 'business income' to 'speculative income', it will be treated at par with lottery or crypto investments. The move could also eliminate the benefit of offsetting profits against any other losses. As per 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.

30% tax may be imposed

According to the newspaper report, the government may also impose TDS on F&O income, as was implemented on cryptocurrencies in Budget 2023-24. It is worth noting that the amount paid as TDS can be claimed only while filing returns. Other options include directly taxing F&O income at 30%, like crypto currency, the report said.