Looking for CA for audit and tax preparation related to stocks trading - Bangalore

[VJAY]

Re: Looking for CA for audit and tax preparation related to stocks trading - Bangalor

Dear Nikhil,
Nice to see your replys...I have some querry .all reference with traders
1.as per you who need audit of accounts?Please explain with one rough example
2.If we made loss this year/last year to carry these losses to next year need audit? :confussion:
3.if any trader income blw 2lac/2.5 lac he need to give IT return
4.please post one detailed post regarding IT return for traders ...who need it return?,what details he need to keep for return?etc....
5.is now days (e-days)need to keep contract notes of every trades?:confuse:
6.Is it brokers P/L statement not enough for file return?

 

[simplebuthard]

Re: Looking for CA for audit and tax preparation related to stocks trading - Bangalor

Nikhil, In case if you don't agree with including sale value while buy and then sell case, Why we need to add sale value in options writing alone?

I say that is not even required.

The direction given by govt is, include the premium collected because investors and traders if don't cover the particular writing trade, full premium becomes favorable difference.

 

[canikhil]

Re: Looking for CA for audit and tax preparation related to stocks trading - Bangalor

Thanks. Total of favorable & unfavorable differences. Thats what I think you are applying to options as well.

What would you suggest someone who has a turnover of 50 lacs and a profit of 50000 Rs. Audit or no audit.

What would be the taxable income in this case in case of that.

This is where section 44AD comes into play. The exact reading of the section would suggest that if the total income is Rs 50000 only and there is no other income, then as per sub-section 5 of section 44AD, audit is not required.

I believe the notices you are referring to are in such cases. Our opinion is that such notices are not valid as the section itself mandates audit only where profits are less than 8% and the income exceeds the maximum exempted limit

For eg: Let say in your case, the assessee also had salary of Rs 2.5 lakhs, then the audit would have been required and his income 2.5 lakhs plus 50 thousand would exceed maximum exempted limit and your profit is less than 8%.

 

[canikhil]

Re: Looking for CA for audit and tax preparation related to stocks trading - Bangalor

Dear Nikhil,
Nice to see your replys...I have some querry .all reference with traders
1.as per you who need audit of accounts?Please explain with one rough example
2.If we made loss this year/last year to carry these losses to next year need audit? :confussion:
3.if any trader income blw 2lac/2.5 lac he need to give IT return
4.please post one detailed post regarding IT return for traders ...who need it return?,what details he need to keep for return?etc....
5.is now days (e-days)need to keep contract notes of every trades?:confuse:
6.Is it brokers P/L statement not enough for file return?

1. Who needs an audit?

Lets continue with lemondew example.

Case 1.
Turnover 50 lakhs, gains Rs 50000, any other income: Nil

Audit not required as condition of income exceeding maximum exemption limit not fulfilled

Case 2

Turnover 50 Lakhs, gains Rs 50000, any other Income: Salary Rs 250000

Audit required as condition of income exceeding maximum exemption limit and profit less than 8% fulfilled

Case 3

Turnover 50 lakhs, losses: 5 lakhs, any other income: Interest : Rs 5 lakhs

Audit not required as losses will get set off against Interest income resulting in maximum income not exceeding maximum exempted limit.

Case 4

Turnover 50 Lakhs, losses 5 lakhs, any other income: interest Rs 2.5 lakhs, salary Rs 3 lakhs

Audit required as only Rs 2.5 lakhs losses are set off against interest and remaining losses are to be carried forward (set off against salary not allowed). So income exceeds exempted limit.

2. Audit required for carry forward of losses?

Audit is required if the conditions specified in section 44AD(5) are met

In case audit is not applicable, you need to just file ITR4 with losses provided for in the return and carry forward.

3. Ideally no. But advisable to file return even if the income is below exempted limit. helps in documentation of income.

4. I am preparing a detailed note. will be posted soon.

5. With regards to contract notes, I will always advise that you keep all of them on your own hard drive for ready reference. However, physical copy is not required. Income-tax Act as well as Information Technology laws allow for e-records.

6. In some cases broker's P&L is sufficient. But will depend on the specifics of each case. for eg, in case you are dealing with 2-3 brokers, you need to consolidate the data into a single P&L.

Also the ledger account that the broker maintains are from his accounting perspective. You need to reverse it to make it yours. For eg: what is shown as credit in broker's books is a debit in yours. But again it is subjective as each broker maintains different styles of reporting ledgers.

Having said the above, I agree with lemondew that 139(9) notices are issued but according to us that happens more on account of :

1. wrong interpretation of 44AD(5) by the department; and in come cases,

2. incorrect filings by the assessee.

