case to be audited if loss exceeds above 10 lac?
This query is : Resolved
10 October 2007
sir,
I trade in dervatives stock market. my loss has ecxeeded 10 lacs after taking expense as I show trading as my income from business.is my case comes under audit. do I have to audit my accounts.pls tell.
I trade in dervatives stock market. my loss has ecxeeded 10 lacs after taking expense as I show trading as my income from business.is my case comes under audit. do I have to audit my accounts.pls tell.
10 October 2007
If it crosses 40L then only Sec44AB will attract. Now Your wish.
10 October 2007
sir , when I called income tax on helpline they said if loss or profit exceeds 10lac u should audit ur file.or if ur turnover crosese 40 lac,pls answer do I have to audit?
10 October 2007
Dear Mangesh,
In your case you say that your loss has exceeded rs 10L. Here u have said that trading in deravatives is your business hence your books needs to be audited u/s 44AB if your total sales, turnover or gross receipts, as the case may be, in this business exceed or exceeds forty lakh rupees in the previous year. hence u will need to give me these details before an opinion can be give as your gross reciepts cannot be estimated by the loss u have incurred.
In your case you say that your loss has exceeded rs 10L. Here u have said that trading in deravatives is your business hence your books needs to be audited u/s 44AB if your total sales, turnover or gross receipts, as the case may be, in this business exceed or exceeds forty lakh rupees in the previous year. hence u will need to give me these details before an opinion can be give as your gross reciepts cannot be estimated by the loss u have incurred.
10 October 2007
a)Carrying on any business where total sales or turnover or gross receipts exceeds Rs. 40L.
b)Assessee carrying on profession where gross receipts exceeds Rs.10L
c)Assessee carrying on business referred to u/s 44AD/AE/AF/BB/BBB and declaring lower income than prescribed.
In that situation audit shall be conducted u/s 288 of the Incometax act.
You will not come under the above said categories. Hence, you will not come under Tax audit.
b)Assessee carrying on profession where gross receipts exceeds Rs.10L
c)Assessee carrying on business referred to u/s 44AD/AE/AF/BB/BBB and declaring lower income than prescribed.
In that situation audit shall be conducted u/s 288 of the Incometax act.
You will not come under the above said categories. Hence, you will not come under Tax audit.
10 October 2007
Mr. Magnesh,
As per income tax act: Every person(a) carrying on BUSINESS shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds FORTY lakh rupees in any previous year
or
(b) carrying on PROFESSION shall, if his gross receipts in profession exceed TEN lakh rupees in any previous year.
shall required Audit of Accounts.
and as you are doing business of trading in shares therefore condition first applies to you.
As per income tax act: Every person(a) carrying on BUSINESS shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds FORTY lakh rupees in any previous year
or
(b) carrying on PROFESSION shall, if his gross receipts in profession exceed TEN lakh rupees in any previous year.
shall required Audit of Accounts.
and as you are doing business of trading in shares therefore condition first applies to you.
10 October 2007
sir , I am confused experts have given different opinion. pls tell wt to do. my loss is above 10 lac and turnover of buy and sell of shares is around 5 crores
10 October 2007
Your turnover is crossing 40L obviously you will come under tax audit net.
10 October 2007
It would not depend on the Loss but on the turnover and that is 5 Cr
10 October 2007
Mr.Mangesh first you would have told your turnover.
11 October 2007
sir, my ca told me derivative trading turnover is not considered as we buy quantity on margins. and loss exceeding 10lac qualifys the case for audit . pls clarify I am also confused
11 October 2007
Mr. Mangesh,
As per the IT act no where does it specify u/s 44AB that the books needs to be audited in case of a loss/profit. all its talks about is the Gross turnover /gross reciept/ total sales. here u consider trading in deravatives as your business and the turnover has exceeded 5 crores, irrespective of the fact that buying is done o margins the books need to be offered to audit under the section
As per the IT act no where does it specify u/s 44AB that the books needs to be audited in case of a loss/profit. all its talks about is the Gross turnover /gross reciept/ total sales. here u consider trading in deravatives as your business and the turnover has exceeded 5 crores, irrespective of the fact that buying is done o margins the books need to be offered to audit under the section
11 October 2007
Mr. Mangesh,
As per the IT act no where does it specify u/s 44AB that the books needs to be audited in case of a loss/profit. all its talks about is the Gross turnover /gross reciept/ total sales. here u consider trading in deravatives as your business and the turnover has exceeded 5 crores, irrespective of the fact that buying is done o margins the books need to be offered to audit under the section
As per the IT act no where does it specify u/s 44AB that the books needs to be audited in case of a loss/profit. all its talks about is the Gross turnover /gross reciept/ total sales. here u consider trading in deravatives as your business and the turnover has exceeded 5 crores, irrespective of the fact that buying is done o margins the books need to be offered to audit under the section
11 October 2007
Mr Rayan is correct u need to get your books audited since u have a receipts or transactions above 40K and no where it is mentioned for the gain or loss
11 October 2007
CLAUSE (d) OF SUB SECTION 5 OF SEC 43 OF INCOME TAX ACT STATES THAT AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO..... IN SECURITIES CONTRACT REG. ACT 1956 CARRIED OUT ON A RECOGNISED STOCK EXCH. IS NOT A SPECULATIVE TRANSACTION.
