TAX IMPLICATIONS ON NRI DERIVATIVES

Tax slab of TDS on derivative profits is at flat rate of 30.90% on the net profit for a calendar month. (Tax 30% + Ser Chg 3%)

This rate is applicable till 31-Mar-2019 (The rate is subject to change based on Union Budget Pronouncement)

The term profit, which is treated as business income for taxation purpose, is a combination of any of the following :

• Futures
  • Profit/Loss on square off of futures contract or expired contracts.
  • Mark to market profit/loss on outstanding futures positions at the end of each day.
• Options
  • Premium receivable on writing an option contract is considered as profit.
  • Premium payable on buying an option contract is considered as loss.
  • On exercise of an option contract  the difference between exercise price (i.e. settlement price) and the strike price is  considered as Profit.
  • On assignment of an option contract  the difference between exercise price (i.e. settlement price) and the strike price is  considered as loss.
  • Profit/Loss on square off of an option contract is considered as loss or profit as the case may be.

The above conditions and rate slabs are based on the written order received under section 195(2) of the Income Tax Act, 1961, from appropriate tax authorities for withholding tax along with surcharge applicable as per prevaling tax laws on the cumulative net profit amount during a given calendar month. Loss in a calender month can be set off against a profit of succeeding month/s till the end of the Financial year only.