How to Calculate F&O Turnover

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Calculate Turnover for F&O Trading

Don't you think F&O trading has garnered significant attention in recent years? Ever since the pandemic ended, there's been a noticeable surge in interest in the Indian derivatives market. Perhaps you've overheard your friends discussing their recent trades, or you've come across news segments highlighting the surge in F&O turnovers.

But what is F&O? Also, when people talk about F&O turnover, what does that even mean? How is futures and options turnover actually calculated? 

If you've found yourself nodding along to such discussions without fully understanding what these terms even mean, or you're keen to boost your trading know-how, this guide is just what you need. Explore how to calculate F&O turnover - step by step.

What is Futures and Options (F&O) Trading?

Futures and options, often abbreviated as F&O, represent two distinct types of contracts in the financial markets. While they're both derivative instruments, their mechanisms differ.

Futures are standardized contracts to buy or sell a particular asset at a predetermined price on a specific future date. They're binding, which means both parties must fulfill the contract's terms.

Options provide the buyer the right (but not the obligation) to buy or sell an asset at a set price within a specific period. There are two primary types of options: calls (the right to buy) and puts (the right to sell).

These basic concepts form the backbone of F&O trading. Interested to know more about options trading? Check out our detailed article on 'How to do Options Trading,' where we explore the process of trading in option contracts, and understand the important terms related to it.

What is F&O Turnover?

Turnover, in simple terms, refers to the total business done in a specific time frame. For a shop, it might be the total sales in a month. For F&O trading, turnover is the total income you get from your F&O trades, including both your profits and losses.

Since 2006, the Indian tax authorities began viewing trading in Futures and Options as a business activity. This means the money you make (or lose) in F&O trading is seen as business income. And just like any business, you need to know your turnover to understand your tax obligations.

Calculating F&O turnover involves taking into account all the money that came in from successful trades and subtracting any losses and costs, like broker fees. The resulting figure can be either positive (you made a profit) or negative (you faced a loss).


One advantage of this system? As a trader, you can offset certain costs against your income. This means traders can deduct certain expenses related to their trading activities when calculating their taxable income. This includes broker charges, software subscriptions, charges for your Demat account, or even rent if you have a dedicated trading space.

Now, the specifics can vary based on individual circumstances and tax regulations. So, always consult with a tax professional or advisor for exact details.

But remember, while this gives an overview, the exact calculations can get a bit more complex especially taxes.

How to Calculate Turnover in F&O Trading?

Understanding your turnover in F&O trading is key, especially when navigating the tax landscape. Here's a simplified approach to calculating it.

For Futures: Your turnover is essentially the sum of your positive and negative trading outcomes. Let's say you gained ₹10,000 from one futures trade and faced a ₹5,000 loss on another. Your "futures trading turnover" would be the combined amount, which is ₹15,000.

For Options: It's slightly different. Start by adding up all your profits and losses from options trading. Next, if you've earned any money from selling options (known as "premium"), add that to the total.

So, in short:

Futures Turnover = Total of all profits and losses from futures trades

Options Turnover = Total of all profits and losses + any premium received from selling options

By understanding how to calculate turnover for your F&O trades, you're better positioned to manage your "futures and options trading" responsibilities, especially when tax season rolls around.

Reporting F&O Turnover for Tax Audit

If you're a trader, you must be aware of the tax implications of your trades:

Turnover Reporting

It doesn't matter if you've made profits or faced a loss in your futures and options trading activities. You must report your F&O turnover to help the tax authorities know what you've earned (or lost) and ensure you're taxed fairly.

Tax Audit

If your annual turnover from F&O or total business from F&O trading exceeds ₹50 lakh in a year, you'll need a tax audit. This is a detailed examination of your accounts and trading activities to ensure everything's in order.


The good news? Some costs related to your F&O trading can actually reduce your taxable income. Costs like broker fees, software tools for trading, or even related research subscriptions can be accounted for.

Seek Expertise

Handling tax on futures and options can be tricky. Consider getting a Chartered Accountant (CA) on board. They can assist with preparing financial statements like profit & loss, balance sheets and cash flow statements. Your CA can also help file your tax audit report (Form 3CD) and ensure your Income Tax Returns (ITR) are in order.

Remember, staying informed about these aspects will keep you compliant with tax rules and help in effective financial planning.

In futures and options trading, your turnover dictates whether your accounts will be audited. Here's what you need to know:

Trading TurnoverAudit Requirement
Up to ₹2 crore

An audit is needed if your profit or loss is less than 6% of turnover. 

If your earnings make up 6% or more, you won’t require an audit.

Between ₹2 crore & ₹10 crore

A tax audit will be conducted if your profit or loss is less than 6% of your F&O turnover. 

If you've chosen the presumptive taxation method under Section 44AD and your profit is 6% or higher, an audit isn't necessary.

Above ₹10 croreAn audit is mandatory irrespective of profit or loss.

Not following these rules can be expensive. If you miss a required audit, you could face a fine of up to ₹1.5 lakh or 0.5% of your sales, depending on what the tax department decides.

Key Takeaways

We've talked a lot about F&O trading and how audits work. Let's check out a quick summary:

1. F&O refers to two types of contracts in financial markets. Futures are binding contracts for asset transactions at predetermined prices, while options grant rights without obligations.

2. In F&O trading, turnover represents the total business conducted within a timeframe. It includes all profits, losses, and other financial outcomes from your trades.

3. All F&O traders must report their turnover, irrespective of profits or losses. If your F&O turnover surpasses certain thresholds, you might need a tax audit.

4. For futures, turnover is the sum of positive and negative outcomes from trades. For options, it's a total of profits, losses, and any premium from selling options.

5. Costs related to F&O trading, such as broker fees or software subscriptions, can be deducted from your taxable income.

6. There are specific thresholds of F&O turnover that dictate if you need a tax audit. It's essential to be aware of these to avoid penalties.

7. Given the complexities, especially around F&O taxation, it's wise to consult a Chartered Accountant for clarity and compliance.

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  • What is the difference between futures and options?

  • When people mention 'F&O', what do they mean?

  • I often hear the term 'annual turnover'. What does annual turnover meaning imply in F&O?

  • What is F&O taxation in simple terms?