The government is considering measures to deter retail investors from the F&O segment. Proposed steps include reclassifying F&O income from ‘business income’ to ‘speculative income’ and introducing TDS. TDS would help the government track investors and may deter participation. Tax experts also suggest a potential 30% tax on F&O income (similar to cryptocurrencies). Currently, F&O income is taxed as business income, which can be offset against other business losses. Reclassifying it as speculative income would limit offsets to F&O gains only.
Seems like the government and regulators are concerned about increased retail participation in derivatives, fearing significant losses. Do share your views on this. IMO there would be steps to use stock derivatives only to hedge underlying, thereby reducing the market participation (just like currency, maybe).