ITR 4 is applicable. For Share trading need to check whether it is Short term or long term to guide u more
I have the following two small businesses planned out and was thinking of ITR4S. Would I be able to use section 44AD? 1) Consulting services (Expected Inc. 50,000 per month) 2) Stock trading. If I can use one current account for both 1 and 2, then I can easily use the money earned from 1 in 2 also. I am an individual, operating alone, and it would be a headache to open and maintain two current accounts separately. I already have a few savings accounts and mutual funds, and it is already difficult to handle the confused paperwork of the financial sector. Please provide a minimum headache solution. I cannot afford to get my time entangled in forming some company then getting seed capital and TIN numbers and DIN numbers and DSCs and all that jungle of confusion that the govt regulators create for every tiny thing. Also, is ITR4S applicable? Please advice on how to best carry out these activities. Thank you. Much appreciated.
ITR 4 is applicable. For Share trading need to check whether it is Short term or long term to guide u more
Hi,
if you are running above businesses in your name or as proprietorship, then one current account sufficient.
Yes, you can file taxes on presumptive taxation basis .
For stock trading tax u/s 44AD income will be assumed 8%, you can NOT claim any expenses or losses
For consultancy services - u/s 44ADA , as consultancy services fall under Professional services- income will be assumed 50%, you can NOT claim any expenses or losses.
or else you can maintain the books of account and can claim lesser income or losses. then you need to file ITR 4
dont worry as yours is not a company.you can easily used your income for your other business or services.
there few more conditions under section 44ADA, that A person opting for the presumptive taxation scheme of section 44ADA is liable to pay advance tax.
second
Any person who is eligible to avail the scheme of Presumptive taxation can opt for the scheme any time.
a person can opt out of the scheme at any time . however , if the person opts out of the scheme then he can not avail the benefit of the scheme for the next 5 years.
Suppose an eligible assessee declares his income under Section 44AD(1) for A.Y. 2017-18. Then as per new Section 44AD(4), he has to file returns for next 5 assessment years i.e. from A.Y. 18-19 to A.Y. 2022-23 by declaring his total income by applying section 44AD(1).
Hi Shyam and Vishakha Thank you for responding. Shyam - I am told ITR4 is a headache and confuses everyone. What are the advantages of ITR4 over ITR4S in my situation? You asked about my stocks - I am interested only in STCG (17% flat rate tax) and NOT in daily trading (Flat rate tax 30%) nor in other complex things like futures/options. Only simple buying selling of stocks involving STCG of 17% which I is due if one sells a stock before 365 days. Vishakha - please explain, for consulting, ITR4S and section 44ADA - what income in consulting is? If a client gives me 25,000 rupees for consultancy, is that gross receipt or income? Secondly, section 44ADA, is that not applicable from FY 2017-18? April 2017 onwards? On proprietorship, I can do it, but if it can be avoided? What extra obligations will land on me if I form a proprietorship? What benefits? In my specific situation? I know a lot of people who feel confused by ITR4 and wish to avoid. On stocks: If my stocks run into a net loss in any FY, can I carry forward in ITR4S and section 44ADA? Losses in consulting will not be there, it is just simple consulting offered to client, more like advisory, No legal liability on me.
Hi,
section 44ADA is applicable from FY 2016-17.
if you are receiving Rs 25000 from your client then whole amount is your gross receipt..
You can continue work as an individual, Proprietorship will give name to your business, and its income will be included i your ITR. no other benefit as such.
it depends on quantum of trading done by you , if the purpose of trading to earn profits and number of transaction and amount involved are more then it is business and you are required to file ITR 4 or 4S.
otherwise it will fall under capital gain income.
if you file ITR 4 or capital gain loss (conditions applicable)
, you can carry forward your losses for 8 financial years.
and can claim all the expenses like advisory expenses, telephone, internet, brokerage fees etc.
if you file ITR4S you have to show gross income and pay taxes and can not claim any losses.
