What is Trading Turnover in Pocket Option?

What Is Trading Turnover: The General Concept

So what is turnover in trading? Generally speaking, turnover is a metric of volume of your activity, which is used to determine whether or not some regulatory requirement applies. This is not the profit you made, and it is not the amount of money which was transacted through your account.

The problem is that the formula of calculation depends on the type of trade. The definition of turnover in relation to stock trading does not equal to the one in case of intraday or options trading.

Just to preface the upcoming information and to be precise, it is necessary to make a remark regarding the first one. The turnover in terms of tax audit is an Indian income tax term which is used to determine the necessity of conducting the tax audit under Section 44AB. If you pay taxes somewhere else, this article provides you with the context, but it does not replace the professional advice of a qualified accountant in your country.

Turnover in Stock Trading (Delivery)

Delivery trading is when you buy shares, they remain in your account until you sell them later. This is the simplest scenario and perhaps the one when turnover is not used at all.

If you own shares as an investment, your gains are capital gains, and there is no need to calculate the turnover for tax compliance purposes. All you need is the sale consideration and the holding period of the shares, not their turnover.

If you trade shares actively enough that your activity is considered a business rather than an investment, then the turnover will be the total value of sales of the shares. Notice how different this is from the next sections: here we measure the total value of transactions, not a figure based on profit and loss.

Whether your activity is investment or a business is a question of frequency, intent and holding period, and it is precisely the kind of question you should discuss with an accountant, not try to figure out yourself.

Turnover in Intraday Trading

Here the intuitive answer breaks down. What is turnover in intraday trading? It is the sum of the absolute values of profits and losses of your trades.

Intraday equity trading is considered speculative business income, and thus the turnover is calculated by taking the profit or loss on each of your trades, disregarding whether it is positive or negative, and summing it up. A loss will increase your turnover by the same amount as a profit of the same size.

This implies that the difference between value traded and turnover is quite obvious: two intraday trades carrying ₹220,500 can provide you with a turnover of ₹2,500, as the result is all that counts. The following worked example will demonstrate how it is done.

This also implies that the trader with many small trades can have a low turnover, while the one who made some wins and losses can have a high one. The turnover is a measure of your result’s volume, not activity level.

Turnover in Options Trading

What is turnover in options trading? This is one area where much of the advice online is outdated, so this section may be more valuable than its length suggests.

With the current method, the turnover is the sum of absolute profits and losses on your options trades. This is similar to the intraday method, and this is also the method used for options buyers all along.

However, the method was different for options sellers. The older advice said that you need to add the premium you receive on sale of options to your absolute profit or loss. This increased the turnover for the sellers of options considerably. This part was changed in the 2022 revision of the Guidance Note on Tax Audit by the ICAI, so that the premium received is no longer added separately to your turnover.

This makes a big difference to your calculation. You sold a call for ₹30,000 of premium, bought it back for ₹18,000, and your profit is ₹12,000. Under the old method, your turnover will be ₹12,000 plus the ₹30,000 of the premium you received, making it ₹42,000. With the new method, your turnover is ₹12,000. Same trade, but a turnover figure that is three and a half times smaller.

Many calculators and online guides still use the old formula. Some brokers' reports used to show turnover calculated both ways. If the figure is too large for the actual trades, it is the extra premium you should pay attention to.

Turnover in F&O Trading

What is turnover in f&o trading also works on the same principle, but this time the futures are the easier part of the equation.

Futures turnover is simply the sum of absolute profit and loss on each individual contract. It is done contract-wise, and since there is no premium to take care of, your turnover will be ₹65,000 if your profit is ₹40,000 and loss is ₹25,000.

The income from F&O trading is non-speculative business income, and that makes a lot of sense when compared to intraday equity. The turnover formula remains the same, but the non-speculative loss can be set off in a wider range as compared to speculative loss, and that’s another topic altogether.

There is one last thing in both futures and options: if you make a reverse trade on the same contract instead of letting it lapse, the difference in that reverse trade will go into the turnover.

Why Trading Turnover Matters for Tax and Compliance

Turnover is not a measure of performance. It matters only as a compliance trigger.

In the Indian tax system, it determines whether a tax audit under Section 44AB applies to you. The commonly quoted thresholds are ₹1 crore of turnover, rising to ₹10 crore if your cash receipts and payments account for 5% or less of your total receipts and payments, which covers almost any trader who trades using bank accounts and brokers. There are different thresholds for professionals, and further conditions for traders who have opted into a presumptive taxation scheme.

