Future and Option business and cloth business

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This discussion clarifies tax audit applicability for individuals running both a cloth business under presumptive taxation (Section 44AD) and a Futures & Options (F&O) business. Even with separate businesses, the aggregate turnover is considered. If presumptive taxation was opted for in previous years, declaring a minimum aggregate profit is crucial to avoid a tax audit under Section 44AB(e), even if the F&O business shows a loss and maintains books of account.

shyam

shyam (Querist)

22 June 2023 If a person has 2 business 1st cloth business in which he avail 44AD his Turnover is less than 2 crore i.e 10 lakh and Profit is more than 8% i.e 1.2 lakh and another business is of F&O in which his turnover is 30 Lakhs and having loss of 3 Lakhs and he maintain book of account in case of F&O business did audit applicable?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

22 June 2023 No. Tax audit based on turnover not applicable.

shyam

shyam (Querist)

22 June 2023 what about in case of that F&O loss

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

22 June 2023 Aggregate turnover is 40 lakhs, so tax audit not applicable u/s. 44AB(a) IT act.

shyam

shyam (Querist)

26 June 2023 sir i am showing profit in cloth business but loss in F&O business however my total Turnover is 40 lakhs and has aggregate loss is 180000 ( 3 lakh loss-1.2 lakh profit) which is less than 8% profit even it is loss , still audit not applicable

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

26 June 2023 Had you opted for presumptive assessment u/s. 44AD IT act, in any preceding FIVE years, for any of these business?

shyam

shyam (Querist)

26 June 2023 yes i opt 44AD last year for cloth business that time F&O did not commence

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

26 June 2023 In that case you need to declare minimum 6/8% profit in aggregate otherwise tax audit will apply u/s. 44AB(e) of IT act.

shyam

shyam (Querist)

26 June 2023 did separate business not consider? we showing profit in cloth business in which we opt 44AD and showing loss in F&O business and mainting book of account for F&O business, in F&O did 44AB(a) not aplicable?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

26 June 2023 No. Separation is not allowed as per rule, though practically it may be possible.

shyam

shyam (Querist)

26 June 2023 so Tax audit applicable ?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

26 June 2023 Unless you declare 2.4L profit in F&O and 6/8% profit in cloth business, i.e around 3.20 lakhs in aggregate (no loss c/f of F&O), tax audit gets attracted.

shyam

shyam (Querist)

26 June 2023 ok Sir Thank you for help

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

26 June 2023 You are welcome.

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