NISM Series XIII Common Derivatives Certification Exam Notes
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Taxation of Exchange Traded Currency Derivatives: Profits or losses from trading in exchange-traded derivatives are taxable under ‘Profits and Gains from Business or Profession’.
Speculative vs. Non-Speculative: Derivative transactions are non-speculative if carried out on a recognised stock exchange for hedging.
Business Income Treatment: Gains/losses from exchange-traded currency derivatives are treated as normal business income and taxed at applicable rates.
FPI Treatment: Securities held by Foreign Portfolio Investors (FPIs) are always treated as capital assets. Gains from derivatives are taxed as capital gains.
Short-Term Capital Gains: If FPI-held derivatives are held under 12 months, gains/losses are short-term capital gains/losses.
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