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speculative transactions

bhavik (CA FINAL) (108 Points)

11 March 2010

if any person has only speculative transaction of share during the year , den wat will be limit for him for the purpose of tax audit u/s 44AB??

such speculation transactions ( without taking delivery ) of shares ... covered under turnover ????

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CA Priya (CS Final) (1049 Points)
Replied 12 March 2010

Profit or loss from a speculative business will be taxable as income under the head profits and gains of business or profession. Tax will be charged on such income at the normal rates applicable to an individual. Such income will be charged under the head profits and gains of business or profession whether or not the assessee is carrying on any other business or profession. the assessee needs to file along with the return of income the profit and loss account, which will be a summary of the transactions made by the reader in the previous year but would not be required to furnish the statements given by the broker along with the return of income. Since this is a business income which is chargeable under the head profits and gains of business or profession an audit will be required under Section 44AB of the Income-Tax Act, 1961 if the turnover exceeds Rs 40 lakh. Turnover for this purpose should be taken as the sale value of the transactions. A similar view has been expressed by the publication of the Institute of Chartered Accountants of India in its second revised edition of the book Issues on Tax Audit.

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Bala (Student) (498 Points)
Replied 12 March 2010

Friend priya,

Iin case of speculative share trading the provisions of sec 44AA & 44AB applies not based on the sales made., but based on the gross amount of Profit & Loss,, since you are not taking any title on it... For ex, if yur only business is speculative share transactions and oyu earn a profit of Rs. 15,00,000/- and incur loss of Rs. 10,00,000/- and the sales made by you is Rs 75,00,000/-.. then the turnover for sec 44AA & 44AB means 25,00,000/- only (Profit + Loss)...