Are You Covered Under Tax Audit

the logic of 8% is that govt wanted to capture the small businesses/shops/retailers under tax net. So they offered a simple provision - if your sales are below Rs 1 cr, then just offer 8% of the sales to tax and avoid maintaining books of accounts etc as it is a general complaint that for small businesses maintaining books is a cumbersome task and costly task. This % could have been fixed at 10%, 15%, 20% too. At the end of the day it is an arbitrary number. At the time of amending 44AD, no explanation was given for fixing at 8%. But then income-tax act is full of such provisions, 44BB, 44AE etc etc.

the F&O traders just got caught in the side-effects of this simple provision!

With regards to your problem with loss not being income or form of income, I actually can't help you much! There are certain things that are obvious in life. For eg, when you are driving your car in reverse gear, will you say it is not moving just because it is not going forward! moving forward or backward is a movement and so is the concept of income. Govt wont tax you for negative income but it has a right to ask you to undergo an audit to ensure that you are claiming genuine expenses!

They have been kind to shopkeepers to avoid the cumbersome task of audit. But they havent been to FNO retail traders.

Heres the catch Obviously when shopekeeper sells he always makes profit never . Plus no one really knows how much he has sold. But when an options trader sells he might be making a loss and govt knows very well he has sold. still he has to pay tax on it. Thats the irony

Hi Canikhil,

Would be pleased to know your opinion on my following matter :


I have turnover in Futures last year (as u showed calculation) is 2,85,000.

Had loss of 1,05,000/-

And salary income of 50,000 and interest income as 15,000.

I have not asked for C/f of my loss ...and didn't audit the accounts.

Current Year also I have turnover of 3,65,500/-approx. and income of interest income as 15000 and salary of just 35000.

Current year loss is 95,000/-

DO I need audit of my accounts?

Thanking you,
Kedar

Hi Canikhil,


Thnx a ton for prompt replay.. now can sleep like a baby.

God Bless your good soul.

Regards,
Kedar

Hi CaNikhil

I have salary income 7 lacs+
losses from future trading 1lac+
Which form should I use ITR4 or ITR4s?

What is meant by books of account?

hi canikhil,

Your pm is not enabled. pls enable it.

Thanks,
MT