Are You Covered Under Tax Audit

[traderniftybull]

1. Salary - No
2. Income from house property (any difference between residential and commercial property income) - No (Doesn't matter residential or commercial)
3. Income from speculative gains - No But speculative losses can be carried forward for 4 yrs and adjusted against future speculative gains only.
4. Short term capital gains - No
5. Long term capital gains - No
6. Income from fixed deposit - Yes
7. Savings bank account intrest - Yes

PLease refer this link for detailed info : http://www.incometaxindia.gov.in/Tutorials/21- MCQ set off and carry frwrd.pdf

Bhai, please clarify, whether
1. You are a CA
2. You are a trader with knowledge of Income Tax
3. You are a trader as well as a qualified CA, (both)

 

[wisp]

.......................

 

[FnOtrader80]

Bhai, please clarify, whether
1. You are a CA
2. You are a trader with knowledge of Income Tax
3. You are a trader as well as a qualified CA, (both)

Trader with some knowledge of income tax

 

[traderniftybull]

Trader with some knowledge of income tax

Thanks bhai.
I asked only because I found 2 discrepancy in your post. I may be wrong as well. Myself also, a trader only, with very basic knowledge of income tax.

1. AFAIR, CA Nikhil has posted previously, somewhere, that income from house property is adjustable with trading loss.
2. Income from speculative gains is also adjustable with trading loss, (as per the link post by you, to my best understanding)

 

[aja]

Where is Nikhil Bhai?

 

[FnOtrader80]

Thanks bhai.
I asked only because I found 2 discrepancy in your post. I may be wrong as well. Myself also, a trader only, with very basic knowledge of income tax.

1. AFAIR, CA Nikhil has posted previously, somewhere, that income from house property is adjustable with trading loss.
2. Income from speculative gains is also adjustable with trading loss, (as per the link post by you, to my best understanding)

Thank you for correcting me, yes income from house property is can be set off against business loss in the same year , if carried forward it can be only adjusted against income from house property only (i have corrected my earlier post) speculative gains can also be set off against non speculation loss but speculation loss can only be adjusted against speculation gains only.

 

[surfer]

Well the annual tax return season is just about to start and its the right time for you to evaluate whether you are supposed to anything more than just filing your tax returns.

This posts attempts to cover the issue of applicability of tax audit under various circumstances.

Till a few years ago, applicability of tax audit was a simple issue: If your turnover crosses a particular limit, you were required to get your accounts audited. However, since the introduction of refurbished Section 44AD, the applicability of audit has become a cumbersome issue.

So to make it easier for you all to know whether tax audit is applicable to you or not, I have shared below a few simple examples. (these examples have been shared at an earlier discussion in this forum too)

Case 1.

Turnover : Below Rs 1 cr
Gains/Loss from Business: 240000
Salary Income: No
any other income: Nil

Audit not required as condition of income exceeding maximum exemption limit not fulfilled

Case 2

Turnover: below Rs 1 cr
Gains: Rs 50000 (assumed)
Salary: Rs 250000

Audit required as condition of income exceeding maximum exemption limit and profit less than 8% fulfilled

Case 3

Turnover: Below Rs 1cr:
losses: 5 lakhs (assumed)
Interest Income: Rs 5 lakhs

Audit not required as losses will get set off against Interest income resulting in maximum income not exceeding maximum exempted limit.

In the above case, had the interest income exceeded Rs 7.5 lakhs, the audit would have become applicable.

Case 4

Turnover: Below Rs 1 cr

losses 5 lakhs (assumed)

Interest Income: Rs 2.5 lakhs,

Salary: Rs 3 lakhs

Audit required as only Rs 2.5 lakhs losses are set off against interest and remaining losses are to be carried forward (set off against salary not allowed). So income exceeds exempted limit.

Case 5

Turnover: Below Rs 1 cr

Speculative Losses: 2 lakhs

Interest Income : Rs 2.6 lakhs,

Salary: Ni

Audit required as speculative losses cannot be set off against interest income and both the conditions : income exceeding basic exemption limit and profit less than 8% are satisfied.

Case 6:

Turnover : Above Rs 1 cr. Don't bother. Audit is compulsory.

Kindly note that in the above examples it has been assumed there are no deductions available under section 80C, 80D etc.

Regards

Nikhil Kaushik

Dear Sir,
If salary is taxed and loss F&O trades not reported. what is the fine sir?

 

[canikhil]

Yes, this is the problem with option turnover calculation, ridiculous and full of faults, that suits govt, tax department and tax experts. So no body want to rectify the mistake/error in the calculation. :annoyed:
Aur traders ki koi sunta nahi, they have no voice to raise.


Thats another grey point, of our taxation, that suits govt, tax department and tax experts. :annoyed:

The problem is with many aspects of accounting. Unfortunately, nobody has bothered to resolve the problem and the officers in the department are completely inept.

But honestly, I wonder why there is so much issue around it. Most of the people are either trading in high enough volumes to get be liable for audit regardless of the method used to compute turnover or have losses that ensure that audit is required. So unless you want to file under presumptive gains, it doesn't matter what method you use for turnover computation. All, you need is to get your auditor to prepare a note on the turnover computation and append it in the "notes to accounts" in the financials statements.

 

[traderniftybull]

The problem is with many aspects of accounting. Unfortunately, nobody has bothered to resolve the problem and the officers in the department are completely inept.

But honestly, I wonder why there is so much issue around it. Most of the people are either trading in high enough volumes to get be liable for audit regardless of the method used to compute turnover or have losses that ensure that audit is required. So unless you want to file under presumptive gains, it doesn't matter what method you use for turnover computation. All, you need is to get your auditor to prepare a note on the turnover computation and append it in the "notes to accounts" in the financials statements.

Thanks

The main problem lies in the calculation of turnover of options trades. I didnt understand the rationale behind addition of sale value of option trade with profit and loss values. Why this addition.

Say for example:
Profit is A, loss is B and sale value is C

For future, the turnover is A + B (C is not added in future TO)
but
For options, the turnover is A + B + C,

this addition of C increases the TO by multifolds and is the main reason behind declaring loss in trading, otherwise one can very easily declare 8% presumptive profit, even if in loss or lesser profit.

Please be kind enough to clarify, why this addition of C is there.
Thanks

PS
This question is open to other members for their comments. I wanted to open a thread on this question, but afraid of participation, so didnt open

 

[wisp]

Thanks

The main problem lies in the calculation of turnover of options trades. I didnt understand the rationale behind addition of sale value of option trade with profit and loss values. Why this addition.

Say for example:
Profit is A, loss is B and sale value is C

For future, the turnover is A + B (C is not added in future TO)
but
For options, the turnover is A + B + C,

this addition of C increases the TO by multifolds and is the main reason behind declaring loss in trading, otherwise one can very easily declare 8% presumptive profit, even if in loss or lesser profit.

Please be kind enough to clarify, why this addition of C is there.
Thanks

PS
This question is open to other members for their comments. I wanted to open a thread on this question, but afraid of participation, so didnt open

If in loss, even if loss is not filed 0.5% is the fine, I think ST Da also mentioned this somewhere, so this shouldnt be a problem for small time traders.