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Tax audit

Querist : Anonymous (Querist) 21 January 2012 This query is : Resolved 
hi can anyone plz tell me that i have been trading in future segment in share market as an indivdual.am i liable to tax audit?
wat r the conditions to be fullfilled for tax audit and how turnover is calculated?
plz mention the section number/circular /notifications if possible
i have read in some post that the difffernce of favourable and unfavourable diferences r taken as turnover so IS THIS TRUE??. PLZZZ TELL ME WERE SUCH PROVISION IS WRITTEN
M/s. Y-not legal services (Expert) 21 January 2012
better you can consult a chattered accountant.. but he may charge you.. take care.

-tom-
C. P. CHUGH (Expert) 21 January 2012
Yes in case of future transaction turnover is taken as favourable differencs and net profit is taken as favourable differences minus unfavourable differences. In case your favourable differences exceed the threshhold limit prescribed u/s 44AB you are required to maintain accounts and get them audited. Thanks
Raj Kumar Makkad (Expert) 22 January 2012
I do agree with chugh.
Sadashiv Rupchand Gaikwad (Expert) 22 January 2012
To meet Proper Charter Accountant.The Application of 44AD, with compulsory maintaince books, show all related transactions which are reported by AIR, Securities Transactions Tax through DMAT a/c
Devajyoti Barman (Expert) 22 January 2012
I agree with the views above..
V R SHROFF (Expert) 22 January 2012
it increases ur turnover, without an fvr profit.
but it attract audit.
Sankaranarayanan (Expert) 22 January 2012
If the turnover exceed 60 lacs then the firm or company come under tax audit u\s 44 AB and 3cd and 3cb will be furnished with charted acccointant certification
Shailesh Kr. Shah (Expert) 22 January 2012
I have similar views as Mr.Sankar.
prabhakar singh (Expert) 22 January 2012
I agree with the views of Mr.sankar narayanan.
A V Vishal (Expert) 22 January 2012
i have been trading in future segment in share market as an indivdual.am i liable to tax audit? wat r the conditions to be fullfilled for tax audit and how turnover is calculated? plz mention the section number/circular /notifications if possible.

Ans. Section 44AB reads as under :-

"Audit of accounts of certain persons carrying on business or profession.

44AB. Every person, --

(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds sixty lakh rupees in any previous year; or

(b) carrying on profession shall, if his gross receipts in profession exceed fifteen lakh rupees in any previous year; or

(c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AD or section 44AE or section 44AF, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year, get his accounts of such previous year audited by an accountant

before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed:




Provided that this section shall not apply to the person, who derives income of the nature referred to in section 44B or section 44BB or section 44BBA or section 44BBB, on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later:

Provided further that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the audit as required under such other law and a further report in the form prescribed under this section.

Explanation - For the purposes of this section, -




(i) "accountant" shall have the same meaning as in the Explanation below sub-section (2) of section 288;

(ii) "specified date", in relation to the accounts of the previous year relevant to an assessment year means, -

(a) where the assessee is a company, the 30th day of September of the assessment year;

(b) in any other case, the 30th day of September of the assessment year."

i have read in some post that the difffernce of favourable and unfavourable diferences r taken as turnover so IS THIS TRUE??. PLZZZ TELL ME WERE SUCH PROVISION IS WRITTEN


Ans. The meaning of turnover for in case of transactions in Futures and Options of shares is not defined under the I T Act.In case of derivative trading-Futures and Option- the difference on which the contract is purchased or sold is important. Although the value of contract is number of contract multiplied with the shares price , yet what is actually given or taken is differential amount in contract. For example if you purchase a future contract for Rs 105 for a share having a lot of 100,you pay nothing at the time of buying a contract, yet at the time of expiry if contract , you are either gainer or loser which is determined whether there is positive or negative difference. So , for the purpose of determining the turnover in case of future and options , for the purpose of 44AB , based on the guidance note of ICAI , following items should be considered to constitute turnover
■The total of positive and negative differences , plus
■Premium received on sale of options is also to be included in turnover ,plus
■In respect of any reverse trades entered, the difference thereon
H.M.Patnaik (Expert) 23 January 2012
Mr. Vishal has done good work to allay doubts of the querist.


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