03 February 2009
I have 2 queries:- (1) For an assessee who is engaged in trading of shares, whether transactions of derivatives (F & O) should be considered for calculating turnover for the purpose of Sec 44AB ?? Take an example:- Turnover from trading in shares is Rs. 35 lakhs, Turnover from F & O transactions is 10 lakhs. Then whether Sec. 44AB is attracted ? (2) F & O is not delivery based. Therefore only the profit or loss is recorded in the books and not sale / purchase. In that case how to compute turnover of F & O transactions for the purpose of Sec. 44AB ??
03 February 2009
1) Yes. 2) Profit and loss are added together to arrive the turnover of F & O transactions. For example ,profit is Rs 100/- and loss is Rs 250/-,turnover is Rs.350/-for the purpose of 44AB.
04 February 2009
It is the net profit or loss from Future and Options which is to be summed up to analyse the limit of Turnover in terms of Section 44AB for the purpose of Tax Audit.
In case of derivative trading-Futures and Option- the difference on which the contract is purchased or sold is important. Although the value of contract is number of contract multiplied with the shares price , yet what is actually given or taken is differential amount in contract. For example if you purchase a future contract for Rs 105 for a share having a lot of 100,you pay nothing at the time of buying a contract, yet at the time of expiry of contract , you are either gainer or loser which is determined whether there is positive or negative difference. So , for the purpose of determining the turnover in case of future and options , for the purpose of 44AB , based on the guidance note of ICAI , following items should be considered to constitute turnover • The total of positive and negative differences , plus • Premium received on sale of options is also to be included in turnover ,plus • In respect of any reverse trades entered, the difference thereon
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