NISM Equity Derivatives Exam | Full Course | Chp 9 : Accounting & Taxation | Nism Exam

Summary

This video script discusses the taxation of income earned by Foreign Institutional Investors (FIIs) in India, focusing on the calculation of turnover for tax purposes. It explains the concept of turnover value in futures and options trading, using examples to illustrate the process. The video also covers the Securities Transaction Tax (STT) applied to equity transactions, detailing the different rates for various types of securities and transactions. It emphasizes the importance of understanding these concepts for tax compliance and exam preparation, urging viewers to take notes and consult provided links for a deeper understanding.

Takeaways

• 😀 The video discusses Chapter 19 of the AIASM Equity Derivatives Exam, focusing on how income from F&O (Futures and Options) trading is taxable.
• 📚 The speaker emphasizes the importance of understanding the concept of STT (Securities Transaction Tax) charges, which is a crucial part of the chapter.
• 🔍 The video provides links in the description for further reading, including a detailed explanation of F&O taxation by SEBI (Securities and Exchange Board of India) and important links from the HT Rates website.
• 📈 The concept of turnover is crucial for taxation in F&O trading. It refers to the total value of trades made during a financial year, calculated based on the trading book details.
• 💼 The calculation of turnover involves adding the profits and losses from futures trading, regardless of whether the trades were profitable or not.
• 📊 For options trading, the net premium received is considered for turnover calculation, not the profit or loss from the options themselves.
• 💡 The speaker explains the example of an individual's trading activities, including futures and options, to illustrate how turnover is calculated and how it affects tax liability.
• 💼 The video mentions that the tax on F&O trading is considered as business income and is subject to applicable tax rates when filing income tax returns.
• 💡 The concept of STT is explained as a tax imposed on the purchase and sale of equity shares, equity-oriented mutual funds, and derivatives traded on recognized stock exchanges in India.
• 📉 The rates of STT vary depending on the type of security and the nature of the transaction, with different rates for equity delivery, intraday, futures, and options trading.
• 📚 The speaker advises viewers to note down the STT rates for different categories and review them thoroughly before the exam, as these are likely to be asked in the AIASM exam.

Q & A

What is the main topic of Chapter Nineteen of the AIIASM Equity Derivatives Exam?

The main topic of Chapter Nineteen is Accounting and Taxation, focusing on how income earned from trading as a financial advisor is considered taxable.

Why is it important to stay until the end of the video on the taxation of financial advisors?

It is important to stay until the end because missing any part could lead to significant difficulties in understanding the complex concepts, especially the crucial concept of STT (Securities Transaction Tax) charges.

What are the two important links provided in the description of the video?

The two important links are the AIIC page detailing the taxation of financial advisors and the HTT Rates website, which contains important links for a clear understanding of taxation.

What does turnover mean in the context of financial advisor trading?

Turnover refers to the total value of trades conducted by the financial advisor during a specific financial year, such as from the first of April to the 31st of March.

How is the basic calculation of turnover value explained on the AIIC website?

The AIIC website explains the basic calculation of turnover value in very simple words, using an example of an individual who has conducted four trades throughout the year and calculates their tax liability based on these trades.

What is the difference between calculating profits and losses for futures and options trading?

For futures trading, both profits and losses are added to calculate the total turnover value, whereas for options trading, only the net premium received is considered, without calculating the profit and loss from the contracts.

How are the total profits and losses from futures trading calculated in the example provided?

In the example, the individual made a profit of ₹15,000 from one trade and a loss of ₹12,500 from another. These values are added together to get the total turnover value for futures trading, which is ₹27,500.

What is the Securities Transaction Tax (STT) and how is it applied?

STT stands for Securities Transaction Tax, which is a tax imposed on the purchase and sale of equity shares, equity-oriented mutual funds, and derivatives traded on the Recognized Stock Exchange in India. It is calculated as a percentage of the transaction value and is a source of revenue for the government.

What are the different rates of STT applicable for various categories of securities transactions?

The rates of STT vary depending on the type of security and the nature of the transaction. For example, equity delivery is 0.1%, equity intraday is 0.025% on the selling side, futures trading is 0.0125%, and equity options are 0.0625%.

How should one prepare for the examination on taxation of financial advisor trading?

One should take notes, thoroughly understand the concepts of turnover calculation, and memorize the rates of STT for different types of transactions. It is also recommended to review the information provided in the video and the links in the description before the exam.