SO DERIVATIVE TRADINDG IS NOT SPECULATIVE BUSINESS.IT IS A NORMAL BUSINESS.
UNDER SEC 44 AB -EVERY PERSON CARRYING ON BUSINESS ......WHERE TURNOVER,SALES OR GROSS RECEIPTS EXCEED RS. 40 LAKHS OR IN CASE OF PROFESSION WHERE GROSS RECEIPTS OF PROFESSION EXCEED RS. 10 LAKHS.... NEEDS TO GET HIS ACCOUNTS AUDITED.
BUT THERE IS NO SUCH PROVISION OF LOSS OF RS. 10 LAKHS QUALIFYING FOR TAX AUDIT.
SO TAX AUDIT IS REQUIRED IN YOUR CASE AS PER YOUR FIGURES.
R.V.RAO
SO DERIVATIVE TRADINDG IS NOT SPECULATIVE BUSINESS.IT IS A NORMAL BUSINESS.
UNDER SEC 44 AB -EVERY PERSON CARRYING ON BUSINESS ......WHERE TURNOVER,SALES OR GROSS RECEIPTS EXCEED RS. 40 LAKHS OR IN CASE OF PROFESSION WHERE GROSS RECEIPTS OF PROFESSION EXCEED RS. 10 LAKHS.... NEEDS TO GET HIS ACCOUNTS AUDITED.
BUT THERE IS NO SUCH PROVISION OF LOSS OF RS. 10 LAKHS QUALIFYING FOR TAX AUDIT.
SO TAX AUDIT IS REQUIRED IN YOUR CASE AS PER YOUR FIGURES.
R.V.RAO
11 October 2007
sir , I will audit my accounts .and thks for ur advice. one more querry my ca last year didn't audit my accounts my turnover was 2 crores and file my return. do I have to pay any penalty for that?
11 October 2007
CLAUSE (d) OF SUB SECTION 5 OF SEC 43 OF INCOME TAX ACT STATES THAT AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO..... IN SECURITIES CONTRACT REG. ACT 1956 CARRIED OUT ON A RECOGNISED STOCK EXCH. IS NOT A SPECULATIVE TRANSACTION.
THE SALE OF SHARES HELD UNDER DEMATERIALISED FORMAT WITH A DEPOSITORY - IT WILL COME UNDER CAPITAL GAIN - SEC 45(2A).
UNDER THIS SCHEME, THE SHAREHOLDER DOES NOT HAVE A CERTIFICATE TO CLAIM OWNERSHIP OF A SHARES IN A COMPANY. HIS INTEREST IS REFLECTED BY WAY OF ENTIRES IN THE BOOKS OF A DEPOSITORY (AN INTERMEDIARY AGENT WHO MAINTAINS THE RECORDS OF SHAREHOLDERS)
THE COST OF ACQUISITION AND THE PERIOD OF HOLDING SHALL BE DETERMINED ON THE BASIS OF FIFO METHOD. (Circular No 768 Dated 24.06.1998)
FIFO METHOD WILL BE APPLIED FOR EACH ACCOUNT INDEPENDENTLY.
WHEN PHYSICAL STOCK IS DEMATERIALIASED THE DATE OF CREDIT INTO THE DEPOSITORY ACCOUNT SHALL BE CONSIDERED FOR THE PURPOSE OF FIFO METHOD, BUT INDEXED COST OF ACQUISTION SHALL BE COMPUTED ON THE BASIS OF YEAR OF ACQUISTION.
IF YOUR ARE COME UNDER THE ABOVE SAID CATEGORY YOUR CASE WILL NOT COME UNDER BUSINESS HEAD CAPITAL GAIN/(LOSS) WILL APPLY.
IN THAT SITUATION YOU NEED NOT AUDIT YOUR BOOKS OF ACCOUNT.
PLEASE CONFIRM WHETHER YOU ARE COME UNDER WHICH CATEGORY.
