F&O transactions may attract higher tax rate

The government is considering various options to discourage retail participation in the futures and options (F&O) segment. The proposed steps include moving F&O from the head of ‘business income’ to ‘speculative income’ and/or also introducing a tax-deductible-at-source (TDS) in the upcoming Budget, sources in the know said.

“The government and regulators have been worried for quite some time about the increased participation of retail investors in the derivatives market. There are fears that if markets correct, there could be significant losses to retail investors, leading to overall dampening of sentiments,” said the source.

Changing the head of F&O income from ‘business income’ to ‘speculative income’ will be a big step because it will be considered at par with lottery or crypto investments.