Tax audit requirement for derivatives Trading business

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A proprietor with a trading business turnover of £75 lakhs and a derivatives trading turnover of £15 lakhs is facing a tax audit. Despite the derivatives trading showing a profit over 8%, the question arises whether a separate audit is required for this segment, especially since books haven't been maintained. The discussion clarifies that a single tax option must cover all business activities, meaning the derivatives trading cannot be treated separately under Section 44AD while the regular business falls under Section 44AB(e).

abhijeet m. deshpande

abhijeet m. deshpande (Querist)

26 December 2021 My assessee is a propietor of a trading business having turnover of Rs.75 lakhs. As the net profit shown is less then 8% his books are audited u/s 44AB(e). He has also entered into derivatives trading with a annual turnover of Rs.15 lakhs and a profit of Rs.4 lakhs (i.e. more then 8%). Will he have to audit the books of his derivatives trading business as well. He has not maintained books of his derivatives trading business. Can he opt for taxation u/s 44AD for his derivatives trading business and sec 44AB(e) for his regular trading business

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

26 December 2021 Yes, audit the books of his derivatives trading business required as well.
Audit the trading details put it in Excel sheet.

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abhijeet m. deshpande

abhijeet m. deshpande (Querist)

26 December 2021 Thanks sir. But can he opt for taxation u/s 44AD for his derivatives trading business and sec 44AB(e) for his regular trading business.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

26 December 2021 That's not possible. Single option allowed combining all the business.

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