1. Is trading income from commodity trading considered capital gains or business income?

For the majority of retail traders in India, the income from trading commodity futures and options (F&O) is considered business income for taxation on commodity futures and options. It is not treated as capital gains because these derivatives are not used for long-term accumulation of assets, but instead for short-term speculation or hedging purposes. This income is added to their total income and is charged to tax at their applicable tax slab rates.

2. Do I have to pay commodity transaction tax (CTT) on all my trades?

No. CTT is only imposed on the seller of non-agricultural commodity derivatives. All the agricultural commodities traded on exchanges such as NCDEX are exempted from CTT by the government for the development of the agricultural sector in India.

3. Can I adjust my commodity trading losses against my salary income?

It depends on the type of loss:

4. What is the Presumptive Taxation Scheme, and can I use it for commodity trading?

The Presumptive Taxation Scheme (Section 44AD) allows eligible taxpayers to declare profits at a flat rate of 6% of their total turnover for digital receipts and 8% for cash receipts, relieving them from the need to maintain detailed account books. You can only opt for this scheme if your gross turnover is below ₹2 Crore or up to ₹3 crore, provided 95% or more of the receipts are digital payments.

5. When is a tax audit mandatory for a commodity trader?

Tax audit is obligatory in two major situations:

Understanding the taxation of Commodity Trading in India

Home

Commodity Trading

Understanding the taxation of Commodity Trading in India

Commodity Trading

Understanding the taxation of Commodity Trading in India

Do you know what is as equally important as making profit from Commodity trading? Understanding and filing for the FnO profits from the Commodity trading.