Are You Covered Under Tax Audit

[aja]

Some Chamchakhor Babu introduced the rule to the Finance Ministry.As he was Chamcha,it got immediately approved and circulated.

A wise Economist wont make such rule.

 

[Smart_trade]

The method of calculating options turnover is specified by study group set up by Institute of Chartered Accountants of India .The Govt generally accepts ICAI recommendations.There is no reason to include sales side in turnover but that is what ICAI study group recommended.I do not know if any options expert was in the group or it is an accounting excercise done by CAs.

But as things are,the sales side inclusion increases the turnover of options traders and practically all will come under audit.Till this rule is changed, we have to follow the rule, so either do audit,or don't trade options....that is an option traders have.But good option traders need not get scared and they do the audit and file their IT returns...but for small option players who are struggling,audit fees is extra burden.CAs should put pressure on their Institute to rectify this error by appointing another study group and come out with fresh guidelines.

Smart_trade

 

[wisp]

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.

http://www.incometaxindia.gov.in/Charts Tables/Penalties and Prosecutions.htm

 

[Smart_trade]

Failure to get accounts audited under this section attracts penalty @ 1/2 % of the turnover or Rs 1,50,000 whichever is less.

Smart_trade

 

[headstrong007]

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

Is that rule vary person to person? CA to CA?
My CA calculated option turnover same as future and I don't get any scrutiny notice yet.. He is a good CA from Mumbai and I don't want to mention his name..
He said, there is a gray area..no need to worry as I paid full tax, he can calculate turnover again if required. Tax don't changes with turnover.
But with C my turnover easily hit above 2Cr.. Audit required, which I don't gave.. But that is absurd..I traded only on premiums.

I have one more advantage.. All F&O trades squared of intraday, not a single contract Exercised.. May be thats why IT don't dare to challenge me..:lol:

 

[aja]

The method of calculating options turnover is specified by study group set up by Institute of Chartered Accountants of India .The Govt generally accepts ICAI recommendations.There is no reason to include sales side in turnover but that is what ICAI study group recommended.I do not know if any options expert was in the group or it is an accounting excercise done by CAs.

Smart_trade

With due respect to CA's and ICAI Team,I bet they purposely forced this recommendation.Because Audit is the only bread and butter for them.

How will they take back this recommendation?

If sell side addition is removed then reaching 2Crs limit on just Buy+Sell turnover is far away for 90% of the traders.

 

[traderniftybull]

Is that rule vary person to person? CA to CA?
My CA calculated option turnover same as future and I don't get any scrutiny notice yet.. He is a good CA from Mumbai and I don't want to mention his name..
He said, there is a gray area..no need to worry as I paid full tax, he can calculate turnover again if required. Tax don't changes with turnover.
But with C my turnover easily hit above 2Cr.. Audit required, which I don't gave.. But that is absurd..I traded only on premiums.

I have one more advantage.. All F&O trades squared of intraday, not a single contract Exercised.. May be thats why IT don't dare to challenge me..:lol:

I am afraid, if your CA is doing this way, then he is doing in wrong way. No question whether you are paying full tax. But how it could be correct, when you are calculating TO in wrong way.

 

[Smart_trade]

Is that rule vary person to person? CA to CA?
My CA calculated option turnover same as future and I don't get any scrutiny notice yet.. He is a good CA from Mumbai and I don't want to mention his name..
He said, there is a gray area..no need to worry as I paid full tax, he can calculate turnover again if required. Tax don't changes with turnover.
But with C my turnover easily hit above 2Cr.. Audit required, which I don't gave.. But that is absurd..I traded only on premiums.

I have one more advantage.. All F&O trades squared of intraday, not a single contract Exercised.. May be thats why IT don't dare to challenge me..:lol:

Every mistake is not detected in IT returns leading to scrutiny..but in case it comes for scrutiny, your CA's interpretation may or may not not be accepted by Income Tax Department and if they slap a heafty penalty on you ,you cannot say the law / rule is absurd.There are many absurd rules and laws which we have to follow until they are changed. So be careful while dealing with law. Baki aap samazdaar ho....

Smart_trade

 

[headstrong007]

I am afraid, if your CA is doing this way, then he is doing in wrong way. No question whether you are paying full tax. But how it could be correct, when you are calculating TO in wrong way.

No, he is not only one who using such method..All of my trades are intraday and there is surely gray area.
I have contracted with a CA farm attach with RKSV 3 years ago. Thay also said they can do same way for my case.
But it needs the expertise of CA to counter logic, if they challenged. I never challenged, this 3rd year with same process..

Just shared the info..

 

[headstrong007]

Every mistake is not detected in IT returns leading to scrutiny..but in case it comes for scrutiny, your CA's interpretation may or may not not be accepted by Income Tax Department and if they slap a heafty penalty on you ,you cannot say the law / rule is absurd.There are many absurd rules and laws which we have to follow until they are changed. So be careful while dealing with law. Baki aap samazdaar ho....

Smart_trade

Thanks, ST, for the concern.. but he is very well known CA. I trust him, this is 3rd year. I am escaping.

Is that bcoz of only intraday trades. Or no tax due. I don't know the real reason. But if there is no tax due, I think the penalty is very less for just not doing an audit. IT respect true tax payers.

Anyone can confirm what is fine in my case when no tax is due. Only option turnover is defective.