Speculation business

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ravi (Querist)
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13 March 2018 Dear sir,
I have to file speculation business income from sale of shares. I have checked in internet that to calculate turnover, i have to sum up all profits and losses(as a positive figure) to arrive at turnover. I have calculated the same but i dont know how to file it in ITR-3. If i enter the turnover amount as sales and to get the profit amount in profits column, i have to deduct the difference amount(difference between the turnover value and profit amount) somewhere. can someone help me, where should i adjust the amount or how to file it?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 March 2018 File ITR 4 by declaring 6% profit on turnover as you calculated.

ravi

ravi (Querist)
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13 March 2018 sir,
i have other business income also whose profit is less than 6% and i have got my books audited but dont know how to show the speculation business turnover and profit in ITR-3

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 March 2018 All business turnover to be clubbed and subject to tax audit.

ravi

ravi (Querist)
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19 March 2018 As per income tax, to arrive at turnover, i have to addup all values(profit and loss). but when i show it in itr, how should i tally the turnover with the profit from speculation business?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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25 July 2025 Got it, you’re dealing with **speculation business income** from share trading, and you want to correctly report the **turnover** and **profit** in **ITR-3**, especially when you also have other business incomes and a tax audit is applicable.

Here’s a step-by-step on how to handle it:

---

### 1. **Turnover of Speculation Business**

* As per tax norms, **turnover for speculation business = Sum of absolute profits and losses** (i.e., add all profits and losses as positive amounts).
* Example: If profit = ₹2,00,000 and loss = ₹1,00,000, turnover = ₹3,00,000.
* This turnover figure is used **only for turnover calculation and tax audit applicability**, not for revenue or sales figures in P\&L.

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### 2. **Profit from Speculation Business**

* The actual **net profit** (profits minus losses) from speculation business is the **taxable income** under the head “Profits and Gains from Business or Profession.”
* So, if turnover is ₹3,00,000 but net profit is ₹1,00,000, only ₹1,00,000 is taxable.

---

### 3. **How to report in ITR-3**

* In **ITR-3**, there are separate columns to report **turnover** and **gross receipts** for businesses.
* **Turnover**: Enter the sum of absolute profits and losses here (e.g., ₹3,00,000).
* **Gross Receipts or Sales**: Enter the actual gross receipts, which for speculation business is usually **zero or the net amount** since no physical sales happen like in normal business.
* **Profit/Loss**: Enter the net profit (e.g., ₹1,00,000).

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### 4. **Adjusting the difference (turnover - profit)**

* The difference (turnover - net profit) represents the losses incurred.
* In your Profit & Loss statement, the **loss amount is shown as expenses** or set-off against profit.
* In ITR, **you don’t show this difference as an expense separately**; rather, the net figure is already profit after considering losses.
* For audit purposes, turnover is for threshold calculation only; profit/loss is for tax.

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### 5. **Combining with other business income**

* Add the speculation business turnover to other business turnovers to check if tax audit limit is crossed.
* Combine profits and losses of all business heads for total taxable business income.

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### **Summary:**

| ITR Field | What to Enter |
| ------------------------- | ---------------------------------------------------- |
| Turnover / Gross Receipts | Sum of absolute profits + losses (turnover) |
| Gross Receipts / Sales | Actual gross receipts (usually zero for speculation) |
| Profit / Loss | Net speculation business profit (profit - loss) |

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### Optional: Use **Audit Report Annexure** to explain turnover calculation as per IT guidelines.

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If you want, I can help you draft a simple worksheet or example entries for ITR-3 form fields for your speculation business. Would that help?

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