Whether shares or commodities trading cover u/s 44ad
This query is : Resolved
26 June 2013
suppose a person has a cash turnover of Rs 35 lakhs, and f&o difference turnover is 13 lakhs and he has incurred loss of Rs 1.25 lakhs , as profit is less than 8%, whether audit provisions are applicable or not?....
kindly suggest.. its urgent
kindly suggest.. its urgent
Rupesh Jain
(Expert)
26 June 2013
TOUROVER RSW. 35.00 LACS PROFIT RATE IS BELOW 8% THE HE HAVE TO AUDIT
26 June 2013
it means share trading is also in perspective of sec 44 ad..
whether it overruled guidance note of sec 44 ab
whether it overruled guidance note of sec 44 ab
03 August 2025
Here’s the clarity on your query regarding section 44AD applicability for shares and commodities trading:
🔹 Section 44AD – Presumptive Taxation Scheme
Applicable to small businesses, including those engaged in business of trading.
Presumptive income is 8% (6% in case of digital transactions) of turnover or gross receipts.
🔹 Does Section 44AD cover Share and Commodities Trading?
No, the CBDT has clarified that speculative business (like intraday equity trading or commodities futures & options trading) is not eligible under Section 44AD.
Such transactions are treated as business income but outside presumptive taxation.
🔹 Turnover Definition for Trading
For share/commodity trading, turnover is usually:
Total of positive and negative differences (profits and losses) in F&O, or
Gross sales value for delivery-based trades.
For speculative trades, turnover means sum of absolute profits and losses.
🔹 Audit Applicability under Section 44AB
If presumptive scheme cannot be opted, then normal provisions apply.
If turnover exceeds Rs. 1 crore (now Rs. 2 crore in recent amendments), audit is mandatory.
Also, if profit is less than 6%/8% on turnover, audit is required even under 44AD.
🔹 Regarding your case:
Rs 35 lakh cash turnover + Rs 13 lakh F&O difference turnover.
Loss of Rs 1.25 lakh means profit is below presumptive 8%.
Since it involves share/commodities trading, section 44AD presumptive scheme is not applicable.
So, normal business income rules and audit provisions under section 44AB apply.
If turnover crosses prescribed limit, audit is mandatory.
🔹 On whether 44AD overrules Guidance Note on Sec 44AB:
No, 44AD is a special scheme.
For activities excluded from 44AD (like speculative trading), normal provisions including 44AB audit rules apply as per Guidance Note.
✅ Summary
Aspect Position
Share & Commodities Trading Not covered under Section 44AD
Presumptive income scheme Not applicable
Audit applicability As per normal rules under Section 44AB
Profit less than 8% Audit applicable if turnover limit crossed
🔹 Section 44AD – Presumptive Taxation Scheme
Applicable to small businesses, including those engaged in business of trading.
Presumptive income is 8% (6% in case of digital transactions) of turnover or gross receipts.
🔹 Does Section 44AD cover Share and Commodities Trading?
No, the CBDT has clarified that speculative business (like intraday equity trading or commodities futures & options trading) is not eligible under Section 44AD.
Such transactions are treated as business income but outside presumptive taxation.
🔹 Turnover Definition for Trading
For share/commodity trading, turnover is usually:
Total of positive and negative differences (profits and losses) in F&O, or
Gross sales value for delivery-based trades.
For speculative trades, turnover means sum of absolute profits and losses.
🔹 Audit Applicability under Section 44AB
If presumptive scheme cannot be opted, then normal provisions apply.
If turnover exceeds Rs. 1 crore (now Rs. 2 crore in recent amendments), audit is mandatory.
Also, if profit is less than 6%/8% on turnover, audit is required even under 44AD.
🔹 Regarding your case:
Rs 35 lakh cash turnover + Rs 13 lakh F&O difference turnover.
Loss of Rs 1.25 lakh means profit is below presumptive 8%.
Since it involves share/commodities trading, section 44AD presumptive scheme is not applicable.
So, normal business income rules and audit provisions under section 44AB apply.
If turnover crosses prescribed limit, audit is mandatory.
🔹 On whether 44AD overrules Guidance Note on Sec 44AB:
No, 44AD is a special scheme.
For activities excluded from 44AD (like speculative trading), normal provisions including 44AB audit rules apply as per Guidance Note.
✅ Summary
Aspect Position
Share & Commodities Trading Not covered under Section 44AD
Presumptive income scheme Not applicable
Audit applicability As per normal rules under Section 44AB
Profit less than 8% Audit applicable if turnover limit crossed
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