Vishakha OK, what about service tax considerations for my consulting? Is that 15% of gross receipt? And does it include VAT and GST or are these extra? How to know if I have to pay these taxes? For Stocks: In ITR2 which I was filing till now, it was possible to carry forward short term capital losses from stocks. It is disappointing that ITR4S does not allow carry forward of capital loss. Question on ITR4S: I understand in my case I'll need two businesses, under categories: 1) "0703 - Consultancy services" 2) "0808 - Share brokers, sub brokers etc" Or is "0204 - Trading - others" the right category instead of 0808? Though trading is a term specifically used for stocks one buys and sells on the same day. I take stocks in delivery mode, to be sold when the time is right, maybe a month later. ____________________________ You have explained that money I get from client, in consulting, is gross receipt. OK. Question: How to know gross receipt in stocks? It's the same money going in and coming out of the stock market. I know how to calculate capital gain in stocks. Perhaps "capital gain" in stocks is "gross receipt" itself, for the purpose of ITR4S and section 44ADA. If so, then perhaps profit is 50% of capital gain, here?
in your case, only service tax will be applicable NOT vat , that is also depends on your revenue. if it exceed Rs 9 lakhs in any financial year, then you are required to registered for service tax. if you are giving consultancy services to outside india ie exporting four services then it will be exempt from service tax.
yes you are required to select to business categories:
0703 & 0204.
there is different calculation for gross receipt in trading of shares.
If the purchase and sale of shares are delivery based, the gross sale value has to be taken as the turnover.
If the transactions in shares are non-delivery based, it is only the net of the sales and purchases that is to be treated as turnover.
Tax audit under Section 44AB would be required only if the turnover so computed exceeds Rs 100 lakh.
It is better you consult a chartered accountant personally , he/she will explain you clearly..as many other parameters are there to look at...to decide your trading in share falls in which category, capital gain or business.
if you want you can contact me at 9538801976
Sir
I will answer your question in simple answers :
1. For calculation of profit in Shares : Take sale cost and also take purchase cost of that stocks, the difference is short term gain/Loss. If the shares are held for more than 12 months then it is long Term Capital Gain/loss which is exempt from Tax.
2. You can also get this statement from your Broker where you are doing trading. You can ask for P & L Account or capital gains statement . He will provide you the same .
3. When you are receiving Consultancy fees this will be treated as gross receipts. From the Gross receipts you need to deduct expenses like salary, Telephone exp, Conveyance etc and the figure arrived at will be your net Income which is chargeable to tax.
Thanks Vishakha. I'll do that. I do hope the govt has specified all these calculations for income from stocks under section 44ADA clearly and unambiguously. It seems that in delivery based stocks, I'll have to pay tax even if there is net loss? Since you wrote that gross sale value of stocks and not capital gain is the turnover in this situation. Shyam, thank you, you've explained to me the traditional ITR4 method, and I understand you are in favour of ITR4, in this situation. I am exploring the suitability of the new ITR4S and the new section 44ADA method, in my specific situation, I find it attractive since it promises to save me from maintaining too much paperwork. and book of accounts, bills, etc. Though the option of carrying forward losses is not there unfortunately and it seems I'll have to pay tax even if there is a net loss (in delivery based stocks) since the concept of capital gain may not be applicable to section 44ADA stock trading of delivery based stocks. One thing is still unclear though. In delivery based stock business, what percentage of gross sale value of stocks will be considered as income under section 44ADA. Thank you both.
Hi,
As i told you before for trading in shares will attract 44AD, it means your income from business in trading = 8% of turnover/ gross receipts.
As you are trading in shares on delivery basis - your gross sale value will be the amount you paid to purchase shares.
but if there is a loss you have to still pay taxes on sale value of shares.
the decision to use which ITR , should be taken at the end of the year,based on your income.
It is always advisable to keep all the paper to prove your case in case any any queries are raised.
i believe that shares trading are always online and you can easily generate report online any time.
so i would advise save your decision till the end of the financial year and choose your option accordingly.
whether it is capital gain or business of trading and which ITR to choose. depending on your gain at the end of the year, if it more than 8% then go for ITR 4S or else go for ITR 4 .