THE SALE OF SHARES HELD UNDER DEMATERIALISED FORMAT WITH A DEPOSITORY - IT WILL COME UNDER CAPITAL GAIN - SEC 45(2A).
UNDER THIS SCHEME, THE SHAREHOLDER DOES NOT HAVE A CERTIFICATE TO CLAIM OWNERSHIP OF A SHARES IN A COMPANY. HIS INTEREST IS REFLECTED BY WAY OF ENTIRES IN THE BOOKS OF A DEPOSITORY (AN INTERMEDIARY AGENT WHO MAINTAINS THE RECORDS OF SHAREHOLDERS)
THE COST OF ACQUISITION AND THE PERIOD OF HOLDING SHALL BE DETERMINED ON THE BASIS OF FIFO METHOD. (Circular No 768 Dated 24.06.1998)
FIFO METHOD WILL BE APPLIED FOR EACH ACCOUNT INDEPENDENTLY.
WHEN PHYSICAL STOCK IS DEMATERIALIASED THE DATE OF CREDIT INTO THE DEPOSITORY ACCOUNT SHALL BE CONSIDERED FOR THE PURPOSE OF FIFO METHOD, BUT INDEXED COST OF ACQUISTION SHALL BE COMPUTED ON THE BASIS OF YEAR OF ACQUISTION.
IF YOUR ARE COME UNDER THE ABOVE SAID CATEGORY YOUR CASE WILL NOT COME UNDER BUSINESS HEAD CAPITAL GAIN/(LOSS) WILL APPLY.
IN THAT SITUATION YOU NEED NOT AUDIT YOUR BOOKS OF ACCOUNT.
PLEASE CONFIRM WHETHER YOU ARE COME UNDER WHICH CATEGORY.
11 October 2007
Mr Ravi,
This information is too good, but would this also be correct for the turnover of 5 crores and a loss of 10K
This information is too good, but would this also be correct for the turnover of 5 crores and a loss of 10K
11 October 2007
Turnover is immeterial under the head Capital Gain. I think that Mr. Mangesh would have engaged in demat derivative activities. Hence, his CA said is perfectly correct.
12 October 2007
This query is opened. Further suggestions are invited.
12 October 2007
Mr Mangesh,
Jus Few Questions,
Are your a Stock Broker or a Investor.
Last year that u mentiond of TO 2 crores was there a PRofit or a loss during that period
Jus Few Questions,
Are your a Stock Broker or a Investor.
Last year that u mentiond of TO 2 crores was there a PRofit or a loss during that period
12 October 2007
Mr Mangesh,
Jus Few Questions,
Are your a Stock Broker or a Investor.
Last year that u mentiond of TO 2 crores was there a PRofit or a loss during that period
Jus Few Questions,
Are your a Stock Broker or a Investor.
Last year that u mentiond of TO 2 crores was there a PRofit or a loss during that period
12 October 2007
sir , I am not a broker. last year my a/c had a loss of 4 lac. there is 2 crore turnover as I buy in futsik (to buy infosys 200shares margin required is 50000)but turnover comes like 200 shares bought and sold.
12 October 2007
So you are an Investor Mangesh, I mean do u work or have a business and the Share Trax is By side,
12 October 2007
So you are an Investor Mangesh, I mean do u work or have a business and the Share Trax is By side,
12 October 2007
SECTION 44AB provides for audit of business .......the section falls under the chapter Business Income .
For a investor of shares , income from shares is capital gains and not business income . Hence the question of audit in his case does not arise .
However , there is huge controversy , when it can be called business and when investment . Depending upon the totality of facts the issue is to be decided . CBDT has also issued guidelines in this regard .
Now , coming to applicablity of section 44AB , it is applicable in case of profession if the gross turnover or receipts exceeds rs 10 lacs . In case of business the corresponing figure is 40 lacs .
Nowhere , the issue can be determined on the basis of profit or loss.
NOW EXAMINE YOUR CASE
JAI HIND , JAI ICAI , JAI CAclub
For a investor of shares , income from shares is capital gains and not business income . Hence the question of audit in his case does not arise .
However , there is huge controversy , when it can be called business and when investment . Depending upon the totality of facts the issue is to be decided . CBDT has also issued guidelines in this regard .
Now , coming to applicablity of section 44AB , it is applicable in case of profession if the gross turnover or receipts exceeds rs 10 lacs . In case of business the corresponing figure is 40 lacs .
Nowhere , the issue can be determined on the basis of profit or loss.
NOW EXAMINE YOUR CASE
JAI HIND , JAI ICAI , JAI CAclub
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