Discussion on section 44AD of IT Act

[TraderRavi]

but their is lot of confusion in options turnover , premiums to be added in turnover also ?

this is ridiculous rule , after 16 trades in NF /turnover coming only 13k while done 11 trades in nifty options/ turnover coming over 300k , by this rate full month turnover over 10 lakh and as per 8% rule , 1 lakh profit per month is needed to avoid audit :annoyed:

 

[lemondew]

deleted as already posted by TJ above

 

[lemondew]

This makes it convenient for traders

Turnover detail available in zerodha BO >reports>tax P&L

 

[oscaramandus11]

Hi,

Will some senior please explain, what are the meaning of the word " Profit " and the word " Loss " with respect to Income Tax Act ?

In my opinion, this is important because in case you have incurred a " Loss " how does the clause " profit less than 8 % " apply for determining audit applicability. Here the words " Profit " and " Loss " are the key.

" Profit " and " Loss " are two different terms with different meaning. When one uses the word " Profit " it is clearly different from the word " Loss ".

" Profit " means receiving or incoming or gain or earning or receipt or positive cash flow or benefit or something which is more than what you started with.

" Loss " means giving or outgoing or losing or expense or negative cash flow or charge or penalty or something is less than what you started with.

Income tax philosophy is to give to government part of some thing which you earn or gain or profit or end up with more than what you started with.

The words are " income tax " and not " outgoing tax " or " expense tax ".
Hence if you are in " Loss ", you are not liable for tax audit.

Am I wrong ?

Rgds,
Oscar

 

[TradeJoker]

this is useful link http://zerodha.com/z-connect/traders-zone/taxation-for-traders/taxation-simplified

 

[oscaramandus11]

this is useful link http://zerodha.com/z-connect/traders-zone/taxation-for-traders/taxation-simplified

Hi TradeJoker,

Thanks for the link, have gone through it but no concrete information is available.

The author repeatedly says - consult a good CA.

The Indian income tax rules are open for interpretation based on logic and understanding. Govt. is interested in tax collection, the more the better. Ambiguous rules aid this objective.

Tax rules are one of the wonders of the world not only in India but in other countries as well.

Rgds,
Oscar

 

[columbus]

If I buy options for 50000 and then sell at 54000 , booking profit of Rs. 4000. what will be my turnover ?
(in futures it will be 4000)

but their is lot of confusion in options turnover , premiums to be added in turnover also ?

TR,

I think the confusion arises in case of FUTURES only ,as far as ,my
understanding goes.For easy calculation 4 lots (100 No.s) are taken,in this example.

A person took options of 8500CE for 100 and sold for 110.
His initial capital is 100*100=10000.
His profit is 100*(110-100)=1000.

A person took exposure NIFTY futures trading at 8350 and sold at 8360.
His initial capital is 8350*100=835000.
His profit is 100*(8360-8350)=1000.
But in case of Futures ,you can take exposure at even less price.
Less than 20K for NRML exposure and 7K for MIS exposure.They keep on
changing from time to time ,depending on NIFTY value.

In case of OPTIONS ,the profit is well defined.
In case of FUTURES ,there is some confusion.Am I right ????????????

 

[TraderRavi]

TR,

I think the confusion arises in case of FUTURES only ,as far as ,my
understanding goes.For easy calculation 4 lots (100 No.s) are taken,in this example.

A person took options of 8500CE for 100 and sold for 110.
His initial capital is 100*100=10000.
His profit is 100*(110-100)=1000.

A person took exposure NIFTY futures trading at 8350 and sold at 8360.
His initial capital is 8350*100=835000.
His profit is 100*(8360-8350)=1000.
But in case of Futures ,you can take exposure at even less price.
Less than 20K for NRML exposure and 7K for MIS exposure.They keep on
changing from time to time ,depending on NIFTY value.

In case of OPTIONS ,the profit is well defined.
In case of FUTURES ,there is some confusion.Am I right ????????????

the turnover thing is open to interpretation by tax officer , so different officers may use it as per their wish .

 

[DSM]

TR,

What my CA has told me :

Turnover does not mean sales - purchase which is done in the conventional sense. Here, it means your Net profit+Net Loss. If both of these added together exceeds the threshold limit, you will be subject to Tax Audit, or else, have to pay minimum tax no question asked.

Just my view - but do check with your CA.

the turnover thing is open to interpretation by tax officer , so different officers may use it as per their wish .

 

[Smart_trade]

TR,

What my CA has told me :

Turnover does not mean sales - purchase which is done in the conventional sense. Here, it means your Net profit+Net Loss. If both of these added together exceeds the threshold limit, you will be subject to Tax Audit, or else, have to pay minimum tax no question asked.

Just my view - but do check with your CA.

Turnover = Sum of Profit + Loss that is clear now.What is still not clear is whether this sum of profit plus loss is computed on profit/loss of each trade and then summed up or done on scrip wise and settlementwise ( zerodha backoffice calculates on settlement wise/scripwise and not tradewise...but that is subject to interpretation and no clear view ( even ICAI is ambiguous on it ) .We should ask zerodha to give us turnover based on both basis.If we are below the limit in both we are on a sure wicket.

Smart_trade