Turnover misunderstanding
This query is : Resolved
29 September 2013
I am trader in stock market.
Case 1. I calculated Turnover= total buy amount+total sell amount.
Case 2. But on some website I read that Turnover=Settlement profit+ Settlement Loss
For ex. If RIL shares bought@1000 x qty 100, and sold @1010x qty 100
Trade volume= +2lakh and Turnover is just 10 x 100=1000
case3= total sell amount( whichever is higher)
So which case 1/2/3 is true???? any proof from tax dept? How to really calculate turnover
Case 1. I calculated Turnover= total buy amount+total sell amount.
Case 2. But on some website I read that Turnover=Settlement profit+ Settlement Loss
For ex. If RIL shares bought@1000 x qty 100, and sold @1010x qty 100
Trade volume= +2lakh and Turnover is just 10 x 100=1000
case3= total sell amount( whichever is higher)
So which case 1/2/3 is true???? any proof from tax dept? How to really calculate turnover
29 September 2013
AS per Guidance note Issued by ICAI on Tax Audit
THE TURNOVER OR GROSS RECEIPTS IN RESPECT OF TRANSACTION IN SHARES, SECURITIES AND DERIVATIVES MAY BE DETERMINED IN THE FOLLOWING MANNER.
(a) SPECULATIVE TRANSACTION: A 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 scripts. Thus, in a speculative transaction, the contract for sale or purchase which is entered into is not completed by giving or receiving delivery so as to result in the sale as per value of contract note. The contract is settled otherwise and squared up by paying out the difference which may be positive or negative. As such, in such transaction the difference amount is 'turnover'. In the case of an assessee doing speculative transactions there can be both positive and negative difference arising by settlement of various such contracts during the year. Each transaction resulting into whether a positive or negative difference is an independent transaction. Further, amount paid on amount of negative difference paid is not related to the amount received on account of positive difference. In such transactions though the contract notes are issued for full value of the purchased or sold asset the entries in the books of account are made only for the differences. Accordingly, the aggregate of both positive and negative differences is to be considered as the turnover of such transaction for determining the liability to audit vide section 44 AB.
(b) Derivatives, futures and options: Such transactions are completed without the delivery of shares or securities. These are also squared up by payment of differences. The contract notes are issued for the full value of the asset purchased or sole but entries in the books of account are made only for the differences. The transactions may be squared up any time on or before the striking date. The buyer of the option pays the premia. The turnover in such types of transactions is to be determined as follows:
The total of favourable and unfavourable differences shall be taken as turnover.
Premium received on sale of options is also to be included in turnover.
In respect of any reverse trades entered, the difference thereon, should also from part of the turnover.
(c) Delivery based transactions: Where the transaction for the purchase or sale of any commodity including stocks and shares is delivery based whether intended or by default, the total value of the sale is to be considered as turnover.
Further, an issue may arise whether such transactions of purchase or sale of stocks and shares undertaken by the assessee are in the curse of business or as investment. The answer to this issue will depend on the facts and circumstances of each case taking into consideration the nature of the transaction, frequency and volume of transactions etc. For this attention is invited to the following judgments where this issue has been considered.
CIT v P.K.N. and Co., Ltd (1966) 60 ITR 65 (SC)
Saroj Kumar Mazumdar v CIT (1959) 37 ITR 242 (SC)
CIT v Sutlej Cotton Mills supply Agency (1975) 100 ITR 706 (SC)
G Venkataswamy Naidu(1959) 35 ITR 591 (SC)
In case such transactions are for the purposes of investment and income / loss arising therefrom is to be computed under the head 'Capital Gains, then the value of such transaction is not be included in sales or turnover for deciding the applicability of audit under section 44 AB. However, in case such transactions are in the course of business, then the total of such sales are to be included in the sale, turnover or gross receipts as the case may be of the assessee for determining the applicability of audit under section 44 AB.
THE TURNOVER OR GROSS RECEIPTS IN RESPECT OF TRANSACTION IN SHARES, SECURITIES AND DERIVATIVES MAY BE DETERMINED IN THE FOLLOWING MANNER.
(a) SPECULATIVE TRANSACTION: A 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 scripts. Thus, in a speculative transaction, the contract for sale or purchase which is entered into is not completed by giving or receiving delivery so as to result in the sale as per value of contract note. The contract is settled otherwise and squared up by paying out the difference which may be positive or negative. As such, in such transaction the difference amount is 'turnover'. In the case of an assessee doing speculative transactions there can be both positive and negative difference arising by settlement of various such contracts during the year. Each transaction resulting into whether a positive or negative difference is an independent transaction. Further, amount paid on amount of negative difference paid is not related to the amount received on account of positive difference. In such transactions though the contract notes are issued for full value of the purchased or sold asset the entries in the books of account are made only for the differences. Accordingly, the aggregate of both positive and negative differences is to be considered as the turnover of such transaction for determining the liability to audit vide section 44 AB.
