Tax Implications of Futures and Options Transactions Under Income Tax

Tax Implications of Futures and Options Transactions Under Income Tax

F&O, also known as futures and options, are derivative contracts that are traded in the share market. In F&O, there is a contract between two parties to trade a stock asset at a fixed price on a future date. Futures and Options are two different instruments having different concepts. A futures contract is when the parties agree to buy or sell an asset at a predetermined price, and both the buyer and seller are obligated to fulfil the contract. On the other hand, in the case of an options contract, there is no obligation to buy or sell an asset at a specified price. This helps the investors to minimise risks with stock trading, as the price is set in advance.

Futures and Options give major profit, but they can also cause significant loss due to inaccurate predictions. Therefore, F&O are only recommended to those active investors who have deep knowledge of the stock market. Let us understand how F&O are taxed.