Discussion on section 44AD of IT Act

Thanks, I stand corrected.

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.

Ethan I think you misunderstand the TO concept. The turnover is not the Trade Price * Contract Size. It's the amount you receive or pay at EOD i.e MTM settlement. You make 2000 on 1 contract in a day then the turnover is 2000. I think the misconceptions are created because of the word turnover. TO in other businesses is sales proceeds/revenue i.e their income. In trading our revenue is daily MTM i.e settlement profit/loss and not TP*Size.

For options you have to consider the premium received for T.O.
So if you trade (500 Buy & 500 Sell) then 500 lots BNF @ Rs.400 = 2 Lacs added to T.O. in addition to P+L figures.

Sharing I understand with examples correct me if I am wrong. I quote the matter from websites. My conclusion is delivery trading gives maximum turnover if sold less than a year.


For FO matter used for calculation
turnover is:
The total of positive and negative, or favourable and unfavourable 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

source:
http://tradingqna.com/3831/futures-&-option-turnover-calculation-for-taxation
http://trak.in/tags/business/2012/07/09/tax-return-filing-futures-options-fo-trades/

a) So for futures trading
Turnover = absolute sum of profits + loss
eg
trade 1 profit 5000
trade 2 loss 5000
turnover = 10000

b) options trading
Turnover = Premium received on sale of options
Sold nifty 8000 PE at 20 * 50 qty turnover = 1000

c) For equity intraday
Turnover = same futures

d) For equity delivery
Turnover = gross sale value
eg sold 100 hdfc @1000 turnover = 100,000
source : http://taxguru.in/income-tax/how-to...audit-us-44ab-of-the-income-tax-act-1961.html