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Is it mandatory to show f&o losses

VJ (senior engineer) (65 Points)

31 March 2017

If assume a salaried person with Rupees Ten Lakh Annual Salary income looses Rs Two Lakh in F&O Trading with Turnover less then 1 Crore and he does not want to carry forward the losses in future (because of requirement of maintaining balance sheet and CA audit issue) and does not declare the losses and files a normal ITR1 showing only salary income. Will it be a problem if the person does not show losses or is it mandatory to show losses. It should be upto the person to show the losses or not right?

What does the income tax law says..for this.."A person with salary income pays all his taxes and does some trading and looses some money but does not prefer to carry forward or show the losses?"

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4 Replies

Diamond Goyal (Finance Accounts Taxation & Auditing) (90 Points)
Replied 31 March 2017

If every thing were calculated correctly, you required to conduct tax audit of your books of accounts u/s 44AD as your total income(including salary) is more than the taxable limit under income tax act. And it is mandatory to maintain your books of accounts.

Nikhil Kaushik (Fellow CA) (85059 Points)
Replied 06 April 2017

whether you wish to carry forward losses or not is a separate issue. Non-disclosure of business activities in the tax return is a different matter. What you are suggesting is a wilful violation. consider it this way - you have 1 cr turnover and you have opted not to show it at all. But the income-tax department anyway knows about it becuase of AIR disclosure by your broker. As you have not done the audit, AO will be within his powers to invoke presumptive taxation and charge 8% of your turnover to income-tax.

Gaurav Sethi (4 Points)
Replied 22 July 2018

Hi sir, consider my case too. Is audit required in this case too?

Made loss in F&O and intraday trading -220000 Made gain by selling shares kept for short term (less than 12 months) +180000 Only income is from FD interest. +132000 Turnover of (FO+intraday+ short term share trading) is 80 lakhs. Is audit required in my case? Can I avoid it by not declaring losses in F&O and intraday and simply show 180000+FD interest as my income and pay tax on it. Will 15% be charged in 180000 profit of short term trading?

Nikhil Kaushik (Fellow CA) (85059 Points)
Replied 23 July 2018

your losses will get adjusted against the FD income and STCG. the balance income will below the taxable limit, hence not audit. File ITR-3. In case you need professional help for filing the return, mail me at ca.nikhilkaushik @ gmail.com