Traders - Compliances under Revised 44AD

[traderniftybull]

Sir , he lowered the actual turnover & paid 8% tax on it as my friend is having loss . The most important thing here is that there is no evasion of income tax but only to avoid tax audit , he lowered the turnover .

So what may be the implications ?

Thanks

Bhai, this will come under suppression of fact or misrepresentation of facts (or something like like). If caught, then heavy penalties are likely to be imposed. Regarding quantum of penalty etc, I do not know, but you can search in internet.

 

[simplebuthard]

i don't know why traders showing their activity as business income and inviting these turnover issue willingly,

there is no law that you should show trading as business.

just show short term capital gain/loss all your trading activities. that is enough.

 

[aja]

i don't know why traders showing their activity as business income and inviting these turnover issue willingly,

there is no law that you should show trading as business.

just show short term capital gain/loss all your trading activities. that is enough.

intraday speculation also fall under short term capital gain/loss?

 

[Subhadip]

i don't know why traders showing their activity as business income and inviting these turnover issue willingly,

there is no law that you should show trading as business.

just show short term capital gain/loss all your trading activities. that is enough.

FNO income is different,

also showing bussiness income, there is chance of getting different deductions like electricity bill, internet etc.

 

[traderniftybull]

The major problem arises, only and only when

One is in loss
or
the profit is below 8% of the turnover

and total gross income exceeds exemption limit of 2.5L for individual below 60 years.

which invites compulsory audit in majority of cases, and it requires to spend further 10-15K

 

[XRAY27]

i don't know why traders showing their activity as business income and inviting these turnover issue willingly,

there is no law that you should show trading as business.

just show short term capital gain/loss all your trading activities. that is enough.

It is Income Tax Act which makes us to declare it under Normal business income U/S 44AB ,it was introduced with Finance Act 2005!!! it is more then 11 years now ..Traderji was from 2004


Till assessment year 2005-06, the Income Tax Act, 1961 did not have any special provisions dealing with taxation of derivatives transactions in general, and dealing with futures and options in particular, though derivatives contracts have been traded on Indian stock exchanges since 2000.

The Finance Act 2005 has amended the provision to section 43(5), with effect from Assessment Year 2006-07, to provide that derivatives trading transactions would not be regarded as speculative transactions, subject to the fulfilment of certain conditions.

with Finance Act 2013 commodity derivatives were also introduced

below is the definition U/S 43 of Income Tax Act'1961,

Section 43(5) of the Income Tax Act’1961,the relevant extract of which is reproduced below:

“speculative transaction” means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips:

Provided that for the purposes of this clause—

(d) an eligible transaction in respect of trading in derivatives referred to in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange; 76[or]

[(e) an eligible transaction in respect of trading in commodity derivatives carried out in a recognised association [, which is chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 (17 of 2013),]]

shall not be deemed to be a speculative transaction.

[Explanation 1].—For the purposes of [clause (d)], the expressions—

(i) “eligible transaction” means any transaction,—

(A) carried out electronically on screen-based systems through a stock broker or sub-broker or such other intermediary registered under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts or by banks or mutual funds on a recognised stock exchange; and

(B) which is supported by a time stamped contract note issued by such stock broker or sub-broker or such other intermediary to every client indicating in the contract note the unique client identity number allotted under any Act referred to in sub-clause (A) and permanent account number allotted under this Act;

(ii) “recognised stock exchange” means a recognised stock exchange as referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and which fulfils such conditions as may be prescribed and notified by the Central Government for this purpose;

[Explanation 2.—For the purposes of clause (e), the expressions—

(i) “commodity derivative” shall have the meaning as assigned to it in Chapter VII of the Finance Act, 2013;

From the reading of the above it is clear that trading in derivatives including commodity derivatives on a recognised stock exchange will not be considered as a speculative transaction and hence not treated as speculative business.

Therefore since these are not considered as speculative business, therefore income from such transactions will be considered as normal business income and loss from such transactions will be considered as normal business loss.



Hope this clears everybody !!!

 

[travi]

i don't know why traders showing their activity as business income and inviting these turnover issue willingly,

there is no law that you should show trading as business.

just show short term capital gain/loss all your trading activities. that is enough.

Your statement is a bit incorrect, bcos u need to define
1. equity trading = speculative income
vs
2. fno trading = non-speculative income

Non-speculative income will require audit in any case except the +8% profit of TO; which has to be carried on for 5yrs.

 

[aja]

From the reading of the above it is clear that trading in derivatives including commodity derivatives on a recognised stock exchange will not be considered as a speculative transaction and hence not treated as speculative business.

Therefore since these are not considered as speculative business, therefore income from such transactions will be considered as normal business income and loss from such transactions will be considered as normal business loss.

Thats about F&O.Thanks

But Trading Intraday Equity/Cash Market is still comes under Speculation Business.

 

[aja]

Non-speculative income will require audit in any case except the +8% profit of TO; which has to be carried on for 5yrs.

Does that mean Speculative Income wont need Audit?

 

[aja]

I have 2 CA's.
CA 1-Always say-Bhai,you are a trader,loss ho-profit ho,audit kar liya karo.Yeh 8%,10% yeh-voh ispe dhaan na do.Audit se aap ka hi fayda hai.

CA 2-Turnover 1Cr ke niche hai,8% declare kar dete hai,audit jaruri nahi hai.

Now,ps tell me,maine kya karna chahiye?
CA 2 1000-1500rs me nipat jaata hai. :rofl:

But which way is right? This is a grey area which varies from CA to CA.