These thresholds have changed several times across various Finance Acts, and there are certain conditions attached to each of them. Treat the figures above as the commonly quoted ones, not as established fact for your personal situation, and check the latest position before relying on them.

There is a trap for loss-making traders. Because the turnover is calculated from absolute values, a bad year can give you a high turnover. You can have a loss for the year overall and still surpass the audit threshold, as the losses increase your turnover rather than decrease it.

The tax treatment of trading income as a whole is a separate issue. You can find an overview in this piece about day trading taxes. For your personal tax filing, both the figures and the judgment calls should be discussed with a qualified tax professional.

A Worked Example: Calculating Turnover

Consider a trader who made five trades over a year in three different segments.

And here is the calculation segment by segment.

1. Intraday turnover: add the absolute values: ₹1,500 plus ₹1,000 = ₹2,500.

2. Futures turnover: same way, ₹40,000 plus ₹25,000 = ₹65,000.

3. Options turnover: profit only, under the current method, ₹12,000.

4. Total turnover: ₹2,500 plus ₹65,000 plus ₹12,000 = ₹79,500.

Three figures are important to compare with that ₹79,500.

• The net profit across all five trades is ₹27,500. Your turnover is roughly three times what you actually made, which is perfectly normal and does not indicate any mistake.

• The intraday trades alone moved ₹220,500 worth of stock, and gave you an intraday turnover of ₹2,500. The value of transactions is not the same as turnover.

• The old options method would include ₹30,000 of premium, resulting in ₹109,500 instead of ₹79,500. The same transactions would give you a difference of ₹30,000 in the figure you report.

What Trading Turnover Means Specifically on Pocket Option

The platform defines the concept differently from the commonly accepted one.

So what is trading turnover in Pocket Option terms? This is the total value of your trades. For instance, if you have made 50 deals of $10, your turnover will be $500. It does not depend on your profits and losses, nor on the success rate of your trades.

The purpose of the figure is connected with bonus conditions. In order to withdraw a deposit bonus, you need to make a certain number of trades, which is measured in turnover. The number required is given in the terms of the bonus offer, so do not assume the standard one.

It is a common practice in the industry. The logic behind it is that the bonus is intended to be traded, not withdrawn right away. The pitfall here is the time for withdrawal:  when you fail to meet the condition, you realize it too late. More details about the payout process are given in the article about whether Pocket Option pays real money.

In brief, volume requirements imply increased trading activity and increased risks. The bonus with a volume requirement is not free money, and the trades required to meet it involve the same risk as any other trades.

Pocket Option Turnover vs Tax-Audit Turnover: Key Difference

Placed side by side, the two are hardly related except for the name.

They only have one thing in common: both are easy to misunderstand in the same way, by assuming that turnover is equal to the total money you traded. The first is wrong because it does not involve the total money at all, but the latter is correct. This is why you can easily confuse the two.

A practical tip. If the question comes from a tax form, calculate the turnover using your absolute profits and losses. If the question comes from a bonus condition, use the turnover figure from your trading account.

Where to Track Your Turnover on Pocket Option

The figure is available in your account, not something you have to calculate yourself.

• Your trade history contains each executed trade and its amount, which gives you the raw material for the turnover calculation.

• When a bonus with a turnover requirement is activated, the progress towards that requirement is tracked with the bonus itself, not hidden in the trading page.

• The required multiple is set in the terms of the specific bonus. Read those terms when you accept the bonus, not at withdrawal time.

If you need to calculate the tax figure, the trade history gives you the data, but you need to calculate it differently: you need the absolute profit and loss of each trade, not the amount. Export your trade history and calculate the figure yourself instead of reading the platform turnover figure and putting it in the tax form, because they are different figures.

To understand how the bonus conditions work, you can follow this guide on getting the best out of a Pocket Option bonus.

Conclusion

Decide which turnover you mean before you calculate anything.

That question settles most of the confusion around the term. If a tax form is asking, the figure is calculated from your profits and losses in absolute values, it has nothing to do with the volume you traded, and even a losing year can give you a large number. If a bonus condition is asking, it is the total value of your trades, profits are irrelevant, and the number is already available in your account. The two are not interchangeable, and the common mistake is reading one figure and reporting it as the other. If you need the tax figure, consult a qualified tax professional to find out both the calculation method and the threshold applicable where you file your taxes.

Disclaimer: This article is meant to be educational and informative, and not advice on taxation and investment matters. It is best to consult with a tax expert for your particular needs. Taxes, the definition of turnover, and the threshold for being audited vary according to your location. The fact that you meet the turnover requirement means that you have engaged in more risky trading activities.