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loss in shares trading

sumit jain (Proprietor) (71 Points)

02 October 2016

Dear sir,

I have done a trading in equity and futures, and suffered a loss of 330000 in equity and 550000 in futures, my query is can I show a profit of 8-9% instead of loss in itr, as i dont want to damage my capital, I have deposited a cash amt of 976000 in my bank account and all my money was washed up in shares, is there any problem in showing a profit of 8-9%. total turnover in shates tradibg is around 1500000,

kindly advise sir...

regards
sumit

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11 Replies

Akash (CA Final (2nd Group Pending)) (876 Points)
Replied 02 October 2016

Yes you can opt for presumptive income under section 44AD and show income of 8% on Turnover.

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sumit jain (Proprietor) (71 Points)
Replied 02 October 2016

Thanks sir for your advise, but apart from this I have business also and its turnover is around 14000000, and I have done a audit also, if in any manner my file comes in scrutiny, will it dept.will ask about my loss, which i am planning to show as 8%profit.

regards

Akash (CA Final (2nd Group Pending)) (876 Points)
Replied 02 October 2016

Originally posted by : sumit jain

Is this business proprietorship or partnership?

You can't opt for presumptive income if its proprietorship. You can set off Loss ofFuture and options trading from your business income. Loss from intraday will speculative and will be carry forward to next 4 years. You can setoff this loss with any future Gains from intraday or agricultural commodity trading in next Years.

sumit jain (Proprietor) (71 Points)
Replied 02 October 2016

my business is proprietorship, but sir i have done shares trading in my name not in my firm name, and if there is any loss is it necessary to do audit for that loss. I mean to say in my case is it necessary to get my personal file audited for loss in shares. And also there is rumour that by seeing a loss in file it dept take the file for scrutiny. is it correct or just a rumour. i am very much confused and my c.a is also in confusion what to do. plz guide

sumit jain (Proprietor) (71 Points)
Replied 02 October 2016

And also sir i am planning to do any intraday from now onwards as there is a loss only in intraday, so my speculative loss will never be set off, however we can set off f&o loss with my business income, but what to do with speculative loss, it will carry forward for nxt 4 yrs wasting my capital, is there any way out to avoid these all complication, if i have to pay tax also i am ready, but i dont want to be in trouble,

Akash (CA Final (2nd Group Pending)) (876 Points)
Replied 03 October 2016

You have to club your income. Future and Options are treated as normal Business income or loss. Just include the same in Profit and Loss Account. It's just Rumor and has no substance that case will be taken directly to scrutiny if you have loss in trading. As you have to maintain proper books of Accounts so it becomes necessary for you include this speculative loss of Intraday Trading even if you have no plans of doing intraday in future.

Akash (CA Final (2nd Group Pending)) (876 Points)
Replied 03 October 2016

Proprietorship firm and You are same person in Income Tax Act. There is no distinction. Doesn't matter if you doing trading from your savings bank account or Proprietorship Bank Account. Both are your Account. There is no distinction. prepare a common balance sheet for all your transactions.

Akash (CA Final (2nd Group Pending)) (876 Points)
Replied 03 October 2016

You can Just withdraw Funds from Proprietorship Capital for future Trading. It does not make any difference.

CA Rahul Mor (Chartered Accountant) (173 Points)
Replied 03 October 2016

Applicability of 44AD

1. A person carrying on profession as referred u/s44AA(1)

2. A person carrying income in the nature of Commission or brokerage.

3. A person carrying on any agency business

4. A person who is in the business of plying , hiring or leasing goods carriages.

Thus income on estimated basis can not be declared u/s 44AD if the gross turnover or gross receipts exceeds Ra. 1 crore during the financial year.This is because if we declare income u/s 44AD, which is not less than 8% ,then we are not required to maintain books of accounts as per the provisions of Sec 44AD however sec 44AB states that audit is compulsory in case the turnover exceeds Rs. 1 crore during the year which requires proper maintenance of books of accounts . Hence an assessee can not apply Sec 44 AD and declare income on estimated basis if the gross trnover or gross receipts exceeds Rs. 1 crore during the financial year.

sumit jain (Proprietor) (71 Points)
Replied 03 October 2016

Dear Rahul Ji,

my trading turnover is just around 1500000 ( 623000 total of profit & loss in equity day trading) and (900000 total of loss & profit in derivative trading), in which i have suffered a loss of around 878000, now my C.A is planning to show a 8-9% profit in derivative turnover as it is a kind of business, and in speculation loss he is saying we will show 13-14% income in equuty turnover. is it possible as by showing a loss ny entire capital will be washed away.
plz suggest.