Forward Contract

Tax Glossary Definition

Forward Contract

Forward Contract Taxation refers to the tax treatment of profits or losses arising from currency or commodity forward contracts. The nature of taxation—whether as business income or capital gains—depends on the taxpayer’s purpose, intent, and frequency of such transactions.

Example: A trader earning ₹50,000 from a foreign exchange forward contract must classify the gain as either business income or capital gains based on the pattern of trading activity.

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