![]() ![]() Neither require to maintain books of accounts nor audit 2,50,000 and profits are not declared according to the provisions of section 44AD then require to maintain books of accounts and also get them audited U/s 44AB. One who declaring Income according per section 44AD of the act not require to maintain books of accounts.īut If his income exceed the basic exemption limit not chargeable to tax i.e. 2,50,000 and for turnover is Rs25 lakhs.) ![]() (Limit for Individual and HUF (Hindu Undivided Family) of Income is Rs. 1,20,000 or the turnover exceed Rs 10Lakh. But in general practice and to deal with future litigation this practice followed.Īs per section 44AA(2) of the income tax act, 1961,Įvery person carrying business, require to maintain books of accounts the Income from the business exceeds Rs. Note: In all the cases of loss audit is not mandatory. In this case audit under section 44AB clause (e) of the act, will be required only if declared profits are less than 8% or 6% (As the case may be) of the total turnover. So, income can also be shown under section 44AD of the income tax act, 1961 on presumptive basis if assessee also is an eligible assessee. ![]() “Īs F&O trading is also falls under the category of eligible business (turnover limit is Rs. For Financial Year 2021-22 this 5Crore limit is further extended to 10Crore. In case cash receipts and cash payments does not exceed 5% of total payments or receipts 1Crore will be read as 5Crore. “Every person carrying business shall, If his turnover is exceed one crore in any previous year, require to get his accounts audited by an accountant. Section 44AB of the Income tax act,1961 provides that: On the basis of turnover, we decide tax audit is required or not. Let me remind you again this calculation of turnover is only to determined that what will be the position under income tax. Table 3 : Example of calculation of turnover of Options in where transactions are squared off: Options If it is not considered for calculation of net profit than Premium will be add to the turnover. In options trading most of the time traders squares off the position if one is the buyer of the call option (premium is paid) he will square off this position by selling this option (Premium will be received) so the differences will be the Profit/loss.Īs per new guidance note If the premium is included while calculating net profit than it will not be considered again for the purpose of calculation. However, where the premium received is included for determining net profit for transactions, the same should not be separately included.Įxample of calculation of turnover of Futures same as given in Table 1 above (No change)Įxample of calculation of turnover of Options: (ii) Premium received on sale of options is also to be included in turnover. ICAI has also bring some changes in the calculation method of Turnover which fulfils the requirement of the act.Ĭalculation of the premium will be as follows according to the updated GN on Tax audit U/s 44AB issued by the ICAI. Law and rules should change according to the need of time. Table 2 : Example of calculation of turnover of Options: OptionsĬalculation of turnover for the Income tax purpose from the AY 2022-23 Table 1 : Example of calculation of turnover of Futures: Future (iii) In respect of any reverse trades entered, the difference thereon, should also form part of the turnover. (i) The total of favourable and unfavourable differences (Profit/Loss) shall be taken as turnover. But given in Guidance Note on tax audit by ICAI pg 25 as follows. ![]() Method of calculation of turnover is not provided under the income tax act, 1961. Many are incurring and losses and some are in profit too.Ĭalculation of turnover for the Income tax purpose before AY 2022-23 Salaried people who are doing F&O transaction are actually doing business unknowingly. So, it is clear that Income from “Future and option trading” is a normal business income. One can also refer Guidance Note on tax audit by ICAI pg 25. as per section 43(5) of the income tax act, 1961. Trading in Future and option is a business transaction. Assuming you all know about the future and option. Most of people step-in into it without having knowledge about its taxability and how it will be shown in their Income tax return? Is it mandatory to show these transactions in return? Require to maintain books of accounts? You will get answer of all of these questions. Further, we cannot deny the role of digitalization and platforms available to invest in stock and derivative market. You will not believe nearly 14.3 million new investors added by the depositories in the year ended 31 march 2021. Share trading and, Derivative trading (F & O trading) is normal now a days. ![]()
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