If somebody has earned amount above the threshold limit specified in Section 44AB, in shares transaction, will he be liable for Tax Audit, even if the income earned by he/she is not his main business, Will the amount earned attract Tax Audit. Please let me know about the case laws against the same. Please help me in the same, its urgent
26 June 2011
Share Trading has 3 gray areas and the income earned is to be divided in 4 Sectors 1) Frequest trading - without taking delivery of the scripts 2) Frequest trading - taking delivery of the scripts 3) Trading on fortnightly basis 4) Trading after 1 (One) year.
A) In case of situation No. 1 the income earned is to be treated as speculation income and is to be taxed under Income from Other heads which do not require Tax Audit.
B) In case of situation No. 2 the income earned is to be treated as income from Business and is to be taxed under Income from Business and Profession. Section 44AB is for business income and hence it requires Tax Audit.
C)In case of situation No. 3 the income earned is to be treated as short term capital gains and is to be taxed under Income from Capital Gains which do not require Tax Audit.
D)In case of situation No. 4 the income earned is to be treated as Long term capital gains and is to be taxed under Income from Capital Gains which do not require Tax Audit.
Now, you decide which type of share trading is done and accordingly will will get the answer.
26 June 2011
Dear Mr Aggarwal WHEN SHARE TRADING IS DONE IN SITUAUTION NO 1 GIVEN BY U THEN INCOME IS TAXED AS INCOME FROM SPECULATIVE BUSINESS WHICH INCOME IS TAXED AS BUSINESS INCOME AND REQUIRES TAX AUDIT
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