(b) Derivatives, futures and options: Such transactions are completed without the delivery of shares or securities. These are also squared up by payment of differences. The contract notes are issued for the full value of the asset purchased or sole but entries in the books of account are made only for the differences. The transactions may be squared up any time on or before the striking date. The buyer of the option pays the premia. The turnover in such types of transactions is to be determined as follows:
The total of favourable and unfavourable differences shall be taken as turnover.
Premium received on sale of options is also to be included in turnover.
In respect of any reverse trades entered, the difference thereon, should also from part of the turnover.
(c) Delivery based transactions: Where the transaction for the purchase or sale of any commodity including stocks and shares is delivery based whether intended or by default, the total value of the sale is to be considered as turnover.
Further, an issue may arise whether such transactions of purchase or sale of stocks and shares undertaken by the assessee are in the curse of business or as investment. The answer to this issue will depend on the facts and circumstances of each case taking into consideration the nature of the transaction, frequency and volume of transactions etc. For this attention is invited to the following judgments where this issue has been considered.
CIT v P.K.N. and Co., Ltd (1966) 60 ITR 65 (SC)
Saroj Kumar Mazumdar v CIT (1959) 37 ITR 242 (SC)
CIT v Sutlej Cotton Mills supply Agency (1975) 100 ITR 706 (SC)
G Venkataswamy Naidu(1959) 35 ITR 591 (SC)
In case such transactions are for the purposes of investment and income / loss arising therefrom is to be computed under the head 'Capital Gains, then the value of such transaction is not be included in sales or turnover for deciding the applicability of audit under section 44 AB. However, in case such transactions are in the course of business, then the total of such sales are to be included in the sale, turnover or gross receipts as the case may be of the assessee for determining the applicability of audit under section 44 AB.
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29 September 2013
Thank u for valuable reply. But dear sir, my broker sent p/l statement which contain Total buy Amount, total sell amount, Net amount, Realised P/L, Unrealised P/L, Total P/L, HEADING OF STATEMENT IS CUMMULATIVE BILL SUMMARY (ACCOUNT / SCRIP) ,SEBI REGI. NO. : INB231052938 ......now which is my TURNOVER? total sales amount/addition of profit+loss=turnover. In this they given all mix intraday transaction and delivery transaction .
29 September 2013
dear sunill sir,
I am not filed return from 2009. I am intraday trader. NOw what will procedure for filing return of all years? Each year their is loss in intrday+ delivery, never trdaed in derevative/option.
please help
I am not filed return from 2009. I am intraday trader. NOw what will procedure for filing return of all years? Each year their is loss in intrday+ delivery, never trdaed in derevative/option.
please help
29 September 2013
Dear Ganesh,
Since you are a insider trader, you need to calculate profit as below:
Intra day Profit in each transaction + ((intraday loss in each transaction)*-1)
So if in day you make Rs 500 profit on reliance and lose Rs 100 on TCS. You turnover is Rs 600.
Do the same for all your trades. The sum total shall be your turnover for 44AA, 44AB and 44AD
Since you are a insider trader, you need to calculate profit as below:
Intra day Profit in each transaction + ((intraday loss in each transaction)*-1)
So if in day you make Rs 500 profit on reliance and lose Rs 100 on TCS. You turnover is Rs 600.
Do the same for all your trades. The sum total shall be your turnover for 44AA, 44AB and 44AD
29 September 2013
Thanks Nikhil sir, But what about delivary trade which i made some time? But when i requested to my broker for P/l statement for Incometax dept, they given me 4 year p/l statement but in this all mixed given, is it be allowed by IT dept?? Also i am not filed incometax return from 2009, i reagrd this i got letter from IT dept for non filing return from 2009. SO I given reply for " Nontaxable income from 2009".
SO what will be my next procedure?
SO what will be my next procedure?
29 September 2013
For delivery trades, refer to the last paragraph of Sunil's answer.
You need to segregate transactions as speculative and delivery based from the information provided by your broker.
If you want, you can share your details with me, may be i can help.
My email id is kausnikhil@gmail.com
You need to segregate transactions as speculative and delivery based from the information provided by your broker.
If you want, you can share your details with me, may be i can help.
My email id is kausnikhil@gmail.com
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29 September 2013
Many many thanks to Nikhil Kaushik and Sunil kumar--as u people doing great job .
Thanks again .
Thanks again .
30 September 2013
Dear Nikhil sir, I sent statement pl go through yur mail. thanks
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