Need guidance regarding audit of derivative and other trxn

nbjumani · #1 29th October 2007, 06:41 PM

Dear Friends,
Hi, I joined today. Good to meet all of you.
I wanted to know how to decide whether my case needs to be audited under Sec 44AB for the YE 31/3/07. We have heavy turnover of 5-8 Futures Transactions per day, each transaction for one lot of Futures is 1-3 lakhs. We are being told to go for auditing even though, there is loss of about 29 lakhs in some scrips and profit of 19 lakhs in some scrips, hence the net loss is about 10 lakhs. There is a profit of 1 lakh under Short-Term capital gains. Apart from this, there is interest and salary income of Rs 2 Lkahs. Please advise regarding the following:

a) Whether 44AB Audit is necessary
b) Whether any income-tax will be payable.

Please give the necessary reference to support the answer.

Thank You,
nbjumani

aca_trader · #2 29th October 2007, 07:01 PM

Quote:

Originally Posted by nbjumani

Dear Friends,
Hi, I joined today. Good to meet all of you.
I wanted to know how to decide whether my case needs to be audited under Sec 44AB for the YE 31/3/07. We have heavy turnover of 5-8 Futures Transactions per day, each transaction for one lot of Futures is 1-3 lakhs. We are being told to go for auditing even though, there is loss of about 29 lakhs in some scrips and profit of 19 lakhs in some scrips, hence the net loss is about 10 lakhs. There is a profit of 1 lakh under Short-Term capital gains. Apart from this, there is interest and salary income of Rs 2 Lkahs. Please advise regarding the following:

a) Whether 44AB Audit is necessary
b) Whether any income-tax will be payable.

Please give the necessary reference to support the answer.

Thank You,
nbjumani

The total Derivative Turnover for Tax Audit purpose will be Sum total of the net gain/Loss. From the figures given, your turnover appears to be Rs. 48 lacs (29 lacs+19 lacs). Hence, Tax Audit becomes compulsory.

As set-off of business loss from Salary not permitted, you will have to pay tax on your salary income while you can set-off your interest income and STCG against business losses. Rest of the Business Losses you can carry forward.

Best Regards,
--Ashish

J_D · #3 29th October 2007, 07:16 PM

What is this tax audit ? and at what frequency it is done?

Is it done at the time of preparing the returns or is it done at regular intervals to determine the profit /loss to determine the advance tax payments?

John.

nbjumani · #4 30th October 2007, 01:08 PM

Thanks all of you. Particularly thank you Ashish. Will get back later.

Nbjumani

nbjumani · #5 30th October 2007, 01:16 PM

Hi John, it is regarding the previous FY 06-07 for which the return is being filed. As there is loss in Futures, the tax has to be paid only on the Salary income as Ashish said. Section 44AB refers to Auditing prescribed under IT Act. Hope it is clear.

J_D · #6 30th October 2007, 03:18 PM

Thank you Nbjumani for the reply.

I take this as Tax audit to be done by the chartered accountant prior to filing the returns, each year, if the criteria of stock market transactions exceed certain prescribed limit (over 40 lakhs) by the IT act..

John.

aca_trader · #7 30th October 2007, 04:02 PM

Quote:

Originally Posted by faltub

U mean to say tax audit is applicable if sum of net profit or loss(not turnover) over that 39.99 lacs ?

F

Yes. This is the way Turnover for F&O contracts is calculated.

Regards,
--Ashish

magnet · #8 11th November 2007, 12:58 AM

How come tax audit necessary for people dealing in shares???

As far as my knowledge only ppl having business and 40 l limit comes than audit is for them...not for peeps who does 4 c transaction in shares