Please clarify. I'm a salaried person, also investing in derivatives and have incurred some loss from the same. I would like to know as to how can I carry forward loss from derivation transaction. Do provisions of Sec 44AB apply and do I need to get my books of accounts audited in order to carry forward the losses?
14 August 2015
01. Take the mod value of each transaction. If the total exceeds 1 crore, then you are liable for Tax audit. 02. You can carry forward the unabsorbed loss to next year and set it off against speculative profit, if any.
14 August 2015
and if the mod value is less than Rs 1 cr and there is loss or there is profit but less than 8% of mod value and the overall income (excluding loss is above Rs 2.5 lakhs) even then audit will be applicable.
14 August 2015
I respectfully differ in your views so far as they relate to either 44AB(d) vis a vis 44AD(5).
According to me, the question of AUDIT will arise if profit is less than 8% AND the income exceeds the maximum amount NOT chargeable to tax. So? The loss cases are not hit by AUDIT.
14 August 2015
Ok. Agreed. May I ask a small query to know your views?
How do you interpret the sentence in that section : and whose total income exceeds the maximum amount which is not chargeable to income-tax shall be required to get them audited.....etc..
so if the total income is say 85,000, still you will advise the AUDIT?
14 August 2015
it depends. for a salaried person this would be Rs 2.5 lakhs of salary income as other incomes can be adjusted against business loss but not salary.
14 August 2015
thats why my view. But I do agree that a lot of people have different views on 44AD. My view is that in absence of any clarification from CBDT on this, I would rather play safe and do an audit.
14 August 2015
That is pretty good Nikhil. In fact, to tell you the truth, I was also of the same opinion as that of you, in good old days, in the initial few years of insertion of sections 44AD, AE and AF But when the Act, included these WORDS with the terms of "eligible business" viz "AND maximum amount not chargeable to tax", I changed my view. anyway, thanks for sharing your views.
14 August 2015
see my view is a simple one. If you exclude losses out of "profit and gains less than 8%" then it would lead to absurd interpretation and consequence. Everyone who wishes not to pay tax, will simply claim that he has incurred loss and since he is covered under 44AD, he doesn't have to comply 44AA and therefore: 1, there is no need for him to prove that there is a loss and neither to file a return!
And I dont think that was the intent of the legislation
17 August 2015
doesn't seem so. The explantory note to Finance Act 2009 gives the following legislative intent:
"(f) An assessee with turnover below Rs. 40 lakhs, who shows an income below the presumptive rate prescribed under these provisions, in case his total income exceeds the taxable limit, required to maintain books of accounts and also get them audited." Para 21.2.
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