For ITR 4S
This query is : Resolved
04 July 2011
Whether Share Trading Income (Business Income ) can it be considered as Presumptive Income ?
05 July 2011
Yes it can be considered for presumptive income u/s 44AD.
05 July 2011
thanks for ur kind reply
but sir some confusion is yet their in ma mind.. kindly help me out
1. is it mandatory to show share trading u/s 44 AD
2.if some one is showing lower profit(8%) den audit is compulsory???
3.if some one is earning 43% return den it is justified to show 8% net income u/s 44AD
4.if net profit increases by 120000/150000.. books of accounts is compulsory??
waiting for ur reply in detail
but sir some confusion is yet their in ma mind.. kindly help me out
1. is it mandatory to show share trading u/s 44 AD
2.if some one is showing lower profit(8%) den audit is compulsory???
3.if some one is earning 43% return den it is justified to show 8% net income u/s 44AD
4.if net profit increases by 120000/150000.. books of accounts is compulsory??
waiting for ur reply in detail
25 July 2024
Let's address your questions regarding the treatment of share trading income under presumptive taxation scheme (section 44AD) for ITR 4S (now known as ITR 4):
### 1. Consideration of Share Trading Income (Business Income) under Presumptive Income Scheme (Section 44AD):
Under section 44AD of the Income Tax Act, businesses with turnover up to Rs. 2 crore can opt for presumptive taxation. Here’s how it applies to share trading income:
- **Presumptive Income for Businesses**: Section 44AD allows eligible businesses to declare income at a prescribed rate (8% of turnover or gross receipts) and exempt them from maintaining detailed books of accounts.
### Answers to Your Specific Questions:
1. **Mandatory to Show Share Trading Income u/s 44AD**:
- Share trading income (if considered business income) can be declared under section 44AD voluntarily if the turnover criteria are met and if the taxpayer prefers the presumptive taxation regime to avoid maintaining books of accounts.
2. **Lower Profit (8%) and Compulsory Audit**:
- If a taxpayer opts for section 44AD and declares income at 8% of turnover, and if the income exceeds the threshold limit (currently Rs. 2 crore), then audit is mandatory irrespective of whether the profit is lower than 8%.
- Example: If turnover is Rs. 1.5 crore and profit declared is Rs. 1 lakh (less than 8%), audit would be mandatory if opting for section 44AD.
3. **High Return and Justification for 8% Net Income**:
- If a taxpayer earns a significantly higher return (like 43%) from share trading, but opts for section 44AD, they would still need to declare income at 8% of turnover as per the presumptive taxation rules.
- The purpose of section 44AD is to provide a simplified method for small businesses to declare income, regardless of actual profit margins.
4. **Increase in Net Profit and Books of Accounts**:
- If the net profit (not turnover) exceeds Rs. 2,00,000 or Rs. 2,50,000 (as per current rules) in any financial year, the taxpayer is required to maintain books of accounts and get them audited under section 44AB, irrespective of whether they opted for section 44AD earlier.
### Conclusion:
- Share trading income (if classified as business income) can be declared under section 44AD.
- Opting for section 44AD simplifies tax compliance by presuming income at 8% of turnover.
- Audit is mandatory if opting for section 44AD and the income exceeds the prescribed limit, even if profit is lower than 8%.
- Even if actual returns are higher than 8%, the taxpayer must declare income at 8% under section 44AD.
- If net profit exceeds specified limits, maintaining books of accounts and audit becomes mandatory.
It's crucial to consult with a tax professional to determine the correct classification of share trading income and ensure compliance with all relevant tax laws and regulations.
### 1. Consideration of Share Trading Income (Business Income) under Presumptive Income Scheme (Section 44AD):
Under section 44AD of the Income Tax Act, businesses with turnover up to Rs. 2 crore can opt for presumptive taxation. Here’s how it applies to share trading income:
- **Presumptive Income for Businesses**: Section 44AD allows eligible businesses to declare income at a prescribed rate (8% of turnover or gross receipts) and exempt them from maintaining detailed books of accounts.
### Answers to Your Specific Questions:
1. **Mandatory to Show Share Trading Income u/s 44AD**:
- Share trading income (if considered business income) can be declared under section 44AD voluntarily if the turnover criteria are met and if the taxpayer prefers the presumptive taxation regime to avoid maintaining books of accounts.
2. **Lower Profit (8%) and Compulsory Audit**:
- If a taxpayer opts for section 44AD and declares income at 8% of turnover, and if the income exceeds the threshold limit (currently Rs. 2 crore), then audit is mandatory irrespective of whether the profit is lower than 8%.
- Example: If turnover is Rs. 1.5 crore and profit declared is Rs. 1 lakh (less than 8%), audit would be mandatory if opting for section 44AD.
3. **High Return and Justification for 8% Net Income**:
- If a taxpayer earns a significantly higher return (like 43%) from share trading, but opts for section 44AD, they would still need to declare income at 8% of turnover as per the presumptive taxation rules.
- The purpose of section 44AD is to provide a simplified method for small businesses to declare income, regardless of actual profit margins.
4. **Increase in Net Profit and Books of Accounts**:
- If the net profit (not turnover) exceeds Rs. 2,00,000 or Rs. 2,50,000 (as per current rules) in any financial year, the taxpayer is required to maintain books of accounts and get them audited under section 44AB, irrespective of whether they opted for section 44AD earlier.
### Conclusion:
- Share trading income (if classified as business income) can be declared under section 44AD.
- Opting for section 44AD simplifies tax compliance by presuming income at 8% of turnover.
- Audit is mandatory if opting for section 44AD and the income exceeds the prescribed limit, even if profit is lower than 8%.
- Even if actual returns are higher than 8%, the taxpayer must declare income at 8% under section 44AD.
- If net profit exceeds specified limits, maintaining books of accounts and audit becomes mandatory.
It's crucial to consult with a tax professional to determine the correct classification of share trading income and ensure compliance with all relevant tax laws and regulations.
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