Vishakha - please confirm this: What if I purchase delivery shares worth, say, 30 Lakh in FY 2016-17, and sell shares worth 20 Lakh only, and carry forward shares worth 10 lakh into the next FY, then what is my "gross receipt" for FY 2016-17. I guess it is 30 lakh? Please confirm. So taxable income becomes 2.4 lakh I guess, regardless of my actual gain or loss? Then what about FY 2017-18. The 10 lakh purchase carried over from previous year, will that be added to any fresh purchases I make in this FY, for calculating "gross receipt" for FY 2017-18? I guess not but just wanted to confirm.
Vishaka Kindly explain.
As per my view 44ADA is different as in that you need to declare 50% of Gross Receipts as Profit.
Share Profit is totally different and STCG and LTCG is being calculated.
Sir In Shares if you sell 20 Lakhs worth then the cost of that particular stocks will be deducted and profit computed as STCG or LTCG.
In case of more queries it is better you fix an phone consultation call with Ms. Vishaka so that your query is answered and your mails are also coming to us and thus we need to answer and revert back.
that Rs 10 lakhs will be your closing stock of that financial year.
and it will be added in next year gross receipt.
Dear Sir,
If you are running above businesses in your name or as proprietorship, then one current account sufficient.
Yes, you can file taxes on presumptive taxation basis .
For stock trading tax u/s 44AD income will be assumed 8%, you can NOT claim any expenses or losses
For consultancy services - u/s 44ADA , if consultancy services fall under Professional services- income will be assumed 50%, you can NOT claim any expenses or losses. Please note income means gross fee received by the client.
Please feel free to call/revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.com
I'm not clear about income from stock trading u/s 44AD. It is 8% of what? Because purchase cost will be different from actual sale receipts of stocks. Difficult to understand because there seems to be no concept of capital gain/loss here. Consider the following simple cases: 1. Purchase cost of stocks = 25 lakh. Sale value = 35 lakh. All bought/sold within same FY. 2. Purchase cost = 25 lakh. Sale value = 20 lakh. All bought/sold within same FY. 3. Purchase cost = 25 lakh. Sale value = 10 lakh 50% stocks sold within same FY. Rest carried forward to next FY. What is the tax payable in all three cases? And how will carried forward stocks be accommodated in next FY? Do you have balance sheet in 44AD? If I pay tax on 8% presumption, and if my actual profit is higher, what about the rest of profit. Is it black money? It should not be since they presume 8% profit even if there is actual loss.
Sir share purchase and sale will not come under 44AD instead it will come under short term capital gain and long term capital gains.
If you are a trader i.e. broker in shares then only it will come under business.
hi,
1) profit will be 35*8% = 2.8L
2) profit will be 20 * 8 % = 1.6 L
3) profit will 10 *8 % = .8L
under presumptive taxation as you are selling you will take 8 % of sale as your profit. (if you are taking delivery of shares)
if in next year you are selling closing stock of previous year, it will add in your next year sale.
it is advisable to go for ITR 4.
no your rest of profit is not be a black money.
Dear Sir,
Your profit in the three case will be 2.8 lakhs, 1.6 lakhs and 80 thousand respectively. Its simply 8% of your sale value regardless of your purchase. Tax payable in all the three case will be as per your slab.
Assuming your slab is 30%, your tax payable would be 84,000, 48,000 and 24,000 respectively.
No, higher profit will not be your black money.
Please feel free to call/revert in case of any doubts.
Thanks and Regards
Abhishek Dugar
CA CS B.Com
Over here it appears that income tax under section 44AD for stocks is far lesser than conventional STCG tax? For example... 1. Purchase cost of stocks = 25 lakh. Sale value = 35 lakh. All bought/sold within same FY. So STCG tax at 16% is applicable. That is 16% of 10 lakh or 1.6 lakh. If we go with 44AD, then taxable income is 2.8 lakh. Assuming 30% tax, it comes to 84,000, which is 8.4 percent of the capital gain of 10 lakh. If tax slab does not touch 30%, then tax would be even lower. Are these calculations correct? Or is there anything else to this? Of course, if there is loss, tax will still be leviable on sale value. Anything apart from this? Any other drawback of using 44AD for stock tax calculation? Thank you.
Please note the following points:
1. STCG tax is 15% in case of equity shares.
2. Turnover in case of stocks is absolute difference of sale less purchase value. You can call me to understand more.
3. Above calculation seems to be incorrect.
Please feel free to call/ revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com