I am a Salaried employee ( 6 months in this financial year ). I have day Trading losses of 60000 with an annual turnover of 220000. Short term capital gains are also present.
I am writing here my understanding of taxation. Please correct me wherever i am wrong.
Day Trading is a speculative business Income. Tax audit is necessary in my case as total turnover is 220000 ( < 2 crores ) and Net profit is -60000 ( < 6% of Total turnover ). Use of ITR 2 is not possible if i report my losses.
ITR 4 is ruled out as I also have to report STCG ( Rs. 15000 ) under Schedule CG.
To be fully compliant, I have to use ITR 3 and get the tax audit done.
I am not interested to carry forward the losses and my Primary objective is to avoid tax audit. Here i seek advise from all of you. I feel, I have following options.
Use ITR 2, Report STCG and Salary income, Ignore day trading losses. ( Please remember i am not interested to carry them forward, I just want to avoid tax audit )
Use ITR 4, Report STCG under the head of ‘income from other sources’ and Pay taxes on 6% of my business turnover of 220000.
Use ITR 3, Report STCG and Salary under appropriate schedule. Though i have incurred loss from day trading ( Business ), I report profit of more than 6% of my annual turnover ( In this way i can avoid tax audit ) and pay required taxes. ( 6 % of 220000 = 13200, 20% ( Tax Slab ) of 13200 = 2640 which is gold when i compare it with Tax Audit hassles. )
Club the turnover and net profit from ‘Day trading’ and ‘Short term equity investment’, Declare myself as a businessman ( I feel i can do that as i have worked only 6 months this FY ) and Take presumptive business income route by using ITR 4.
Please advice me on what path to follow in order to avoid ‘wrath of IT Department’ as well as ‘Tax Audit’. Any other suggestions except above are most welcome.
Thanks.
CAclubindia
