Tax audit

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Querist : Anonymous

Querist : Anonymous (Querist)

29 July 2014 Can any one guide me I am salary income having income of 5 lac & F&o Trading loss Rs.5000/- can i eligible for tax audit. I don't want to go in 44AD Because turnover is higher is going to 20 Lacs.

CA UMESH DULAL

CA UMESH DULAL (Expert)
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29 July 2014 Tax audit is applicable for the person who have business or profession. Is your F &O trading is business/profession ?

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Querist : Anonymous

Querist : Anonymous (Querist)

29 July 2014 Thanks for your reply, As I have seen in many articles Future & option trading in stock Exchange treated as a Business Income. are you agreed? if yes, but i am salaried employee. So what to do?

CA UMESH DULAL

CA UMESH DULAL (Expert)
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29 July 2014 this article may be useful for you

plz follow the link

https://taxguru.in/income-tax/how-to-compute-turnover-in-case-of-future-and-options-trades-speculation-trades-and-applicability-of-tax-audit-us-44ab-of-the-income-tax-act-1961.html

CA UMESH DULAL

CA UMESH DULAL (Expert)
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Querist : Anonymous

Querist : Anonymous (Querist)

29 July 2014 My question is that even if loss in F&O Trading & also Turnover is lesser than 1 crore. it is required to do tax audit?

One more question Speculation or Non Speculation business income both are applicable for tax audit if turnover having more than 1 crore or loss without having turnover of 1 crore?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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30 July 2014 Dear Querist,

1. the Future and Options transactions are taxed as Business Income only.

2. Future and options are not speculative transactions and are considered normal business transactions. Only share trading (without taking delivery ie intra-day and obligation trades) are considered as speculative income.

3. Yes as such the tax audit shall be applicable to your case. The only way to avoid audit is to offer 8% of the turnover as profits. The impact of doing so is explained in Point 4.

4. The correct way of looking at this is:

You have a turnover of Rs 20 lakhs. So as per 44D, your minimum income (to avoid tax audit) should be Rs 1.6 lakhs (8% of the turnover)

Since you already has Rs 5 lakhs as income, this presumptive of income of Rs 1.6 lakhs should be taxed at 20%. Accordingly, if you don't want audit to be done, you shall be required to pay Rs 32,000 as tax!!

So the set off by doing an tax audit is:

1. you don't have to pay the tax as referred above.

2. you get to carry forward the loss (even if it is only Rs 5000)

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5. where you decide not to get the audit done, you carry the risk of future tax liabilities (even without earning any profit!!)

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