Discussion on section 44AD of IT Act

[lemondew]

K as per FIFO How will we pair a buy and sell order to calculate profit/loss per pair when you have 5 buy orders of 100 followed by 10 sell orders of 50 each.

here netted we have 500 buy /500 sell.

We have to do it using FIFO ( First In First Out method) . The question is not what is better....the question is what method the IT cannot dispute...and it is calculation of tradewise profit/loss and adding to get turnover.

Zerodha's calculation is beneficial to us but neither IT dept nor ICAI has accepted that. We are just interpreting and hoping that all is well....

I have seen few traders doing it with Excel sheet tradewise but it is too cumbersome...software programme will do it fast.

Smart_trade

 

[Smart_trade]

K as per FIFO How will we pair a buy and sell order to calculate profit/loss per pair when you have 5 buy orders of 100 followed by 10 sell orders of 50 each.

here netted we have 500 buy /500 sell.

It can easily be done...if Zerodha agrees to incorporate the change, I will explain to them how it is done .

ST

 

[lemondew]

ST,

You can write logic on how it should be calculated manually. One of the coders here will try and code. And you can send the same logic to zerodha also to see whether they believe it is correct.

It can easily be done...if Zerodha agrees to incorporate the change, I will explain to them how it is done .

ST

 

[Smart_trade]

ST,

You can write logic on how it should be calculated manually. One of the coders here will try and code. And you can send the same logic to zerodha also to see whether they believe it is correct.

Zerodha coders can easily do it, but I doubt whether they will take up anyting new till Pi is stabilised and all issues resolved....so let us see if Govt does something in the budget ( chances are remote) then we can request Zerodha....they will do it as it will be a good client service initiative.

ST

 

[lemondew]

Cool, Lets wait for budget and see what happens. This is complicated for eq intraday and futures. For options and delivery stocks turnover definition is clear

Zerodha coders can easily do it, but I doubt whether they will take up anyting new till Pi is stabilised and all issues resolved....so let us see if Govt does something in the budget ( chances are remote) then we can request Zerodha....they will do it as it will be a good client service initiative.

ST

 

[columbus]

Section 44AD requires books to be audited if the profit made in a financial year
is less than 8% of turnover while trading on Indian exchanges. This causes unnecessary
burden and an eventual non - compliance by most small retail traders and investors

Section 44AB (audit required if turnover more than Rs 1 crore) ensures that
anyone trading the markets professionally has to maintain books and have it audited by a CA.

Consider a person trading in 100 NIFTY FUTURES, buying it at 8900 and selling
at 8910.The turnover is calculated at 100*8900+100*8910= 17.8 lakhs.

In this way ,1 crore turnover will be reached in hardly 6 trading days.

If ,a trader is a scalper ,then this ONE crore figure will be reached within
5 trading days or lesser.

Certainly it is a big headache for a retail investor and it should be eliminated
immediately.

Go to POST #1 to sign petition.
OR http://www.traderji.com/brokers-trading-platforms/89121-zerodha-part-3-a.html#post1050112

 

[suri112000]

Section 44AD requires books to be audited if the profit made in a financial year
is less than 8% of turnover while trading on Indian exchanges. This causes unnecessary
burden and an eventual non - compliance by most small retail traders and investors

Section 44AB (audit required if turnover more than Rs 1 crore) ensures that
anyone trading the markets professionally has to maintain books and have it audited by a CA.

Consider a person trading in 100 NIFTY FUTURES, buying it at 8900 and selling
at 8910.The turnover is calculated at 100*8900+100*8910= 17.8 lakhs.

In this way ,1 crore turnover will be reached in hardly 6 trading days.

If ,a trader is a scalper ,then this ONE crore figure will be reached within
5 trading days or lesser.

Certainly it is a big headache for a retail investor and it should be eliminated
immediately.

Go to POST #1 to sign petition.
OR http://www.traderji.com/brokers-trading-platforms/89121-zerodha-part-3-a.html#post1050112

I think you have made a mistake while arriving at turnover. The turnover is the difference between buy and sell value whether it is positive or negative in case of futures and equity. The turnover in case of options is the selling price of the options.

Eg

Buy @ 8900 and sold @ 9000. Turnover = 100 (It is a profit transaction)
Buy @ 9000 and sold @ 8900. Turnover = 100 (It is a loss transaction)

The total turnover in this case is 200.

Buy Nifty Option @ 10 and sold @ 20. Turnover = 500 (Profit)
Buy Nifty Option @ 10 and sold @ 5. Turnover = 125 (Loss)

The total turnover in this case is 625.

Total turnover in both cases is 825.

IT is not clear about how to calculate the turnover. However, ICAI has issues these guidelines on how to arrive at turnover. IT normally obliges the guidelines of ICAI.

 

[columbus]

I think you have made a mistake while arriving at turnover. The turnover is the difference between buy and sell value whether it is positive or negative in case of futures and equity. The turnover in case of options is the selling price of the options.

Eg

Buy @ 8900 and sold @ 9000. Turnover = 100 (It is a profit transaction)
Buy @ 9000 and sold @ 8900. Turnover = 100 (It is a loss transaction)

The total turnover in this case is 200.

Buy Nifty Option @ 10 and sold @ 20. Turnover = 500 (Profit)
Buy Nifty Option @ 10 and sold @ 5. Turnover = 125 (Loss)

The total turnover in this case is 625.

Total turnover in both cases is 825.

IT is not clear about how to calculate the turnover. However, ICAI has issues these guidelines on how to arrive at turnover. IT normally obliges the guidelines of ICAI.

Hi Suri,

I have taken data from "NITIN KAMATH" original post in CHANGE.ORG and
producing a part of it ,for you.

Once my trades are over ,I get a message from NSE (in the night),the word
that is used is YOUR TRADED VALUE is 17.6 lakhs (if traded 100 nifty futures
8900 (buy) and 8910(sell)) but the word TURNOVER is not found.

Yes ,there is a confusion on term ,TURNOVER.


Petitioning Arun Jaitley - Minister of Finance and 2 others
This petition will be delivered to:
Arun Jaitley - Minister of Finance
Jayant Sinha - Minister of State - Finance
K V Chowdary - Chairman - CBDT
Exclude Business of trading in securities and derivatives from Section 44AD
Nithin Kamath
India

Section 44AD requires books to be audited if the profit made in a financial year is less than 8%
of turnover while trading on Indian exchanges. This causes unnecessary burden and an eventual
non - compliance by most small retail traders and investors

Firstly, turnover in reality is not the contract turnover but the sum of settlement profit and losses.
So if 100 x Nifty is bought at 8500 and sold at 8510, the turnover is Rs 1000 ( the profit made on this trade)
and not Rs 1710000 ( 8500x100 + 8510x100). Sum of all such profits and losses make up for the total
turnover in a financial year.

 

[suri112000]

I am referring to this link

http://taxguru.in/income-tax/how-to...audit-us-44ab-of-the-income-tax-act-1961.html

 

[columbus]

I am referring to this link

http://taxguru.in/income-tax/how-to...audit-us-44ab-of-the-income-tax-act-1961.html

Hi suri,

I am referring to Zerodha's back office ,for TURNOVER.

Anyway, we are not bound to take ZERODHA's definition.

However ,you will find ABSOLUTE profit/loss instead of NET profit/loss
in case of F&O turnover.