44ad & 44ab - share trading business

My Client has Share Trading Business. & Also Trades in F&O.

As per Provisions of 44AB, His Turnover doesn't exceeds 1 Crore so he is not liable for Tax Audit.

 

But, I want to know whether he has to go for TAX AUDIT U/S 44AD.

Because, 8% Profit (8% of the Turnover) is hardly Possible. Even Though My Client has Other Incomes like Interest. Net Profit from Share Trading is less than 8% but if Other Incomes are included in Net Profit then 8% Target is achieved. And 44AD doenst counts Other Income for Calculating the 8% Profit, I think.

 

So is he liable for Audit U/s 44AD?

 

If Yes, then I think Majority of Share Traders will have to go for Audit even though there Turnover may be as low as 10-20 Lakhs.

 

Kindly Reply ASAP.

 

Thank You.

Replies (8)

"If Yes, then I think Majority of Share Traders will have to go for Audit even though there Turnover may be as low as 10-20 Lakhs."........... Rightly predicted.......

Mainly two conditions to occur simultaneously..........

a. Profit margin less than 6%.............. b. Gross total income (after adjustment of the loss from other heads of income except salary) to exceed basic exemption limit........

Thanks Sir.

Yes Sir, Profit is less than 8%. (Why U wrote 6% ??)

Share Traing Business Net Profit is less than 8%. EXCLUDING the OTHER INCOMES which are included in P&L A/c. (Not Income from Ither Sources).

[Note: Kindly Guide whether we have to Exclude such other Income while Calculating the 8% or to include such income in Turnover on which we calculate 8%]

Also, Gross Total Income is above Basic Exemption Limit. Excluding the Speculation Losses and Such Other Losses which are not allowed to Setoff.

 

Thanks.

 

Hello Sir,

One more thing I wud like to ask.

From Share Trading Business - Gross Profit / loss is Coming. The Individual has Other Incomes too.

Whether, This Gross P/L will be taken in Profit & Loss A/c. and The Net Profit be Taxed as per Normal Provisions. i.e Basic Exemption will be available.

 

OR

Whether the Profits / Loss of Share Trading will be Subject to SHORT TERM & LONG TERM Capital Gains Tax. ??

I have read this treatment here in this article.

https://help.cleartax.in/hc/en-us/articles/115008078987-Income-from-shares

I hv filled up the ITR 3 taking share purchase and sales and Opening and Closing Stock in the P&L A/c in the Return Form - i.e. Share Sales in "Sale of Goods" etc.

If this Treatment is wrong Suggest the Correct Treatment.

For transactions through banking mode the minimum amount of profit is fixed at 6%, while that for cash mode is 8%.

The income from other sources is not included under PGBP, hence the presumptive assessment is only for business income.

When the gross income after set of of non-speculative loss with IFOS exceeds basic exemption limit...... tax audit is mandatory.

" This Gross P/L will be taken in Profit & Loss A/c. and The Net Profit be Taxed as per Normal Provisions. i.e Basic Exemption will be available?"        YES.

"Whether the Profits / Loss of Share Trading will be Subject to SHORT TERM & LONG TERM Capital Gains Tax?"         No. Check the word 'Trading' is not 'Investment' !!!

Income from shares investment is treated under Capital Gains.......... but not intraday & F&O Tradings.

For calculations on shares trading refer: chapter/turnover-balance-sheet-and-pl

I am confused here. why have u said all traders will be required to get audit if they want to show less than 8%. I dont think 44AD is a compulsary section.

Yes, you are right, Sec.44AD is not compulsory unless got assessed under the section in immediate preceeding year !!! [inference sec 44AD(5)]

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