So even where you are not getting hit by 44AD(5) audit, it is important that tax filings are done properly.

 

[canikhil]

Re: Looking for CA for audit and tax preparation related to stocks trading - Bangalor

http://zerodha.com/z-connect/trader...rs/notice-under-section-139-9-possible-reason

Read the comments there are so many. Zerodha folks are helpful and would answer comments on that thread.

Hey lemondew,

went through the post. it seems that the original post missed out the import of Total Income in requirement of audit. The same was later corrected in 2014 when someone else pointed it out.

Have explained some of the possibilities in my response to Vijay's query. I hope it helps.

 

[VJAY]

Re: Looking for CA for audit and tax preparation related to stocks trading - Bangalor

1. Who needs an audit?

Lets continue with lemondew example.

Case 1.
Turnover 50 lakhs, gains Rs 50000, any other income: Nil

Audit not required as condition of income exceeding maximum exemption limit not fulfilled

Case 2

Turnover 50 Lakhs, gains Rs 50000, any other Income: Salary Rs 250000

Audit required as condition of income exceeding maximum exemption limit and profit less than 8% fulfilled

Case 3

Turnover 50 lakhs, losses: 5 lakhs, any other income: Interest : Rs 5 lakhs

Audit not required as losses will get set off against Interest income resulting in maximum income not exceeding maximum exempted limit.

Case 4

Turnover 50 Lakhs, losses 5 lakhs, any other income: interest Rs 2.5 lakhs, salary Rs 3 lakhs

Audit required as only Rs 2.5 lakhs losses are set off against interest and remaining losses are to be carried forward (set off against salary not allowed). So income exceeds exempted limit.

2. Audit required for carry forward of losses?

Audit is required if the conditions specified in section 44AD(5) are met

In case audit is not applicable, you need to just file ITR4 with losses provided for in the return and carry forward.

3. Ideally no. But advisable to file return even if the income is below exempted limit. helps in documentation of income.

4. I am preparing a detailed note. will be posted soon.

5. With regards to contract notes, I will always advise that you keep all of them on your own hard drive for ready reference. However, physical copy is not required. Income-tax Act as well as Information Technology laws allow for e-records.

6. In some cases broker's P&L is sufficient. But will depend on the specifics of each case. for eg, in case you are dealing with 2-3 brokers, you need to consolidate the data into a single P&L.

Also the ledger account that the broker maintains are from his accounting perspective. You need to reverse it to make it yours. For eg: what is shown as credit in broker's books is a debit in yours. But again it is subjective as each broker maintains different styles of reporting ledgers.

Having said the above, I agree with lemondew that 139(9) notices are issued but according to us that happens more on account of :

1. wrong interpretation of 44AD(5) by the department; and in come cases,

2. incorrect filings by the assessee.

So even where you are not getting hit by 44AD(5) audit, it is important that tax filings are done properly.

:clapping::clapping::clap::thumb:
Nice explanation nikhil bro.....

 

[XRAY27]

Re: Looking for CA for audit and tax preparation related to stocks trading - Bangalor

@CANikhil

Good to another CA,answering this issue..btw bro i'm also a CA..

 

[comm4300]

Re: Looking for CA for audit and tax preparation related to stocks trading - Bangalor

what happens when salary income is below 2.50 lakhs, but Turnover in FnO is > 2cr?

intention is to carry forward losses.

 

[canikhil]

Re: Looking for CA for audit and tax preparation related to stocks trading - Bangalor

what happens when salary income is below 2.50 lakhs, but Turnover in FnO is > 2cr?

intention is to carry forward losses.

Tarush, once the turnover crosses Rs 1 cr, then all this discussion is not required. You are compulsorily required to get the audit done. The audit in such cases are covered under section 44AB and is more expensive as Chartered Accountants can do only a limited number of 44AB audits whereas there is no limit on 44AD audits.

 

[newuser_RK]

Re: Looking for CA for audit and tax preparation related to stocks trading - Bangalor

Nikhil boss I had done options trading for a month last year but I incurred losses. I have a taxable salary income. Given your example I need to go for an audit but I am planning to pay 8% of my turnover as a tax flat. Now this is a real pain if I calculate turnover as per Zerodha its substantial but if I calculate as sum of all the difference taken as positive then the turnover is manageble . do we have any definitive answer ?

Also this year I will trade in my huf account which will have no income but for the trading so if my trading income is less than 2.5l I need not do audit, I think this is a good workaround for those small traders who want to escape audits...

I appreciate your efforts nikil...