Discussion on section 44AD of IT Act

Turnover = absolute sum of settlement profits & losses for F&O

Calculation of turnover is to determine if you need your books audited or not, so audit by a CA is required if:
1. Turnover for financial year is > 1 crore

2. If turnover < 1 crore and profitability is less than 8% of turnover (Section 44 AB)

3. Also note that if your total gross total income (trading + Salary or other business) is lesser than Rs 2lks, you don’t need an audit even if your profit is less than 8% of your turnover or if turnover for the year is > 1 crore


Now here was the second point there last year as well or it has been introduced this year only?

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

Re: General Trading Chat

Thx St,

Just 1 more clarification. if I have profit 10000, loss of 90000. In this case TO = 100000.

What will my profitability be 10000 or -80000. In this case I ll need an audit?

Re: General Trading Chat

Haan bhai...even if it is a loss, you still need Audit ( profit<8% of TO ) as your net profit/loss will be -80000 or 80 K loss. Even loss needs Audit. So if you make anything less than 8000 profit, you need audit.This is really bad of this regulation.

Even if Govt keeps turnover more than 1 Cr for Audit it is ok.....but profit less than 8 % of TO needing Audit is the part which is pinching the most.

ST

Re: General Trading Chat

i can think of only one reason why this is the case. Its quite possible the CA's would have lobbied for this as they have strong connection with IT dept. It only benefits them.

Re: General Trading Chat

This gives a great handle to IT assessing officers to armtwist the taxpayers and also non return filers and extract money by corruption....any taxpayer would like to pay tax and be clean than get armtwisted and then pay up.....

ST

Re: General Trading Chat

I am worried about the knowledge of our CAs. :rofl: What am I supposed to do if I ve to audit and I didnt do it last year.

The CA i visited told me if TO below 1 Cr no audit. He never knew about all this

Re: General Trading Chat

Fno learning ka tax bhi lag gaya 10 k per year.

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

Re: General Trading Chat

Lets do calculation of lets say on each trade
say 1 nifty 8000 * 100 = 8,00000.

In this case our turnover would be 20 - 30 crores or say 100 crores. Even then if my profit is say just 1 lac. I have to pay tax only on 1 lac that is nothing. Only that I have to get it audited from a CA and pay him 10 k. Am i wrong here. Ask ca to do this exercise why are we paying him 10 k for . Let him do some silly work