Regarding speculative transactions and taxability

This query is : Resolved

BHOOMIJA (Querist)
Follow

13 July 2019 Assessee is having Salary income and also has engaged in Intra day trading in shares (Speculative transaction). The details are as follows:-
1. Salary Income - Rs.6,50,000
2. Speculative transaction details:-
Sale value - Rs.3,98,995, Purchase value - Rs.3,99,374. Speculative Loss - Rs.379.
Turnover - Aggregate of the Positive and Negative difference - 2462.
Turnover has not exceeded 1 crore. Turnover less than 1 crore and profit less than 6%.
1. Whether this transaction will be liable to Tax Audit on account of profit less than 6%?
2. Suppose the assessee is willing to declare 6% profit, then on which amount this 6% is to be calculated? Whether on Rs.3,98,995 or Rs.2462 (i.e aggregate of the Positive and Negative difference)

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

13 July 2019 1. No, since income from business is less than the maximum amount which is not
chargeable to tax (loss), assessee being an individual,

2. Infructuous, in view of the above.

BHOOMIJA

BHOOMIJA (Querist)
Follow

14 July 2019 Is it not "total income which exceeds the maximum amount not chargeable to tax"?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

20 July 2025 Great question! Let me break it down clearly regarding speculative transactions, tax audit, and profit declaration for your case.

Facts Recap:
Salary Income: Rs. 6,50,000
Speculative Intraday Trading:
Sale Value: Rs. 3,98,995
Purchase Value: Rs. 3,99,374
Speculative Loss: Rs. 379
Turnover (Sum of absolute gains and losses): Rs. 2,462
Turnover < Rs. 1 Crore
Profit < 6% (actually a loss here)
Your Questions:
1. Is tax audit applicable since profit is less than 6%?

Tax audit under Section 44AB applies if turnover exceeds Rs. 1 crore for speculative business or profit is below 6% but turnover exceeds Rs. 1 crore.
Since your turnover is only Rs. 2,462 (much less than 1 crore), tax audit is NOT applicable even if you declare less than 6% profit.
2. If you want to declare 6% profit, on which amount should it be calculated — Rs. 3,98,995 or Rs. 2,462?

The profit percentage for presumptive taxation or threshold calculation is calculated on the aggregate turnover, which for speculative business is the sum of absolute positive and negative differences (here Rs. 2,462), not just the sale value.
So, 6% profit would be 6% of Rs. 2,462 = Rs. 147.72 approximately.
Additional Points:
Since your salary income alone is Rs. 6,50,000, your total income is above the basic exemption limit (Rs. 2,50,000), so you need to file income tax return declaring all income.
The loss from speculative business can be set off only against speculative income in the same or future years.
Tax audit is only mandatory if turnover or profit conditions are met (which they are not in your case).
Summary:
Condition Your Case Tax Audit Applicability
Turnover < Rs. 1 Crore Rs. 2,462 (much less) NO tax audit
Profit < 6% Loss of Rs. 379 Tax audit not applicable due to turnover
Profit declaration basis Aggregate turnover Rs. 2,462 Profit % calculated on turnover

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now