Hi, consider a person 'X'. 'X' suffered loss of Rs. 6.7 lacs due to intraday and delivery based trading in F.Y 14-15. He got his activities audited by a C.A and submitted his return. In F.Y 15-16, he only did trading (intraday and delivery) for a week as he ran out of money by 8 th April, 2015. He received Rs. 3,60,000 as his PF from which he bought shares but held them up to end of F.Y 15-16. This P.F amount will be taxable as he left his job before 5 years. 'X' had no other income in this F.Y as he was unemployed. My question is whether 'X' is liable to get an audit in F.Y 15-16 too because he did trading for a week. The turnover of this trading was 1.6 lacs and gain made was Rs 23. Thanks.
Hii
No Audit Required in FY 2015-16 , for Audit current year Turnover matters, which is only 1.6 lac in ur case, one more thing I want to clear For Audit purpose only Delivery turnover count and intraday profit / loss directly marked in profit and loss account
Hi,
As per Sec 44AD, if assesee claims profit lesser than 8% of turnover, then he is liable to 44AB audit if and only if his income exceeds basic exemption limit.
So in Financial year 15-16, as the income is less the exemption limit of Rs 250000, there is no need of tax audit, he can file the return without getting audit done,
in case PF amount is withdrawn before completion of 5 years, it is not taxable if unemployment is due to the following reason:
If the employee has not rendered continuous service of five years, but the service is terminated by reason of the employee’s ill health or discontinuance of the employer’s business or reasons beyond the control of the employee, the amount will be tax-exempt.
'X' did intraday trading (1 week) and the sum of his sell value (value of scripts when sold) for these trades is Rs. 1,65,640. He ran out of money here. He got his PF money and he bought shares worth Rs. 3,60,000 and out of these shares worth Rs. 1700 were sold automatically (after few days, so count as delivery) due to some compulsory payment requirement by the broker. Rest of the shares he held up to the end of his financial year. He has no other source of income as he was unemployed. Only money he got was this Rs. 3,60,000 in the form of his PF as he left his job. So, is he free from all those Sec 44AE, AB, AD etc? Is he also free from 8% requirement of Sec AD? Is it because this activity cant be treated as business?
Dear Sir,
I dont know whether you are aware about the calculation of turnover in case of intra day trading or not. IT is the absolute sum total of gain and loss made during the year.
If you dont want to go for an audit, you have an option to show presumptive profit of 8% of turnover and pay tax on the same. In that case you are not required to go for an audit.
We can help you in this process and filing your return of income. Should you need our services, please feel free to reach me at .
Thanks and Regards
Abhishek Dugar
CA CS B.Com
Yes he is free n for tax planing show as investment Rs. 360000, on Rs. 1700 sales as short term capital gain loss and rest as investment n after 12 months of holding u can sell these without paying any income tax
Ya,
as quantum of activity is not big, he can show these trading under capital gain.
no need of tax audit. or 8% requirement under section 44AD.
@Abhishek Dugar Oh, sorry. Absolute sum and gain of intraday trading comes to Rs. 1899. So, is 'X' liable for an audit or those Sec 44E, AD etc applicable? He bought shares worth Rs. 3,60,000 and held them till F.Y ending too. No job, no source of income (except PF money). @LalitBansal Okay. So even if 'X' have no source of income (unemployed) except his PF money, 'X' did intraday trading for 5 days (sum of absolute gains and loss Rs. 1899) and bought shares worth Rs.3,60,000 to hold them, 'X' is not liable for an audit? @Vishaka Agarwal Okay, so because the activity is not so big (intraday- absolute sum of gains and loss- Rs. 1899, held shares worth Rs. 3,60,000) , it wont come under Sec 44AE, AD etc, right?
@Abhishek Dugar Oh, sorry. Absolute sum and gain of intraday trading comes to Rs. 1899. So, is 'X' liable for an audit or those Sec 44E, AD etc applicable? He bought shares worth Rs. 3,60,000 and held them till F.Y ending too. No job, no source of income (except PF money). @LalitBansal Okay. So even if 'X' have no source of income (unemployed) except his PF money, 'X' did intraday trading for 5 days (sum of absolute gains and loss Rs. 1899) and bought shares worth Rs.3,60,000 to hold them, 'X' is not liable for an audit? @Vishaka Agarwal Okay, so because the activity is not so big (intraday- absolute sum of gains and loss- Rs. 1899, held shares worth Rs. 3,60,000) , it wont come under Sec 44AE, AD etc, right?
Right
because of the following reasons income is not liable for tax audit.
1) Gross turnover is not exceeding Rs1 cr
2) there is no loss in trading and taxable income is not exceeding taxable limit.
3) as transactions of trading is not of huge amount , you can take income from capital gain.
hope i am clear.
@Vishakha Agarwal 'X' resigned from his job before 5 years and he received PF of Rs 3,60,000/-. The taxable income is this PF money, right? Or only the profit and gain from trading are to be considered as income for determining whether audit is required or not??
only income from trading business is to be considered for audit.
income from PF falls under income from other sources.
intraday trading is also income from other sources as speculative income
income from other tradings is income under capital gain. if he is still holding shares till the end of the financial year. there is no income.
if he had resigned due to health issue or some unavoidable reason then the PF amount is exempt from tax.otherwise it is taxable
but if Provident fund is tax exempt then it needs to be shown under exempt income
I think my other colleagues are answering the question. This will wait
Hello Sir,
Firstly you are not liable for Tax Audit as it is not your Business Income. The shares can be shown as Investment as No Tax needs to be paid.
All you should do is pay Tax on the PF Amount and Tax on the amount of Gains made during the year.
Do not show it as Stock but in turn show it as Investment (The stock purchased during the year i.e 2015-16).
Trust this clarifies your query.
Feel free to call back/ get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP.
