Discussion on section 44AD of IT Act

[TradeJoker]

Re: General Trading Chat

Actually i was not talking abt trading lets say u sold a property more than fair value of the land, if u deposite that cash in bank, its black money, so if IT Dept. punish u for 10lac penalty or 6 month imprisonment ? Which one u choose

The above says min of 0.50% of total turnover or 1,50,000.
So 20 lac turnover means 10000 penalty if they prove ushd ve audited.

how did u get 10 lac figure now.????

trading to fir bhi kar lenge magar ye tax ka kya kare :rofl::rofl:

 

[sudoku1]

Re: General Trading Chat

Actually i was not talking abt trading lets say u sold a property more than fair value of the land, if u deposite that cash in bank, its black money, so if IT Dept. punish u for 10lac penalty or 6 month imprisonment ? Which one u choose

see d positiv (manageable)side of any event :-D

 

[lemondew]

Re: General Trading Chat

Escape to UK

Actually i was not talking abt trading lets say u sold a property more than fair value of the land, if u deposite that cash in bank, its black money, so if IT Dept. punish u for 10lac penalty or 6 month imprisonment ? Which one u choose

 

[TradeJoker]

Re: General Trading Chat

see d positiv (manageable)side of any event :-D

u mean imprisonment ? Free food,accomodation,cloths,electricity,water,police protection,medical checkup etc. :lol:

 

[ethan hunt]

Re: General Trading Chat

It was there last year too.....

your third point is wrong...if income is less than Rs 2 L even then you require audit if your TO is > 1 Cr OR TO < 1 Cr and profits < 8% of TO...the Section 44AD needing audit is an independent section.

So even if you trade few trades and make profits less than 8 % of TO and even though your total income is less than 2 L you need audit under section 44AD. That is the real issue with this section.

Smart_trade

FOR Point 3: excerpt from the web:

SECTION 44AD(5)

Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.

The assessee is bound to get the books of accounts audited, if the following two conditions are satisfied:-

1. His profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) i.e. his net profit is lower than 8% of turnover.

and

2 Whose total income exceeds the maximum amount which is not chargeable to income-tax.

Here see both the conditions are simultaneous and the assessee required to get his accounts audit only and only if his profits from the business u/s 44AD are lower than 8% of this turnover and further his total income is more than maximum amount which is not liable to tax.

 

[Smart_trade]

Re: General Trading Chat

FOR Point 3: excerpt from the web:

SECTION 44AD(5)

Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.

The assessee is bound to get the books of accounts audited, if the following two conditions are satisfied:-

1. His profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) i.e. his net profit is lower than 8% of turnover.

and

2 Whose total income exceeds the maximum amount which is not chargeable to income-tax.

Here see both the conditions are simultaneous and the assessee required to get his accounts audit only and only if his profits from the business u/s 44AD are lower than 8% of this turnover and further his total income is more than maximum amount which is not liable to tax.

Thanks, I stand corrected.

Smart_trade

 

[ethan hunt]

Re: General Trading Chat

I came across this article on taxation on futures and options trading.

http://trak.in/tags/business/2012/07/09/tax-return-filing-futures-options-fo-trades/

For calculation of turnover it says:

Turnover Calculation
Now, here comes the point calculation of turnover. Determination of turnover in case of F&O is one of the important factors for every individual for the income tax purpose. Turnover must be firstly calculated, in the manner explained below:

The total of positive and negative or favorable and unfavorable differences
shall be taken as turnover.

Premium received on sale of options is to be included in turnover.

In respect of any reverse trades entered, the difference thereon shall also form part of the turnover.

Here, it makes no difference, whether the difference is positive or negative. All the differences, whether positive or negative are aggregated and the turnover is calculated.

The points posted by you are from ICAI advisory guidelines. IT/AO is free to disagree.

Let us see:
1) The total of positive and negative or favorable and unfavorable differences
shall be taken as turnover.
NO Problem.

2) Premium received on sale of options is to be included in turnover.
BIG problem.
No clarity.
Option sold & covered (or bought & sq off) do we consider the prem rcd for T.O. ?
Prem should be considered for T.O. only if option is written & expires worthless.
Imagine trading (Buy+Sell) a modest qty of 500 BNF * 400 = 2Lac T.O. / day >>> 1 cr. in 2 months only !!!
Exercise ?

3) In respect of any reverse trades entered, the difference thereon shall also form part of the turnover.
Same point as point 1, why repeating ???
By reverese do they mean Shorting then covering ??? then it should include option writing & covering. Contradicting point 2.[/I]

4) Here, it makes no difference, whether the difference is positive or negative. All the differences, whether positive or negative are aggregated and the turnover is calculated.
Same point as point 1, why repeating ???
Even then it is same as point 1.

These points should be put across to ICAI. Once ICAI revises guidelines then Tax software making companies & CA will follow, untill then bhedchaal...

 

[umeshmandal]

Re: General Trading Chat

That view is wrong....even defination of Turnover given by Nithin Kamath in the petition is also not officially accepted by IT. Institute of Chartered Accounts view is also open to many interpretations.

There are some CAs and IT officials I know who insist that turnover means sum of profits and loss but calculated on each trade on FIFO basis and not on each settlement scripwise netted as claimed by Zerodha. But Zerodha have obtained some views from CAs. But IT dept is free to not accept this defination.Imagine if we have to calculate profits/loss of each trade and then add....I would leave trading and go to Himalayas than do this excercise in Excel ......

Just hope that you dont get found out....

Smart_trade

From the Net :

There is confusion on to what should be the turnover of intra-day trading transaction .Should the value of purchase or sale or only difference between the purchase and sale be taken for computing turnover for the purpose of tax audit under Section 44AB of the IT Act?

The issue had come up in the case of Babulal Enterprise v ACIT before the Mumbai bench of ITAT [IT Appeal No. 6031 (Mum.) of 1996, dated 12 February 1997]. It was held where the actual delivery was not taken and the difference in price was settled on the basis of contract note,the turnover cannot include the value of those transactions. Another decision of the Mumbai Tribunal expressing similar views was in the case of Growmore Exports v ACIT [78ITD 95]. Accordingly, the aggregate of both positive and negative differences is to be considered as turnover for determining liability to audit under Section 44AB.

 

[pakatil]

What all this jugglery of words mean.......??

Some one please tell in simple understandable language.

This copy and paste of different rules is only adding to the existing cesspool.

 

[copypasteaee]

What all this jugglery of words mean.......??

Some one please tell in simple understandable language.

This copy and paste of different rules is only adding to the existing cesspool.

i think the ruling says the turnover is only the difference between buy value and sell value if the physical delivery is not taken.